Endeavour Mining has said that it will acquire Semafo, a Canadian-based mining company with gold production and exploration activities in West Africa, in a $690.7 million deal. This creates the biggest gold producer in Burkina Faso, increasing its focus on the country despite rising insecurity.
The combined group will produce 1 million ounces of gold a year, Endeavour Chief Executive Sebastien de Montessus said, making it larger than Newmont Goldcorp, Barrick, and Goldfields in West Africa.
Endeavour shareholders will own about 70% of the combined company, with the rest going to Semafo shareholders.
Semafo shares have halved in value since the start of November last year, when a convoy of employees was attacked near its Boungou mine in eastern Burkina Faso, causing 39 deaths and halting operations at the facility.
“After the attack, I think Semafo probably felt that two mines in a consolidating market was not enough, and that teaming up with Endeavour was a good way to grow,” said de Montessus.
Semafo’s CEO Benoit Desormeaux was set to become president of the combined group, while its chief financial officer Martin Millette will become the group CFO.
“We are very excited about this announcement,” Desormeaux said on a call with investors.
“For Semafo shareholders this transaction offers the benefits of both an immediate premium, and the chance for a significant re-rating within a combined entity.”
The deal is set to close in June, and de Montessus said the coronavirus pandemic was unlikely to disrupt the planned takeover.
Mining shares have plummeted due to the coronavirus pandemic, making dealmaking more attractive. Global miner BHP (BHP.AX) said earlier this month it is in “good shape” to act if disruption from the virus brings M&A openings.
The combined group would have a production cost per ounce of around $900, in the bottom third of the industry cost curve, de Montessus said, and a leverage ratio of 0.7x net debt to earnings before interest, tax, depreciation and amortisation (EBITDA).