Endeavour’s Centamin plan hits roadblock

Centamin Plc [CEE-TSX, CEY-LSE] has released an update in relation to an unsolicited conditional proposal from Endeavour Mining Corp. [EDV-TSX] in connection with a proposed all-share combination of the two companies.

“Since it was approached by Endeavour in November, Centamin has repeatedly made it clear to Endeavour that it is willing to facilitate a reciprocal exchange of due diligence information in order to better assess the value to shareholders of the potential combination,” Centamin said in a press release Wednesday December 18.

“To allow that exchange of information to take place, Centamin proposed that a non-disclosure agreement (NDA) be executed,” the company said.

However, Centamin said Endeavour declined to enter into an NDA and instead made a voluntary announcement which, under City Code on Takeovers and Mergers, triggered an automatic and mandatory deadline of 31 December [the PUSU Deadline] for Endeavour to either announce a firm intention to make an offer for Centamin under Rule 2.7 of the Code or announce that it does not intend to make an offer for Centamin.

On December 10, Centamin said the parties executed an NDA and the Chairman of Centamin and CEO of Endeavour met. During that meeting on December 14, Centamin said it was agreed that the parties would conduct a reciprocal due diligence in order to fully assess the value to shareholders of the potential combination as a precursor to any further negotiations.

However, Centamin said Endeavour has now indicated that it will not provide the information that Centamin has requested unless and until Centamin agrees to an extension of the PUSU Deadline. “Without Endeavour providing important information that is core to the assessment value, such as its financial model, Centamin cannot properly assess the proposed combination,” the company said.

Centamin went on to say that its board of directors is disappointed that despite its efforts at constructive engagement, Endeavour has repeatedly refused to engage in a proper manner. “The unsolicited approach from Endeavour has created an intense period of uncertainty for all of the company’s stakeholders. Therefore, the board of Centamin believes that Endeavour should, without further delay, enter into substantive reciprocal due diligence,” Centamin said.

“The company will determine whether to seek an extension of the PUSU Deadline following its review of any information forthcoming from Endeavour.”

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 an ounce. 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.

On Wednesday, Centamin rose 2.5% or $0.05 to $$2.06.  The shares are trading in a 52-week range of $1.39 and $2.53. Endeavour eased 1.1% or 26 cents to $23.60.  The shares trade in a 52-week range of $17.24 and $28.98.