Payday for investors in Mali-focused gold junior

Payday for investors in Mali-focused gold junior

Avnel employs 366 Malians, sponsors four clinics in surrounding communities and has built four schools. Image: Avnel Gold

Shares in Avnel Gold Mining (TSE:AVK) soared on Thursday day after London-HQed Endeavour Mining announced it's paying $126 million (C$159m) to take over the Mali-focused company.

Endeavour plans to re-design and optimize the current feasibility study and expand the plant capacity, ultimately we would expect a mine plan with an annual production rate of 200koz or more

During early afternoon trade the Guernsey-based junior was exchanging hands for $0.41, up 43.8% on the Toronto Stock Exchange, with more than 18m shares changing hands. Endeavour's offer constitutes a premium of 48% on Avnel stock before the deal. Avnel is now worth $140.4 million in Toronto. Shares in Endeavour Mining, which operates five mines in West Africa, declined 2.7% in Toronto in line with a weaker gold price and a general down day on North American markets.

Avnel holds an 80% interest in the Kalana Gold project in Mali which includes a small-scale underground operation dating back the the Soviet era. The fully permitted feasibility stage open pit project boasts a reserve of 2.0m oz grading 2.8g/t Au and is projected to produce just over 100,000 oz of gold annually at all in costs of of $784/oz over 18 years, with 148,000 oz per year during the first five years at an AISC of just $589/oz. Construction costs are pegged at at $196m.

Boards of both companies have approved the transaction as have Avnel's controlling shareholders Elliot Group and Fern Trust (Avnel CEO Howard Miller's family holding). In a commentary on the transaction Vancouver's Haywood Securities urges shareholders of Avnel to tender their shares arguing that Endeavour will add value to the project:

Endeavour plans to re-design and optimize the current feasibility study and expand the plant capacity, ultimately we would expect a mine plan with an annual production rate of 200koz or more. We also expect Endeavour to take full advantage of satellite prospects to develop the resource potential, including the Kalanako deposit with a resource of 119koz at a grade of 3.34g/t Au, which cover a concession area of 387km2…