Endeavour Mining Corp and Avnel Gold Mining have reached an agreement under which Endeavour will acquire Avnel in an all-share transaction for a total consideration of approximately $ 122 million (C$ 159 million). The terms of the transaction have been unanimously approved by the Boards of Directors of both companies.
Avnel holds an 80% interest in the Kalana gold project in Mali and holds significant exploration permits in the surrounding area. Kalana is a fully permitted feasibility-stage project based on a 1.2 Mt/y CIL plant and a single open-pit constrained reserve of approximately 2.0 Moz grading 2.8 g/t Au. According to the feasibility study, it has an 18-year mine life and an expected production of 101,000 oz/y at an average All-in Sustaining Cost (AISC) of $784/oz (with 148,000 oz on average during the first five years at an average AISC of $589/oz). The initial capital cost is forecast at $196.3 million and Kalana demonstrates robust economics with an after-tax NPV5% of $257 million, an after-tax IRR of 38% and a payback of 1.2 years based on a gold price of $1,200/oz.
Avnel has pursued optimization scenarios that, if adopted, could provide Kalana with an after-tax NPV5% of $321 million and an after-tax IRR of 50%. In addition, such optimization scenarios could reduce average AISC to $730/oz over the 18-year mine life and to $561/oz over the first five years. Endeavour expects to take advantage of its construction expertise, operating synergies and exploration experience to re-design and optimize the current feasibility study, which is expected to increase the annual production profile and improve the project economics.
Sébastien de Montessus, President & CEO, said: “We are delighted to have reached this agreement with Avnel. We believe that Kalana fits well within our strategy of building a high quality portfolio of long-life, low AISC assets with exploration upside. Furthermore, this acquisition expands our footprint in Mali and reinforces our project pipeline, which will allow us to continue to leverage our in-house construction expertise.
“Kalana adds a third high-quality project to our portfolio, which we intend to develop following the completion of our Hounde and Ity CIL projects. In the interim, we look forward to optimizing the current feasibility study which should unlock further value for both Endeavour and Avnel shareholders, as well as benefiting our partners, the State of Mali and the local communities around Kalana.”
Howard Miller, Chairman and CEO of Avnel, said: “This transaction with Endeavour will deliver many benefits to all our stakeholders. Avnel’s shareholders will receive an immediate premium and benefit from the Kalana project being part of a diversified West African gold producer with significant growth potential and an experienced operational team. With a strong track record of successfully building mines on time and on budget in West Africa, we are confident that Endeavour is the ideal partner to develop Kalana. As such, this transaction will benefit our shareholders, the local community and our partners in the Malian government.”