Endeavour to acquire Avnel to further strengthen high-quality project pipeline

JOHANNESBURG (miningweekly.com) – Canadian gold producer Endeavour Mining will acquire gold mining, exploration and development company Avnel Gold, which owns the Kalana gold project in Mali, in an all-share transaction valued at about $122-million.

The transaction, which is expected to close in September, has been unanimously approved by the companies’ boards of directors.  

Avnel holds an 80% share in the Kalana gold project and holds significant exploration permits in the surrounding area.

Kalana is a high-quality project that fits Endeavour's strategic portfolio criteria and whose addition strengthens the company’s construction pipeline, following the completion of the Houndé and Ity carbon-in-leach (CIL) projects, in Burkina Faso and Côte d’ivoire, respectively, and it leverages its operational synergies in the region.

The project, which will include a 1.2-million-tonne-a-year CIL plant and a single openpit with proven and probable reserves of nearly two-million ounces grading 2.8 g/t gold, is fully permitted.

According to a feasibility study, Kalana has an 18-year mine life, with expected production of 148 000 oz/y at an average all-in sustaining cost (AISC) of $561/oz over the first five years, based on the optimisation scenarios pursued by Avnel.

The same optimisation scenarios, if adopted, could provide an after-tax net present value of $321-million and an after-tax internal rate of return of 50%, based on a gold price of $1 200/oz.

Endeavour intends to redesign and enhance the current feasibility study and anticipates expanding the plant’s capacity, which would increase the average yearly production and shorten the mine life based on current reserves. The company also intends to launch a new exploration programme to capture additional potential. 

"We are delighted to have reached this agreement with Avnel. We believe Kalana fits well within our strategy of building a high-quality portfolio of long-life, low-AISC assets with exploration upside. [This] acquisition expands our footprint in Mali and reinforces our project pipeline, which will allow us to continue to leverage our in-house construction expertise,” Endeavour president and CEO Sébastien de Montessus said in a statement on Thursday.

Avnel CEO and chairperson Howard Miller added that the transaction with Endeavour would deliver significant benefits to all stakeholders, with Avnel's shareholders to receive an immediate premium and still benefit from the Kalana project.

TRANSACTION DETAILS
Endeavour will acquire 100% of Avnel's issued and outstanding common shares under a court-sanctioned scheme of arrangement.

Avnel shareholders will receive 0.0187 of an Endeavour share for each Avnel share held, which represents a value of C$0.42 a share based on Endeavour's 5-day volume-weighted average price (VWAP) on the TSX on June 28 and a total transaction consideration of about C$159-million or $122-million.

This represents a premium of 48% to the closing price of Avnel's ordinary shares on the TSX on June 28 and a 52% premium based on Avnel's 20-day trailing VWAP on the TSX for the period ending on June 28.

About seven-million Endeavour shares are to be issued under the scheme, based on the issued and outstanding shares of Avnel.

Following the completion of the transaction, Endeavour will have about 103.6-million ordinary shares in issue, with former Avnel shareholders holding about 6.8% of Endeavour's pro forma share capital.

The scheme will be subject to, among other things, approval by Avnel’s shareholders.

Avnel's directors intend to recommend that Avnel shareholders vote in favour of the scheme. Directors holding shares have irrevocably undertaken to Endeavour to do so in respect of their holdings of, in aggregate, 1 000 Avnel shares.