Centamin rebuffs US$1.9B bid from Endeavour Mining

Egypt-focused gold miner Centamin (TSX: CEE; LON: CEY) has rejected a US$1.9-billion all-stock takeover bid from Canada’s Endeavour Mining (TSX: EDV) announced earlier on Tuesday, saying it did not offer enough value to the company’s shareholders.

Additionally, the proposed deal would put dividends at risk and expose Centamin to Endeavour’s $729 million of gross debt obligations, including $310 million maturing in 2021, it said.

Endeavour was planning to offer 0.0846 of its own shares for each Centamin share, equivalent to about 126.27 pence ($2.18) per share. That represents a 13% premium to the British company’s last closing price.

The Toronto-listed miner, which is ultimately seeking to gain control of Centamin’s Sukari mine in Egypt, also said Centamin had rejected several previous attempts to engage in talks.

“Despite repeated good faith attempts to engage with Centamin, our efforts have been frustrated by their refusal to entertain any discussions about a merger before entering into a standstill agreement,” Endeavour’s chief executive Sébastien de Montessus said. “A standstill would have the effect of precluding us from taking the proposal to shareholders if the proposal was not seriously considered by Centamin,” he noted.

The firm’s Sukari gold mine is a 500,000 oz. per year operation, and one of the world’s top ten gold deposits. However, the company has struggled with a series of operational issues at the mine, which have weighed on the asset’s performance and on Centamin’s share price.

Mining operations at Centamin’s Sukari gold mine in Egypt. Credit: Centamin.

Sukari, which began operations in January 2010, and is Egypt’s largest gold mine, comprises a large open pit and an underground portion. Last year, the company worked on operational improvements on both sections, but they took longer than planned to materialize, which impacted output.

Centamin began 2019 with changes to the board, including the move of Josef El-Raghy from executive chairman to chairman, 16 years after becoming managing director. He has remained linked to the company while it searches for a successor.

In the months to follow, the company struggled to boost production at Sukari, its only operating mine, and the disappointments ended with the departure of Centamin’s chief executive, Andrew Pardy, announced in October.

Like El-Raghy, Pardy agreed to stay at the post for a year while Centamin looks for a new boss.

Montessus said he was “disappointed” with Centamin’s refusal to discuss a business combination at a time when investors were pushing for consolidation in the gold sector.

“We believe that the Centamin’s shareholders are currently disadvantaged by the Sukari mine being managed within a single-asset portfolio, by the recent operational challenges and the ongoing leadership transition at Centamin,” he said.

A merger of both companies would create a miner with a market value of more than £2.9 billion  (US$3.8 billion) and annual production of more than 1.2 million oz. gold from three flagship assets.

A potential agreement would be just one more of the many mergers and acquisitions that have swept the gold sector this year, kicked off by the highly publicized multi-billion-dollar mergers of Barrick-Randgold and Newmont-Goldcorp.

The past few days have been especially busy, with China’s state-backed Zijin Mining offering US$1 billion for Canada’s Continental Gold, and Kirkland Lake Gold launching a US$3.7 billion offer for Detour Gold.

— This article was first published by our sister publication MINING.com.