Acacia Mining confirms talks with Endeavour

Acacia Mining confirmed on Monday that it is in preliminary discussions regarding a possible combination with Canadian gold miner Endeavour.

The statement was in response to press speculation and both Acacia and Endeavour stressed that the discussions might not result in agreement of a transaction.

“Acacia continually assesses opportunities to grow and develop its business in line with its strategy, including the assessment of potential strategic combinations,” the company said, adding that a further announcement will be made when appropriate.

Deutsche Bank said a merger would make sense, add value and create capex synergies.

It said the combined entity could be an African gold miner champion with annual production capacity of 1.5moz and would also improve Acacia's liquidity position, and speed up its geographic diversification efforts.

Shore Capital said it reckons a combination would be more to Acacia’s benefit. “Indeed, the rather more dynamic Endeavour stressed that its strategic focus was on organic prospects within its existing asset portfolio, although it ‘routinely evaluates business opportunities’ and has a track record of growing by acquisitions (most recently of True Gold Mining last year).

“For Acacia, a merger would provide desirable geographic diversification – all of Acacia’s operating mines are in Tanzania. Acacia is on record as praising West Africa’s attractive exploration potential, and indeed, has in the last few years began conducting exploration in a number of countries there. Additionally, largest shareholder Barrick Gold Corp has long wanted to exit from or at least reduce its 64% stake, as it views Acacia as non-core. A combination with Endeavour would significantly dilute Barrick’s interest, making its disposal much easier (the geographic diversification and increased size of merged entity would also add attractiveness, we believe).”

At 1500 GMT, the shares were up 5.3% to 440.20p.