Endeavour Mining Corporation (TSE:EDV) (OTCMKTS:EDVMF) has revealed it is to combine with SEMAFO Inc (TSE:SMF) in a C$1 billion deal which will create a leading West Africa-based gold producer generating over 1 million ounces a year.
The merger brings together six mines with strong cash flow into one portfolio, the opportunity to optimize assets, and a growth pipeline. Both company's boards have unanimously approved the transaction.
Under the deal, each SEMAFO shareholder will receive 0.1422 Endeavour shares, representing a premium of 27.2% based on the 20-day volume-weighted average price of both companies for the period to March 20 this year.
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The implied equity value for SEMAFO of C$1 billion based on Endeavour’s closing price on March 20 this year. The deal is immediately accretive on all key financial metrics, Endeavour said in a statement.
"Together, we will create a leading West African gold company with production of more than 1 million ounces of gold annually, supported by a robust pipeline of development projects and a significantly enhanced exploration portfolio focused on the highly prospective Birimian Greenstone Belt," Sébastien de Montessus, Endeavour's CEO added.
"With both companies having recently completed build-out phases and mine ramp-ups, the combined business is well positioned for a sustained period of strong cash flows."
Michael Beckett, Endeavour's chairman added: "We will also continue to benefit from having La Mancha as a cornerstone shareholder, who will invest $100 million into to the combined entity and hold a 25%t interest on a pro forma basis."
Endeavour and SEMAFO have worked as industry partners and early last year began a dialogue to evaluate the merits of a combination but then it was not possible to agree terms. Earlier this year, talks began again.
Intermediate producer SEMAFO operates two mines - the Mana and Boungou mines in Burkina Faso. Endeavour operates four mines across Côte d’Ivoire (Agbaou and Ity) and Burkina Faso (Houndé, Karma).
Endeavour shares slipped around 13.5% in Toronto to C$18.70 each.
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