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Endeavour in merger talks with Teranga

Image from Endeavour Mining.

Endeavour Mining (TSE: EDV) confirmed on Tuesday that it is in discussions with Teranga (TSE: TGZ) regarding a potential merger.

The miner is considering an all-stock purchase and may offer a low premium for the Toronto-listed company, people with knowledge of the matter told Bloomberg.

Teranga also confirmed the talks in a separate statement.

Teranga shares rose 4.5% in Toronto while shares of Endeavour fell 5.7% by midday Tuesday.

Teranga reported third-quarter adjusted earnings that beat analysts’ estimates

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% this year on Monday, giving the company a market capitalization of about C$2.2 billion ($1.7 billion). Endeavour is valued at about C$5.2 billion in Toronto.

Endeavour, which is 24.12% owned by Egypt’s Sawiris family, acquired Semafo in March to become West Africa’s top gold miner.

In January, it abandoned an attempt to buy Centamin Plc, which owns the Sukari mine in Egypt, after the company rebuffed its offer.

The Teranga deal, if completed, would add another operating mine – Wahgnion – to Endeavour’s four existing mines in Burkina Faso, and would also give the company exposure to Senegal with Teranga’s operations there.

Since commercial production began in November 2019, Wahgnion’s processing plant has performed approximately 25% above nameplate capacity for throughput and gold recovery.

Teranga bought Barrick Gold’s 90% stake in the Massawa project in Senegal last year in a $430 million deal.

On Tuesday, Teranga reported an increase in adjusted net profit attributable to shareholders to $38.8 million, or $0.23 per share, compared to $2.3 million or $0.02 per share, beating analysts’ estimates.

The company announced a 69% increase in gold production to a record 104,773 ounces in the quarter, and 169% growth in revenue to $192.6 million.

Further consolidation of the many junior miners operating in West Africa brings with it the possibility of economies of scale which could help miners manage increasing security costs especially in the unstable Sahel region.

The CEO of Barrick Gold, which operates Mali’s biggest gold mine, has been among the loudest voices in the gold mining industry calling for consolidation.

(With files from Reuters)