The current wave of gold consolidation has reached London as Canadian company Endeavour Mining (CAN:EDV) has gone public with an all-share offer for Centamin (CEY). The Sukari miner’s shares initially climbed 9 per cent on the news, although its board has rejected the offer.
Endeavour said it had put its terms to Centamin's board last week but was “frustrated” by a lack of engagement. This was the third approach it had made, Endeavour said.
The rejected offer would have given Centamin shareholders 0.0846 Endeavour shares per share owned. At the 2 December price, this represents a 13 per cent premium and values the London company at £1.47bn. The proposal would see Centamin's shareholders own 47 per cent of the combined company.
In a statement, Centamin said the offer would disadvantage its shareholders.
“[The board believes] the terms of the proposal provide comparatively greater benefit to Endeavour's shareholders, do not adequately reflect the contribution that Centamin would make to the merged entity and that Centamin is better positioned to deliver shareholder returns than the combined entity,” Centamin said.
Endeavour operates four mines in West Africa, with production forecast for 665,000 ounces (oz) in 2019, compared with Centamin’s 490,000 oz. The Egypt-focused miner has had a poor run over the past 18 months operationally, and its production has fallen 10 per cent since 2017.
While gold has climbed over $1,400 an oz this year, and spent time over $1,500 an oz, Centamin’s production issues have not seen its valuation climb as much as other gold miners. The S&P/TSX Global Mining Index is up 25 per cent in the last year, while Centamin has climbed 18 per cent. Endeavour chief executive Sébastien de Montessus said his company was “ideally positioned to improve the efficiency of Sukari and deliver stronger value to both sets of shareholders”.
