#Endeavour Mining#True Gold#True Gold Mining#Neil Woodyer

Endeavour Mining to Acquire True Gold: Low Cost Gold Production

Endeavour Mining (TSX:EDV) (OTCQX:EDVMF) is pleased to announce that it has entered into a definitive arrangement agreement with True Gold Mining Inc. (...

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|Mar 7|magazine16 min read

Endeavour Mining (TSX:EDV) (OTCQX:EDVMF) is pleased to  announce that it has entered into a definitive arrangement agreement with True Gold Mining Inc. (“True Gold”) (TSX-V:TGM) pursuant to which Endeavour Mining will acquire all of the issued and outstanding common shares of True Gold via a court-approved plan of arrangement (the “Arrangement Agreement”).  In conjunction with the acquisition, Endeavour Mining is pleased to announce that La Mancha Holding S.àr.l., its largest shareholder with 30% ownership, intends to exercise an anti-dilution right that will result in an approximate CDN$82.6 million (US$61.5 million) new equity placement in Endeavour Mining. 

Neil Woodyer, CEO of Endeavour Mining, stated: “The production profile and low cost of True Gold’s Karma Mine is a very attractive fit with our West African operating portfolio.  Karma is nearing production, and Endeavour Mining has both the financial strength and an experienced operations team to ensure Karma’s value is maximized during this important stage.  While True Gold shareholders are receiving an attractive premium and an opportunity to participate in a larger diversified West African producer, Endeavour Mining shareholders are gaining a new, low-cost mine that boosts group production while reducing group AISC/oz in a value accretive transaction.  In the long term, the Karma Mine has extensive exploration potential to extend its mine life.  Endeavour Mining’s enhanced ability to finance an expanded exploration strategy at Karma, and at our own mines, is expected to generate significant value.

Highlights of the Acquisition

  • The True Gold acquisition is consistent with Endeavour Mining’s previously-announced ‘buy-and-build’ strategy and firmly positions the company as one of West Africa’s premier gold miners.
  • The Karma Mine provides a material upgrade to the recently divested Youga Mine and emphasizes management’s dedication to proactive portfolio management and cash flow maximization.
  • On a pro forma basis, Endeavour Mining will have five producing mines; the Houndé Project, a long-life and low-cost development project that is construction ready; and an attractive pipeline of development and exploration properties (see Figure 1 for locations).
  • Through an all-stock transaction, True Gold shareholders can continue to participate in the future growth of Karma through Endeavour Mining shares and, importantly, access its superior financial capacity and leverage its proven operating team. 
  • Endeavour Mining’s cash balance and available amount from its revolving credit facility totaled US$220 million, as of December 31, 2015.  Including the US$20 million proceeds received from the sale of the Youga Mine on February 29, 2016 and the La Mancha anti-dilution investment of US$61.5 million increases the available liquidity to approximately US$301.5 million.
  • A pro forma market capitalization of CDN$1.08 billion using Endeavour Mining’s closing price on the TSX as of March 3, 2016.
  • For 2016, Endeavour Mining has production guidance range of 535,000 to 560,000 ounces (updated to exclude the recently sold Youga Mine) at an AISC/oz range of US$870 to US$920.  Adding the Karma Mine potentially lowers the AISC range by approximately US$25/oz (assuming Karma achieves US$700 AISC/oz in 2016).
  • Endeavour Mining will integrate Karma into its existing operations management structures and does not anticipate an increase in its corporate G&A expense also True Gold G&A will be eliminated (~6 m C$/year).
  • Across a range of valuation metrics and contribution analysis, this acquisition is value accretive to the Endeavour Mining shareholders.
  • Valuation upside as Endeavour Mining continues to grow its low-cost gold production, and this transaction enhances a financing plan that accelerates the construction of the Houndé Project and the ability to finance an expanded exploration strategy.

Summary of the transaction

  • Acquisition of True Gold in an all share transaction with each True Gold common share exchanged for 0.044 of an Endeavour Mining common share valuing True Gold at approximately CDN$0.57 per share or CDN$226 million, using closing prices on the TSX and TSX-V as of March 3, 2016.  Using Endeavour Mining’s 20-day volume weighted average price (“VWAP”), the acquisition is valued at CDN$191 million. 
  • The offer represents a 43.4% premium for the True Gold shareholders using closing prices as of March 3, 2016 and a 32.7% premium using 20-day VWAPs, on the TSX and TSX-V, respectively.
  • True Gold has a 90% interest in the Karma gold mine in Burkina Faso, which is nearing production start-up with first gold pour anticipated in late March / early April 2016.  The acquisition will increase Endeavour Mining’s forecast gold production rate by approximately 110,000 - 120,000 ounces per year at a low AISC of approximately US$700/oz in years 1 to 5, with a mine life of 8.5 years based on current reserves.
  • Endeavour Mining’s attributable Proven and Probable gold reserves will increase by 19% to 5.4 million ounces and Measured and Indicated gold resources will increase by 39% to 10.2 million ounces, and Inferred gold resources will increase by 123% to 3.9 million ounces (see Appendix 2).  
  • Under the transaction, Endeavour Mining is providing a US$15 million convertible bridge loan to True Gold (the “Bridge Loan”) to ensure True Gold remains well funded as it completes construction of the Karma Mine.  Currently, True Gold has drawn US$105 million of its US$120 million gold streaming facility with Franco-Nevada Corporation and Sandstorm Gold Ltd.  Endeavour Mining is providing the Bridge Loan as a financing alternative that allows True Gold to maintain its current liquidity without additional gold streaming. 
  • The anti-dilution right permits La Mancha to subscribe for new Endeavour Mining shares to maintain its current 30% ownership.  Upon completion of the True Gold acquisition, La Mancha has committed to purchase approximately 7.5 million Endeavour Mining shares at a price of CDN$10.94 (in line with 20-day VWAP) for proceeds of approximately CDN$82.6 million. The subscription for, and listing of, all new shares is subject to TSX and other regulatory approvals.  

    About Endeavour Mining Corporation

    Endeavour Mining is a TSX-listed intermediate gold mining company which operates four West African mines in Côte d’Ivoire, Mali, Burkina Faso and Ghana. In 2016, it expects to produce between 535,000 and 560,000 ounces at an all-in sustaining cost of US$870 to US$920 per ounce, after the sale of the Youga Mine and before the addition of the Karma Mine. Endeavour Mining is focused on effectively managing its existing assets to maximize cash flow as well as pursuing organic and strategic growth opportunities that benefit from its management and operational expertise.

  • Source: Endeavour Mining Website - www.endeavourmining.com