Endeavour Mining Corporation (TSX:EDV) and Teranga Gold Corporation (TSX:TGZ) (OTCQX:TGCDF) are pleased to announce that they have entered into a definitive agreement whereby Endeavour will acquire all of the issued and outstanding securities of Teranga by way of a Plan of Arrangement under the Canada Business Corporations Act. Management will host a joint conference call and webcast today, at 8.30am Toronto time, 1.30pm London time (information provided in the section below).
Existing Endeavour and Teranga shareholders will own approximately 66% and 34%, respectively, of the combined company on a fully diluted in-the-money basis. Pursuant to the Plan of Arrangement, Teranga common shares will be exchanged at a ratio of 0.470 Endeavour ordinary shares for each one Teranga common share (the “Exchange Ratio”). The Exchange Ratio represents a modest premium of 5.1% based on the closing price of Endeavour and Teranga’s shares on the TSX on November 13, 2020 and 9.4% based on the 20-day volume weighted average price of both companies for the period ended November 13, 2020.
Sébastien de Montessus, President and CEO of Endeavour, said: “This combination offers an attractive opportunity to both sets of shareholders. By combining our complementary assets, we will enhance our strategic position on West Africa’s highly prospective Birimian Greenstone Belt and we will have the ability to deliver material synergies. The combined entity will become a new senior gold producer and enjoy an improved capital markets profile, underpinned by a healthy balance sheet and strong cash flow capabilities to support a sustainable dividend.
This transaction is immediately accretive to our shareholders on a NAV basis and broadly CFPS and EPS neutral over the next two years. It will be strongly accretive from 2023 when Sabodala-Massawa is ramped up into a top asset in the region while immediately adding geographic diversification into mining-friendly Senegal. The Wahgnion mine provides immediate cash flow and the rapidly advancing Golden Hill and Afema projects offer further growth optionality. The Teranga management team has done an outstanding job unlocking value and we look forward to continuing to deliver returns for shareholders through the creation of a business with outstanding prospects.”
Richard Young, President and Chief Executive Office of Teranga, said: “We have taken Teranga from a single asset producer to a low cost, mid tier gold producer over the past few years. This combination with Endeavour, strongly supported by our two largest shareholders, allows Teranga shareholders to benefit from an improved valuation as owners of a best in class senior gold producer with among the lowest costs as well as among the best balance sheet, free cash flow yield, growth pipeline and dividend yield.”
Teranga is a low cost, mid tier gold producer in West Africa with two producing gold mines and an attractive growth pipeline in Senegal, Burkina Faso and Côte d’Ivoire. Teranga is expected to produce 533,000 ounces of gold per year at average all-in-sustaining costs of $785 per ounce over the next five years. Endeavour is a leading West African gold producer with six mines across Burkina Faso and Côte d’Ivoire with a production profile of over 1 million ounces at below $900 per ounce.
CREATES A NEW TOP 10 SENIOR GOLD PRODUCER WITH INDUSTRY-LEADING LOW PRODUCTION COSTS
Figure 1: 2021 Gold Production for Senior Gold Producers1 Figure 2: 2021 AISC for Senior Gold Producers1
COMBINES HIGHLY COMPLEMENTARY ASSETS WITH POTENTIAL FOR SIGNIFICANT SYNERGIES
ABILITY TO PAY ATTRACTIVE DIVIDENDS AND FUND GROWTH UNDERPINNED BY STONG BALANCE SHEET
HIGH POTENTIAL FOR SIGNIFICANT SHARE PRICE RE-RATING
Figure 3: Senior Gold Producers Trading Multiples6
COMBINATION STRONGLY SUPPORTED BY CORNERSTONE SHAREHOLDERS
Voting Support Agreements Received
La Mancha Commits to Invest $200 Million in Support of Combination
TRANSACTION APPROVALS AND TIMELINE
For Endeavour, pursuant to the rules of the TSX, the Combination will require approval by a simple majority of the votes cast by its shareholders. In addition, shareholders of Endeavour will be asked to approve the issuance of Endeavour ordinary shares to La Mancha pursuant to the terms of a subscription agreement entered into between Endeavour and La Mancha dated November 16, 2020. Such resolution will require the approval of a simple majority of votes cast by Endeavour shareholders.
For Teranga, the Combination will require the approval of 66 2/3% of votes cast by shareholders of Teranga and the approval of a simple majority of the votes cast by shareholders of Teranga, other than the shareholders required to be excluded under applicable laws, including Barrick Gold who is a syndicate member in Teranga’s facility with Taurus Funds Management Pty Ltd which is intended to be refinanced on closing.
Full details of the Combination will be included in the joint management information circular of Endeavour and Teranga, which is expected to be mailed to each company’s respective shareholders in December 2020. It is anticipated that both shareholder meetings and the closing of the Combination will take place in the first quarter of 2021.
BOARD, MANAGEMENT AND EMPLOYEES
The Board of Directors of Endeavour will be comprised of 10 directors, including 7 representatives from Endeavour and 3 from Teranga.
Sebastien de Montessus and his executive team will lead the combined group, with the support of key Teranga senior management.
BOARD OF DIRECTORS’ RECOMMENDATIONS
Teranga appointed a special committee of independent directors to consider and make a recommendation with respect to the Combination. Based in part on the unanimous recommendation of the special committee of Teranga, the Arrangement Agreement has been unanimously approved by the Board of Directors of Teranga. The Arrangement Agreement has also been unanimously approved by the Board of Directors of Endeavour. Both Boards of Directors recommend that their respective shareholders vote in favor of the Combination.
Canaccord Genuity Corp has provided a fairness opinion to the Board of Directors of Teranga and Cormark Securities Inc. has provided a fairness opinion to the Special Committee of Teranga. Each fairness opinion stated that, as of the date thereof and, based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the consideration received under the Arrangement Agreement is fair, from a financial point of view, to the Teranga shareholders. Scotiabank has provided a fairness opinion to the Board of Directors of Endeavour stating that, as of the date thereof and, based upon and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration to be paid by Endeavour to the shareholders of Teranga is fair, from a financial point of view, to Endeavour.
Mr. Naguib Sawiris, Chairman of the Board of Managers of La Mancha, abstained from voting as a director of Endeavour on the $200 million investment by La Mancha.
CONDITIONS AND OTHER PROVISIONS
In addition to shareholder and court approvals, the Combination is subject to applicable regulatory approvals including TSX and Investment Canada Act and Competition Act (Canada) approvals and the satisfaction of certain other closing conditions customary in combinations of this nature.
The Arrangement Agreement contains customary provisions including mutual non-solicitation provisions, a mutual right to match any superior proposal of the other party, a $40 million termination fee payable to Teranga under certain circumstances, and a $40 million termination fee payable to Endeavour under certain circumstances.
In addition to other customary closing conditions under the Arrangement Agreement, there is a closing condition in favor of Endeavour that it shall be provided by Franco-Nevada (Barbados) Corporation a waiver and consent in respect of certain change of control and other requirements under the amended and restated gold purchase and sale agreement, dated May 1, 2019, among, amongst others, Franco-Nevada (Barbados) Corporation, Teranga and Teranga Gold (B.V.I.) Corporation, in form and substance satisfactory to Endeavour, acting reasonably.
ADVISORS AND COUNSELS
Gleacher Shacklock LLP and Scotiabank are acting as financial advisors to Endeavour with McCarthy Tétrault LLP and Linklaters LLP acting as Endeavour’s legal advisors.
Cormark Securities Inc., Cutfield Freeman & Co. Ltd. and Canaccord Genuity Corp. are acting as financial advisors to Teranga with Stikeman Elliott LLP acting as Teranga’s legal advisor.
Blake Cassels & Graydon LLP acted as the legal advisor to Teranga’s Special Committee.
Stanhope Capital LLP acted as financial advisor to Tablo Corporation.
Norton Rose Fulbright Canada LLP acted as legal advisor to La Mancha.
Endeavour Mining is a multi-asset gold producer focused on West Africa, with two mines (Ity and Agbaou) in Côte d’Ivoire, four mines (Houndé, Mana, Karma and Boungou) in Burkina Faso, four potential development projects (Fetekro, Kalana, Bantou and Nabanga) and a strong portfolio of exploration assets on the highly prospective Birimian Greenstone Belt across Burkina Faso, Côte d’Ivoire, Mali and Guinea.
As a leading gold producer, Endeavour Mining is committed to principles of responsible mining and delivering sustainable value to its employees, stakeholders and the communities where it operates. Endeavour is listed on the Toronto Stock Exchange,
Teranga is a mid-tier gold producer operating long-life, low-cost mines and advancing prospective exploration properties across West Africa, one of the world’s fastest growing gold jurisdictions. The top-tier gold complex created by integrating the recently acquired high-grade Massawa project with Teranga’s Sabodala mine, the successful commissioning of Wahgnion, Teranga’s second gold mine, and a strong pipeline of early to advanced-stage exploration assets support the continued growth of Teranga’s reserves, production and cash flow. Through its continued success and commitment to responsible mining, Teranga creates sustainable value for all stakeholders and acts as a catalyst for social, economic, and environmental development.
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