Endeavour Mining drops bid for Centamin

Canada’s Endeavour Mining (TSX:EDV) has walked away from a potential 1.47 billion pound ($1.9 billion) acquisition of Centamin (LON:CEY) (TSX:CEE), citing lack of information on the company’s assets.

Endeavour said the quality of the data shared by the Egypt-focused company during an accelerated due diligence process was “insufficient” to make a firm offer. Therefore, merger talks have been terminated, it said.

“We remain convinced about the strategic rationale of combining Endeavour and Centamin to create a diversified gold producer with a high-quality portfolio of assets,” chief executive Sébastien de Montessus said in the statement.

Under UK takeover rules, Endeavour now has to wait six months before it can bid again for Centamin unless another party makes an offer or it reaches a deal with the Egyptian miner.

Centamin had rebuffed the all-stock takeover proposal from Endeavour in December, saying it did not offer enough value to its shareholders. The miner reiterated those reasons on Tuesday, saying the offer materially undervalued Centamin and its prospects.

It also noted that the terms of the deal did not adequately reflect the contribution that it would make to the merged entity, adding that the company was better positioned to deliver shareholder returns than the combined entity. 

The UK’s takeover panel agreed to extend a deadline for the Toronto-listed miner to make a firm offer, to allow more time for the two sides to engage and share information.

Endeavour, a West African-focused gold miner owned by billionaire Egyptian Naguib Sawiris, was seeking to gain control of Sukari, a 500,000-ounce-a-year gold mine and one of the world’s top ten deposits of the yellow metal.

The operation, which entered production in January 2010 and is Egypt’s largest gold mine, comprises a large open pit and an underground portion. 

Centamin has, however, struggled with a series of operational issues at the asset, which have weighed on its performance and on the company’s share price.

The company spent most of 2018 working on operational improvements on both sections, but they took longer than planned to materialize, which hit output.

The negative effects were short-lived. Centamin said last week that gold production jumped 51% in the last three months of 2019. It noted that Sukari churned out 148,387 ounces of gold in the fourth quarter, which is the mine’s strongest performance since the end of 2017.

A deal between the two companies would have created a strong mid-tier gold miner with a market value of almost $4 billion and annual output of more than 1.2 million ounces.

The transaction would have been one more of the many mergers and acquisitions that have swept the gold sector in the past year.

The frenzy, kicked off by the highly publicized multi-billion mergers of Barrick – Randgold and Newmont – Goldcorp in early 2019, has picked up speed in the past month. China’s state-backed Zijin Mining offered $1bn for Canada’s Continental Gold in early December and Kirkland Lake Gold launched a $3.7bn offer for Detour Gold.