Endeavour buys Semafo, creates one of West Africa’s top gold miners

Endeavour’s flagship Houndé mine in Burkina Faso. (Image courtesy of Endeavour Mining)

Canada’s Endeavour Mining (TSX:EDV) gave markets a welcome break from Covid-19-related news on Monday by announcing the acquisition of smaller rival Semafo (TSX: SMF) in a C$1 billion ($691 million) deal.

The transaction, the company said, will create the biggest gold producer in Burkina Faso and Ivory Coast with production estimated at over 1 million ounces a year.

Business combination creates gold miner with six operations and more than 1 million ounces of gold production expected in 2020

The West Africa-focused miner, owned by billionaire Egyptian Naguib Sawiris, said the merger would bring together six mines with strong cash flow into one portfolio, the opportunity to optimize assets and a growth pipeline.

Endeavour shareholders will own about 70% of the combined company, with Semafo shareholders holding the rest.

Under the deal, the target company’s shares will be exchanged at a ratio of 0.1422 Endeavour shares for each Semafo share, which represents a premium of 54.7% from the closing price of Endeavour and Semafo on March 20.

La Mancha Holding, which has a 31% stake in Endeavour, has agreed to invest $100 million in the combined company. Its interest, however, is expected to drop to roughly 25% once the transaction is completed.

Endeavour and Semafo have previously worked as industry partners and in early 2019 began a dialogue to evaluate the merits of a business combination, but were unable to reach a deal. Talks resumed earlier this year, the companies said.

Semafo’s shares have lost more than 50% of their value since early November, when a convoy of mine employees was attacked in eastern Burkina Faso, causing at least 37 deaths and halting operations at its Boungou mine.

The company had said it planned to restart operations at the mine in the fourth quarter.