Mining is set to produce more than 300,000 ounces of gold annually after agreeing to acquire Canadian-based gold mining company Avion Gold.
The C$389 million deal involves Endeavour acquiring all of the issued and outstanding common shares of Toronto-listed Avion via a court-approved plan of arrangement.
The acquisition will create one of West Africa’s largest mining companies, comprising three producing mines, a fourth mine currently under construction and many exploration opportunities.
Under the agreement, Avion shareholders will receive 0.365 of an Endeavour common share in exchange for each Avion common share: valuing Avion at C$0.88 per share.
The takeover will increase Endeavour’s gold production forecast by about 50 per cent to between 282,000oz and 304,000oz for 2012, and increase its proven and probable gold reserves by 31 per cent to 2.8 million ounces.
Its measured and indicated gold resources will increase to 6moz while inferred gold resources will increase to 3.3moz.
Avion holds an 80 per cent share in the Tabakoto and Segala gold projects in Mali.
As part of the agreement, Endeavour will provide a US$20 million short-term exchangeable loan to Avion to restart its Tabakoto mill capacity upgrade.
Endeavour chief executive Neil Woodyer said the acquisition complemented the company’s strategy of becoming a leading and diversified West African gold producer.
“Avion’s Tabakoto mine and Kofi property in western Mali, and the advanced Houndé property in Burkina Faso, fit very well into Endeavour’s production and development portfolios,” he said.
The Tabakoto mine produced 91,200oz of gold at $652 per ounce in 2011, with 2012 production expected to deliver between 95,000oz and 102,000oz of gold.
Avion president, chief executive and director John Begeman said the transaction was “mutually beneficial to both parties”.
“It provides shareholders with a substantial, premium and meaningful ownership in a stronger combined West African-focussed mining company with the financial resources to withstand a protracted lull in the capital markets,” he said.
The agreement is subject to Avion and Endeavour shareholder approval, and other customary conditions including court approvals.
The two shareholder meetings are expected to be held in October. Meanwhile, Endeavour has been granted a mining permit from the Côte d’Ivoire government for its 85 per cent-owned Agbaou gold project, which is under construction and on track to begin production in the first quarter of 2014.
Agbaou is one of the largest undeveloped gold resources in Côte d’Ivoire and Endeavour hopes to produce 100,000oz per annum from the mine.