Endeavour Mining Corporation (Endeavour) announced on Tuesday an all-share merger with Centamin plc (Centamin), where Centamin is valued at $1.89bn.
Endeavour proposes an exchange ratio of 0.0846 in Endeavour shares to each Centamin share, representing a 5% premium to the 30-day volume-weighted average price of Endeavour and Centamin and a 13.1% premium to the closing price of Endeavour and Centamin on December 2.
Michael Beckett, Chairperson of Endeavour, said “We firmly believe that the proposed combination between Endeavour and Centamin provides a compelling value creation opportunity for both sets of shareholders which is superior to what can be achieved by each company on a standalone basis. Despite repeated good faith attempts to engage with Centamin, our efforts have been frustrated by their refusal to entertain any discussions about a merger before entering into a standstill agreement. A standstill would have the effect of precluding us from taking the proposal to shareholders if the proposal was not seriously considered by Centamin. We have therefore decided that, due to the strong merits of the merger and its potential to create value, it is necessary to make public our proposal so that the voices of shareholders are heard.”
While Endeavour President and CEO, Sébastien de Montessus, said that they believe Centamin’s shareholders are currently disadvantaged by the Sukari mine being managed within a single-asset portfolio, by the recent operational challenges and the ongoing leadership transition at Centamin.
He added “There would be immediate potential benefits from integrating Sukari into a multi-asset portfolio that is managed with a long-term value focus and with La Mancha as a key cornerstone shareholder. Building on our operational track record, we believe that the combined management team, we would be ideally positioned to improve the efficiency of Sukari and deliver stronger value to both sets of shareholders.”
The Sukari mine, which began production in 2009, is considered to be the first large scale modern gold mine in Egypt and is located in the south-eastern region of the Eastern Desert. It is jointly owned by Centamin and the Egyptian Mineral Resources Authority on a 50% equal basis.
Sukari mine has a gold production rate range from 490,000 to 520,000 ounces in 2019, with around 15.5m ounces of gold in reserves, which makes it one of the largest gold mines in the world.
Endeavour Mining’s largest shareholder, La Mancha Holding – with 29.88% stake – welcomed the proposal on Tuesday. Egyptian tycoon, and La Mancha Holding Chairperson, Naguib Sawiris said that “We believe in the strategic rationale for this proposal and are fully supportive. We have long argued that there is scope for further consolidation within the industry. Moreover, we can add significant value in Egypt, which is opening-up its mining sector through a new, more supportive mining code, and increase the potential for further expansion in the country. We strongly urge the Centamin board to engage with Endeavour to explore the merits of this combination further.”