Endeavour drops Centamin takeover plan

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Endeavour Mining Corp. [EDV-TSX; EDVMF-OTCQX] has dropped its planned takeover of Centamin Plc [CEE-TSX; CEY-LSE].

The move by Africa-focused Endeavour comes after Centamin did not seek an extension to a January 14, 2020 deadline for the prospective buyer to make a firm offer. Endeavour said the information Centamin provided during the due diligence process was not enough for it to be confident about lodging a firm offer.

Following a review of the proposal and the available public information on Endeavour, Centamin has previously said its board of directors believes the company is better positioned to deliver shareholder returns than the combined entity. “The board believes that the proposal is skewed in favour of Endeavour’s shareholders and fundamentally undervalues Centamin,” the company said. Centamin also declared a final dividend of US$0.06 per share for 2019.

On December 3, 2019, Centamin issued a statement saying it noted the announcement by Endeavour Mining regarding an unsolicited preliminary proposal for a potential all-share combination of the company and Endeavour based on an exchange ratio of 0.0846 Endeavour shares for each Centamin share.

On Tuesday, Centamin shares eased 7.0% or $0.015 to $1.99. The shares are currently trading in a 52-week range of $1.39 and $2.53.

Endeavour shares advanced on the news, rising 6.0% or $1.42 to $25.08 and now trade in a 52-week range of $17.24 and $28.98.

Centamin Plc is a mineral exploration and development mining company with a dual listing on the London and Toronto stock exchanges.

Centamin’s principal asset, the Sukari Gold Mine, began production in 2009 and is the first large scale modern mine in Egypt. Base case production is 500,000 ounces per year, with the potential to exceed this level as optimization of the mining and processing operations continues.

The company has said its strong record of replacing reserves at Sukari means that despite producing more than 3.7 million ounces of gold to date, Sukari still has a current reserve life of more than 15 years.

Centamin gained a foothold in Burkina Faso, West Africa, via the 2014 acquisition of Australian company Ampella Mining Ltd. and a district-scale land package in southern Burkina that covers the southwest margin of the Boromo Greenstone belt and extends across the border into Cote D’Ivoire.

Endeavour Mining is a West Africa-focused gold producer. It operates four mines across Cote d’Ivoire (Agbaou and Ity) and Burkina Faso (Hounde, Karma), which are expected to produce 650,000 ounces of gold this year at an all-in-sustaining cost of US$795 to US$845/oz. Its ongoing five-year exploration program aims to discover 10-15 million ounces of gold by 2021, which represents more than twice the reserve depletion during the period.

Endeavour has said it believes that an all-share merger with Centamin would strongly benefit both sets of shareholders due to the compelling long-term value creation opportunity.

“After several unsuccessful attempts to engage Centamin, on November 25, 2019, Endeavour submitted a proposal regarding a merger to the board of directors of Centamin to initiate formal discussions regarding the prospects for a combination,” Endeavour said in a press release.

However, Endeavour said meaningful engagement was not forthcoming.

Endeavour has estimated that the combined entity could produce 1.2 million ounces of gold at an all-in-sustaining cost of US$875 per ounce.

However, in its response to the proposal, Centamin says the exchange ratio in the proposal would result in Centamin shareholders owning only 47% of the shares of the enlarged company even though Centamin would have contributed 100% of the free cash flow during the first half of 2019.

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