Endeavour Mining to Acquire True Gold Mining for C$226 million

Endeavour Mining (TSXV:EDV) announced on Friday morning that it will acquire True Gold Mining (TSXV:TGM) in an all-share transaction.
Each True Gold share will be exchanged for 0.044 of an Endeavour Mining share, valuing True Gold at approximately C$0.57 per share, or C$226 million. As of 1:42 p.m. EST, True Gold’s share price was up 22.78 percent, at $0.49.
“The production profile and low cost of True Gold’s Karma Mine is a very attractive fit with our West African operating portfolio,” said Endeavour Mining CEO Neil Woodyer. “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.”
True Gold owns a 90-percent interest in the Karma gold mine in Burkina Faso, for which first gold pour is anticipated in March or April of 2016. The mine is expected to produce 110,000 to 120,000 ounces per year over its 8.5-year mine life, with all-in sustaining costs (AISC) of US$700 per ounce for the first five years of production.

“I am very proud of what our team has accomplished at True Gold. In just over three years we have taken Karma from an unpermitted and unfunded conceptual project to a fully constructed mine, nearing production start,” said Mark O’Dea, executive chairman at True Gold, in a statement.
He added, “[o]ur long term goal for the Company has been to grow the business into a significant and highly profitable producer. This transaction with Endeavour accomplishes that goal, giving our shareholders meaningful ongoing exposure to Karma as it moves into production, as well as exposure to Endeavour’s exceptional portfolio of producing mines and development projects.”
O’Dea is also chairman of Oxygen Capital, which is behind Pilot Gold (TSXV:PLG) and Pure Gold Mining (TSXV:PGM) in addition to True Gold. Shareholder meetings and the closing of the transaction are expected to take place in April 2016.
In a note to clients released on Friday, Tara Hassan of Haywood Securities gave Endeavour Mining a “buy” rating and a target price of $12. She states in the report that the company reported mixed 2015 financial results, missing consensus estimates on one-time items, but beat its 2015 production guidance and AISC guidance. The company also delivered significant free cash flow and improved its net debt position.
Hassan also notes that the company will be updating its valuation to consider Friday morning’s announcement. “The transaction will result in Endeavour growing its West African production base to in excess of 850 koz by 2019, allowing it to compete to be in the top 3 African gold producers,” she states.
Shares of Endeavour were trading at $11.43 as of 1:42 p.m. EST, down 11.19 percent.

 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.