Endeavour Mining Explores Combination With Rival Teranga Gold

(Bloomberg) -- Endeavour Mining Corp., the acquisitive gold producer backed by Egyptian billionaire Naguib Sawiris, is in talks about a potential combination with Teranga Gold Corp. as it seeks to build scale.

The miner is discussing a “merger of equals style” deal with Teranga, it said in a statement Tuesday, confirming an earlier Bloomberg News report. It is considering an all-stock purchase and may offer a low premium for Toronto-listed Teranga, people with knowledge of the matter said earlier. Teranga confirmed the talks in a separate statement.

Endeavour aims to reach a friendly agreement, one of the people said, asking not to be identified because the information is private. The company will only pursue a transaction that represents a “compelling value creation opportunity” for shareholders, according to Tuesday’s statement.

Teranga shares jumped as much as 13% at 9:30 a.m. Tuesday in Toronto.

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 through 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.

Teranga said there’s no certainty they will lead to a completed deal. The company remains focused on developing its pipeline of assets and maximizing shareholder value by increasing free cash flow through diversification, according to its statement.

Dealmaking Flurry

The gold industry has seen a flurry of dealmaking in the past few years, as smaller companies seek to combine or snap up assets following large transactions by the two biggest producers. The spree was started when Barrick Gold Corp. agreed to buy Randgold Resources Ltd. in 2018, an all-stock acquisition that set the tone for low or zero premiums in precious-metal transactions.

A successful deal would extend a years-long transformation by Endeavour, which has replaced high-cost mines with two new flagship projects that produce more gold and will operate for much longer. Teranga has assets in Senegal, Burkina Faso and Ivory Coast.

Endeavour agreed in March to buy rival Semafo Inc. for about C$1 billion in stock to add West African assets. Still, the company has also been happy to walk away from deals in the past if it couldn’t reach a friendly agreement.

In January, it abandoned an attempt to buy Centamin Plc, which owns the Sukari mine in Egypt, after the company rebuffed its advances. In 2017, it ended talks about a potential combination with the former Acacia Mining Plc, a gold miner in Tanzania that has since been reabsorbed by Barrick.

On Tuesday, Teranga reported third-quarter adjusted earnings that beat analysts’ estimates as gold prices rose and the miner ramped up output to a record. In December, Teranga agreed to buy a Barrick project adjacent to its flagship Sabodala gold mine, a deal that made Barrick its second-largest shareholder.

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