Endeavour Mining, the acquisitive gold producer backed by Egyptian billionaire Naguib Sawiris, is in talks about a potential combination with Toronto-listed Teranga Gold as it seeks to build scale.

The West Africa-focused gold miner on Thursday declared its first dividend, saying it will pay out $60m, or $0.37 per share, to investors after it reported higher producton. The dividend will be paid to shareholders in the first quarter of 2021, earlier than expected. Endeavour's third-quarter production jumped 64% from the previous quarter to 244,000oz of gold, according to reports said.

The miner is discussing a “merger of equals style” deal with Teranga, it said in a statement this week, confirming an earlier Bloomberg News report. It is considering an all-stock purchase and may offer a low premium forTeranga, people with knowledge of the matter said earlier. Teranga confirmed the talks in a separate statement.

Endeavour aims to reach a friendly agreement, one of the people said, asking not to be identified because the information is private. The company will only pursue a transaction that represents a “compelling value creation opportunity” for shareholders, according to Tuesday’s statement.

Shares in the company rose 3.7% on Thursday.

Gold producers are benefiting from a rebound in the price of the metal, which hit a record high in recent months. Shares of Teranga were already up 87% in 2020, giving the company a market capitalisation of about C$2.2bn ($1.7bn). Endeavour is valued at about C$5.2bn in Toronto.

Teranga said there was no certainty they will lead to a completed deal. The company remains focused on developing its pipeline of assets and maximising shareholder value by increasing free cash flow through diversification, according to its statement.

Deal making flurry

The gold industry has seen a flurry of deal making in the past few years, as smaller companies seek to combine or snap up assets after large transactions by the two biggest producers. The spree was started when Barrick Gold agreed to buy Randgold Resources in 2018, an all-stock acquisition that set the tone for low or zero premiums in precious-metal transactions.

A successful deal would extend a years-long transformation by Endeavour, which has replaced high-cost mines with two new flagship projects that produce more gold and will operate for much longer. Teranga has assets in Senegal, Burkina Faso and Ivory Coast.

Endeavour agreed in March to buy rival Semafo for about C$1bn in stock to add West African assets. Still, the company has also been happy to walk away from deals in the past if it couldn’t reach a friendly agreement.

In January, it abandoned an attempt to buy Centamin, which owns the Sukari mine in Egypt, after the company rebuffed its advances. In 2017, it ended talks about a potential combination with the former Acacia Mining, a gold miner in Tanzania that has since been reabsorbed by Barrick.

On Tuesday, Teranga reported third-quarter adjusted earnings that beat analysts’ estimates as gold prices rose and the miner ramped up output to a record. In December, Teranga agreed to buy a Barrick project adjacent to its flagship Sabodala gold mine, a deal that made Barrick its second-largest shareholder.

Bloomberg, Reuters 


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