Canadian authorities may launch a national security review of the imminent merger between Endeavour Mining (TSX:EDV) and smaller rival Semafo (TSX: SMF), which would create West Africa’s top gold producer.
The proposed deal would bring
together six mines into one portfolio, with a combined production estimated at
over 1 million ounces a year.
In a financial update, Quebec-based Semafo said the director of investments under the Investment Canada Act, had recently contacted Endeavour. In the communication it told the miner that the Innovation, Science and Economic Development Minister was considering whether to put the proposed merger under scrutiny.
Proposed merger would create West Africa’s top gold producer, with a production estimated at over 1 million ounces a year.
Neither company was aware of any
reasons for the notice, Semafo said, adding that Endeavour would work with the
director to address any concerns.
Minister Navdeep Bains has until June 25 to make a decision on a review of the C$1 billion-deal, announced in March.
Semafo noted that, while its head office is located in Montreal, it has no mining operations in Canada. Its assets are all related to gold production and exploration in Burkina Faso.
Long-time coming
Endeavour and Semafo have
previously worked as industry partners. In early 2019, they began a dialogue to
evaluate the merits of a business combination, but were unable to reach a deal.
Talks resumed earlier this year, the companies said.
So far, the deal has received the support of key stakeholders, Semafo said. The proposed tie-up requires approval by a simple majority of the votes cast by Endeavour shareholders and a two-thirds majority vote by the target miner’s shareholders.
Semafo’s shares have lost more than
50% of their value since early November, when a convoy of mine employees was
attacked in eastern Burkina Faso. The ambush caused at least 37 deaths and triggered an operations halt
at Boungou mine.
Work to process stockpiles at the mine’s
plant was restarted in February, with employees and contractors transported by
air and lodged on site. The planned resumption of mining in the fourth quarter,
however, is conditional on improvements to security on the public road and in
the surrounding region, Semafo said at the time.