Gold mining giant Endeavour Mining is in talks with the much smaller Teranga Gold over a merger which if successful would mark the latest in a series of deals involving the West African gold industry.
Increased consolidation of mining firms operating in Western Africa enhances miners’ abilities to manage increasing security costs especially in the lawless Sahel region.
“The combination of Endeavour and Teranga would further solidify Endeavour as West Africa’s leading gold producer – though a low premium offer for Teranga would leave too much value on the table,” Raymond James analyst Craig Stanley said.
Endeavour, which is 24.12% owned by Egypt’s Sawiris family, has been on the acquisition trail this year as gold prices have gained on the back of global stimulus.
In March, Endeavour acquired Semafo to become Burkina Faso’s biggest gold producer, increasing its focus there despite rising insecurity. The firm also uncovered additional gold wealth in the country.
Endeavour had a market capitalization of $4 billion as of Monday’s close, while Teranga was valued at $1.55 billion.
A deal with Teranga, if completed, would add another operating mine, Wahgnion, to Endeavour’s four existing mines in Burkina Faso, and also give it exposure to Senegal.
Teranga last year bought Barrick Gold’s 90% stake in Senegal’s Massawa project.
The CEO of Barrick Gold, which operates Mali’s biggest gold mine, has been among the loudest industry voices calling for consolidation.
But with gold prices and company valuations at eye-watering levels, mining executives have been trying to reassure investors that they are not going on buying sprees or paying hefty premiums.