Mar 31 | 2020
Sébastien de Montessus gives an update on latest developments at the West African gold miner
|Following Endeavour Mining’s acquisition of SEMAFO, we spoke with Sébastien de Montessus, President & CEO at Endeavour Mining.
What made SEMAFO the ideal partner to grow Endeavour Mining’s portfolio in West Africa?
This is a fantastic opportunity for both companies to come together for the benefit of our shareholders and employees and create a leading top 15 global gold producer focused on West Africa.
We have known the SEMAFO team for some time and co-operated closely as industry partners on issues common to companies operating in West Africa. With both companies having just completed their construction phases and fully ramped-up, now is the right time to combine our businesses to strengthen our strategic positioning, enhance our capability to manage risks and leverage our size to become the partner of choice for governments and West African stakeholders.
The new and enlarged Endeavour will be led by a highly skilled and complementary management team, allowing us to pool our joint expertise in open pit and underground mining, heap leach and CIL processing plants, project development and exploration.
Our asset portfolio is significantly strengthened with four cornerstone mines producing over 200koz per annum each providing a solid base and with strong cash flow capabilities. We have an attractive growth project pipeline and added potential to unlock exploration value with the opportunity to deploy a significant exploration budget.
We will be a leading low-cost West African gold producer, the largest in fact in Côte d'Ivoire and Burkina Faso, with annual production of +1.0Moz of gold and a market cap of approximately $2.1bn.
Finally, the combined entity will have an enhanced capital markets profile. For gold producers to remain relevant to investors and particularly generalists, they need scale, tangible near-term growth prospects, a business model that demonstrates sustainable cash flow and a focus on return on capital as well as a certain market cap and liquidity to meet the basic thresholds for a number of the bigger funds.
What are the main synergies of the transaction and what are the next steps to realise them?
The combination of Endeavour and SEMAFO delivers significant synergies at corporate, country and asset level.
At the corporate level, we expect to see some G&A savings in the first year. We’ll have an improved ability to allocate capital between operations as well as the opportunity to optimise our procurement and supply chains, centralise technical services and enhance security measures.
With regards to our portfolio, we will have increased operational diversification, operating synergies between Houndé and Mana, the ability to standardise systems and processes and share human resources, along with an attractive growth project pipeline and optionality with the Fetekro, Kalana, Bantou and Nabanga Projects.
Having just announced the transaction, we are currently in the process of finalising documentation, with a view to completing the transaction in June and then we expect the implementation process to take a few months after that.
Burkina Faso has been a rather challenging territory in the last six months and yet one of the synergies is a potential consolidation of Endeavour and SEMAFO’s assets in Burkina Faso. What factors make Burkina Faso a great investment opportunity?
Burkina Faso has a wealth of yet untapped mineral resources – offering exceptional greenfield exploration potential along the world class highly prospective Birimian greenstone belt. It is a jurisdiction that both management teams know well, having operated there for an extensive period, and we have strong relationships at all levels of government.
SEMAFO’s Mana mine is located in western Burkina Faso, along the same trend as our Houndé mine and consolidates the 200km Houndé belt to create a world class mining district, where both companies have already demonstrated exploration success.
We therefore are confident that this regional consolidation will result in stable and effective management in this jurisdiction by an expert team familiar with the region. West Africa is the 4th largest gold producing region and the most prospective with regards to gold discoveries globally, with Burkina Faso accounting for 17% and 22% of these respectively.
With COVID-19 shaking up the global economy, how much does the pandemic impact Endeavour Mining’s working environment and production targets? What measurements do you have in place with regards to COVID-19?
At Endeavour, we consider the safety and wellbeing of our employees and contractors our highest priority. At the outbreak of COVID-19, we immediately activated our incident management and response plan. The crisis management team is being supported by a well-regarded epidemiologist, acting as special advisor to Endeavour, and an 11-person medical team from a leading US NGO who will be deployed as and when the need arises.
At our mines and offices, we have implemented all the necessary actions, such as temperature monitoring, social distancing, hand sanitizers, education campaigns, restricting all non-essential travel and quarantining any suspected cases.
In addition, we have a business continuity program and have identified 3 levels of response within our overall plan. Response ranges from Level 1 which is essentially regular operations with precautions to prevent international travelers from importing the virus, up to Level 3 which is a partial or complete shutdown of operations as a result of either government mandate or the operating situation.
We are currently at Level 1, although we are closely monitoring the situation on the ground as things continue to change daily. We have also started working with SEMAFO to co-ordinate our COVID-19 responses.
So far, we have not witnessed any impact to production or operations at any of our mines or exploration activities. We have sufficient inventory of supplies and equipment, while suppliers have confirmed that placed and forecast orders are intact.
For more on Endeavour's acquisition of SEMAFO, click here.