A new junior mining deal has highlighted the attractiveness of West Africa's gold industry and set the stage for further consolidation in the red-hot region.
Toronto-listed Endeavour Mining Corp. announced that it will acquire Australia-based Adamus Resources Ltd. in a $313-million ‘merger of equals,' combining gold assets in Burkina Faso, Ghana, Ivory Coast and Mali. The two companies also promised to use their financial flexibility and know-how to acquire more assets in the area.
For investors, that announcement is a long time coming.
West Africa has become a very popular gold mining jurisdiction in recent years, especially since Kinross Gold Corp. paid more than $7-billion for Red Back Mining Inc. in 2010 (shortly after Red Back made a huge discovery in Mauritania). West African nations are hot because they are vastly under-explored; many have enacted mining-friendly policies only over the past decade or two and received almost no investment before that.
"It just hasn't been trampled the way other places have [because] it hasn't had a mining history for so long," says Endeavour Chief Executive Neil Woodyer.
Yet apart from the Red Back merger and Iamgold Corp.'s 2009 takeover of Orezone Resources Inc., there has not been much deal-making, even though a number of junior and intermediate companies in the region are having success and gold prices continue to hit new highs.
Ron Little, CEO of Ottawa-based Orezone Gold Corp. (which was spun out of the Iamgold merger) says investors are always asking about potential consolidation in West Africa, possibly because of political risk concerns. "It's being thrown at all of us. That stimulates companies like Endeavour and Adamus to get together," he says.