Endeavour Adds Heavy Hitters to Crew Gold's Board of Directors
By Guy Bennett
The rise in share price of Crew Gold (TSX:CRU), a West African gold producer, was a gift to many investors earlier in 2010 as it rose 500%, from 10 cents to 50 cents on huge volume – the result of a takeover battle between Canada’s Endeavour Financial (TSX:EDV) and Russian steel giant Severstal (LSE:SVST).
But now that the two groups have kissed and made up, agreeing to restructure Crew’s board of directors, the stock has dropped in half to 25 cents.
So much for the peace time dividend. What should investors be thinking now about Crew?
A key sign of the future could be in the makeup of the board.
Endeavour’s significant board appointees Frank Giustra and Michael Beckett signal its lofty ambitions for Crew Gold.
"Endeavour and Severstal share a common goal of maximizing the value of our investments in Crew Gold,” stated Endeavour CEO Neil Woodyer. “We are delighted to be working in tandem with Severstal as a cooperative approach will allow each of us to best achieve the value creation potential of our gold investment strategies."
Crew has been increasing production while lowering costs. A $75 million capital program to upgrade the asset has and will greatly improve performance.
The Lefa mine produced 57,930 ounces of gold in the quarter ended March 31, 2010 selling for an average price of $1,105 an ounce.
The reconstituted Crew board has nine directors; four from Endeavour, three from Severstal and two representing other shareholders.
Frank Giustra is an exclusive advisor to Endeavour and President and CEO of Fiore Financial. He has interests in dozens of companies and does not normally sit on the board of directors. Giustra has spearheaded equity investments of more than $3 billion in the international resource sector and launched the Clinton Giustra Sustainable Growth Initiative (CGSGI) with former US President Bill Clinton in 2007.
While no individual can guarantee the success of a company, the presence of Giustra on the board is an encouraging sign for Crew and Endeavour shareholders.
In 2001 when he returned to the resource market, he sat on the board of Wheaton River Minerals, which became one of the most successful junior miners of the decade, eventually merging with Goldcorp.
In 2005 Mr. Giustra was a key architect behind Urasia Energy, and he was on the board of directors there. The uranium producer raised $500 million in the public markets and the stock went from $1.80 to $8 in two years, when Uranium One paid $3.1 billion to acquire Urasia.
Michael Beckett is another heavyweight Endeavour appointee, who has rubbed shoulders with Presidents of numerous African countries. A former Chairman of Ashanti Goldfields Ltd., the largest black managed company in Africa, Beckett has been involved in the development of some of the largest gold mines in the world, in Africa and Papua New Guinea; Iron Ore mines in West Australia; Industrial Minerals in the Ukraine, Russia and Indonesia; and Platinum in South Africa.
How Endeavour will continue with its gold strategy after acquiring big interests in Crew and Etruscan Resources (EET-TSX) is not known. What is known is that between October 2009 and March 2010, Endeavour invested approximately $200 million buying 55% of Etruscan and 43% of Crew Gold. These investments today are worth north of $300 million (a 50% + appreciation).
Endeavour continues to work actively with both companies and looks forward to creating even more value which history says is good news for shareholders.