More gold merger news from Diggers and Dealers

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DIGGERS AND DEALERS: Just before Endeavour Mining Corporation executive director and CEO Mark Connelly was to deliver his presentation at Diggers & Dealers, the ASX and TSX-listed company announced it had entered into a definitive arrangement agreement with Avion Gold Corporation.

The deal will result in Endeavour acquiring all of the issued and outstanding common shares of Avion via a court-approved plan of arrangement.

Summary of the transaction:

–    Acquisition of Avion in an all share transaction with each Avion common share exchanged for 0.365 of an Endeavour common share valuing Avion at CDN$0.88 per share or CDN$389 million, using closing prices on the TSX as of August 7, 2012;

–    The acquisition will immediately increase Endeavour’s forecast gold production by approximately 50 per cent to 282,000 to 304,000 ounces for 2012;

–    Endeavour is providing a US$20 million short term exchangeable loan to Avion to restart the Tabakoto mill capacity upgrade, leading to further gold production growth to over 450,000 ounces per year when Agbaou reaches steady state production;

–    Endeavour’s NI 43-101 compliant, attributable Proven and Probable gold reserves will increase by 31 per cent to 2.8 million ounces and Measured and Indicated gold resources increase by 52 per cent to 6.0 million ounces and Inferred gold resources increase by 167 per cent to 3.3 million ounces; and

–    The acquisition of Avion will create one of the largest West African mining companies with three producing mines, a fourth mine currently in construction, and an attractive pipeline of exploration and resource development properties.

 

Mine and project location map. Source: Company announcement

 

Speaking to journalists after his presentation, Connelly said the company’s reasoning behind the deal was its desire to grow.

He said the deal reflects the company’s previously announced plans to become a 450,000 to 500,000 ounce producer by the end of 2013.

“This presents that today,” he said.

“We will be at 450,000 [ounces] with the acquisition of Avion, plus the upgrade of the Tabakoto mine in Mali.

Connelly said Endeavour had been looking at a number of opportunities that had become increasingly attractive due to valuations easing within some of the targets the company had been focused on.

“Our primary targets have always been in West Africa,” he explained.

“We have our technical operational base there, we have demonstrated we can build projects, permit them and operate them successfully within West Africa.

“Avion has open pit mining and underground at Tabakoto and Kofi in Mali. They have a very good exploration opportunity in Burkina Faso, called Houndé.

“We see Mali as being another potential for us. It is the southwest part of Mali; all the operational mines are there…so we are in the right jurisdiction and right location.”