Avnel Acquisition · Avnel Acquisition ›June 2017 . 2 ... ›After-tax NPV 5% of $321m and...
Transcript of Avnel Acquisition · Avnel Acquisition ›June 2017 . 2 ... ›After-tax NPV 5% of $321m and...
Avnel Acquisition › June 2017
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TRANSACTION HIGHLIGHTS Endeavour to acquire Avnel, which owns the Kalana Gold project in Mali
1 FITS OUR
STRATEGIC PORTOFLIO
CRITERIA
› An all-share transaction values Avnel at US$122m (C$159m), representing a 48% premium to Avnel’s closing price on 28 June 2017
› Kalana is a high-quality project that fits Endeavour’s strategic portfolio criteria
› Strengthens Endeavour’s construction pipeline following the completion of the Hounde and Ity CIL projects and leverages its operational synergies in the region
› With robust project economics, the transaction will be value accretive on a Net Asset Value basis to Endeavour shareholders
› The Boards of Directors of both Endeavour and Avnel have unanimously approved the transaction 3 4
2 FILLS OUR PROJECT PIPELINE
CORPORATE & OPERATING
SYNERGIES
VALUE ACCRETIVE
AVNEL TRANSACTION
› Feasibility-stage project
› 1.2Mtpa CIL plant
› Single open-pit reserve of 1.96Moz at 2.8 g/t
› 18-year mine life
› Low AISC cost operation with $730/oz over life of mine
› After-tax NPV5% of $321m and after-tax IRR of 50% based on a gold price of $1,200/oz
› Endeavour intends to re-design the current feasibility study
› Significant exploration upside
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FITS OUR STRATEGIC PORTOFLIO CRITERIA Kalana is a high-quality project
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AVNEL TRANSACTION
GENERAL INFORMATION
Ownership 80% Avnel; 20% Mali government
M&I Resources (inclusive of reserves) 3.10Moz @ 4.07g/t
Reserves 1.96Moz @ 2.80g/t
Mine Type Open Pit
Processing Rate 1.2mtpa
LIFE OF MINE PRODUCTION
Strip ratio, w:o 9.9
Tonnes of ore processed, Mt 21.7
Grade processed, Au g/t 2.80
Gold content processed, Koz 1,964
Gold recovery, % 93%
Gold production, Moz 1,821
Mine life, years 18
Average gold production, koz pa 101 koz
AISC, $/oz US$730/oz
CAPITAL COST
Upfront capital cost, $m US$171m
Sustaining capital cost, $m US$122m
ECONOMIC RETURNS (US$1,200/oz)
After-tax Project NPV 5%, $m US$321m
After-tax Project IRR, % 50%
Payback, years (undiscounted) 1.1
Numbers presented are Based on Anvel’s the Optimised Feasibility Study dated Jan. 9, 2017
Numbers presented are Based on Anvel’s the Optimised Feasibility Study dated Jan. 9, 2017 4
› Production profile based on the Optimised Feasibility Study:
‒ Average over first 5 years: 148koz at an AISC of $561/oz
‒ Average over mine life: 101koz at an AISC of $730/oz
› Endeavour intends to re-design and optimize the current feasibility study:
‒ Expanding the plant capacity
‒ Increase the average annual production and shorten the mine life
‒ Integrate synergies
‒ Integrating exploration upside
FITS OUR STRATEGIC PORTOFLIO CRITERIA Kalana has potential to increase annual production to c.150kozpa
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AVNEL TRANSACTION
66koz
88koz
119koz123koz123koz
170koz
203koz
53koz
$976/oz
Pre-
production
$703/oz
Avg. Years
11-17
Year 5 Avg. years
6-10
$865/oz
Year 2
$446/oz
$676/oz
Year 1
$598/oz
Year 3
$689/oz
Year 4
Production AISC
Reserve life of mine plan
Potential for a +150kozpa operation
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AVNEL TRANSACTION
› Kalana Main deposit still fully open at depth
› The high-grade Kalanako prospect, located 2.5km northeast of the Kalana Main Project, provides potential for a satellite deposit (already hosts an Indicated resource of 119koz at 3.34 g/t)
› Kalana concession covers 387km2 and contains 27 exploration prospects with multiple geochemical anomalies
› Strong regional exploration potential with multiple prospects outside of Kalana
› Currently have a small unclassified resource at Djirlia
FITS OUR STRATEGIC PORTOFLIO CRITERIA Kalana has significant exploration upside
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
$900/oz
$1,200/oz
$950/oz
$1,000/oz
$1,050/oz
$1,100/oz
$1,150/oz
$850/oz
$750/oz
$700/oz
$650/oz
$600/oz
$550/oz
$500/oz
$450/oz
$800/oz
Mine life, years
SOLD
Agbaou (175-180koz)
Nzema (100-110koz)
Tabakoto (150-160koz)
AISC, US$/oz
Ity HL (75-80koz)
Ity CIL 165koz
starting 2019
Karma (100-110koz)
Bubble size represents production
Côte d’Ivoire Burkina Faso Ghana Mali
Youga
Houndé +250koz starting Q4-2017
Cut-back
Kalana Potential (125-150koz)
FITS OUR STRATEGIC PORTOFLIO CRITERIA 1 Kalana Fits Well in our “Magic Box”
AVNEL TRANSACTION
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Kalana, Mali
Ity (CIL), Côte d'Ivoire
Houndé, Burkina Faso
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2017 2018 2019
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STRENGHTENS ENDEAVOUR’S PROJECT PIPELINE
Ity CIL, Côte d’Ivoire - Construction period
Construction team expertise
Project construction pipeline
› Core construction team has successfully developed projects together for +10 years
› 7 projects built, $2.4B in capex
› All projects delivered on time and within budget ‒ Agbaou
‒ Nzema
‒ Karma expansion
‒ Houndé (85% completed)
2 Kalana will be developed after the Hounde and Ity CIL projects
AVNEL TRANSACTION
Houndé - Construction period
Kalana, Mali - Construction period Kalana, Mali - Exploration and optimisation
› Endeavour’s West African presence will benefit Kalana and provide opportunities to draw on operating synergies in a country where Endeavour already has a producing mine
› Synergies from operating the Kalana with the current team in Abidjan
› Removal of Avnel corporate costs
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AVNEL TRANSACTION
CORPORATE & OPERATING SYNERGIES 3 Second mine in the country and 6th in West-Africa
Source: Market data as per 28 June 2017 9
VALUE ACCRETIVE Meets equity hurdle rates and is accretive on an NAV basis
NAV per share accretion
Endeavour NAV
2,061 1,834
1,573 1,329 1,199 1,136 1,122 1,058
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Avnel NAV
Average NAV of US$253m (P/NAV of 0.33x)
Average NAV of US$1,414m (P/NAV of 1.21x)
NAV Accretion to Endeavour
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AVNEL TRANSACTION
› Due diligence demonstrates that the acquisition meets minimum hurdle rate returns when accounting for the acquisition cost, the initial construction costs, and the holding / integration costs prior to production
› Strong returns based on current feasibility study with further potential to optimize the study, unlock exploration, and benefit from synergies
› Strongly accretive on a NAV per share basis
NAV analysis at US$120m Acquisition Cost
Equity offer US$m 122 Shares issued m 7.0
PF Endeavour shares m 103.5
PF NAV US$m 1,667
Endeavour NAV / share US$ 14.65
PF NAV / share US$ 16.10
NAV per share accretion / (dilution) % 9.87%
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TRANSACTION TERMS Transaction closing by 13 Sept 2017
Offer
› 0.0187 Endeavour shares for each Avnel share, implying a value of C$0.42 per Avnel share
› Implied aggregate consideration of US$122m
› Offer will be conducted through a Guernsey Scheme of Arrangement
› 75% present and voting, and a majority in number requirement
Implied premia › 48% premium to spot
› 52% premium to 20 day VWAP
New shareholders
› Avnel shareholders will make up 6.8% of Endeavour register
› Major Avnel shareholder, Elliott, is expected to hold 4.3% of Endeavour
Shareholder approvals and support
› Total irrevocable undertakings of 72.3%
› Irrevocable undertakings to support the transaction from Fern Trust (8.9% percent), from Elliott (63.4% percent) and from Avnel’s Directors and Officers
Indicative timeline
› Shareholder approval expected on 31 August 2017
› Transaction closing by 13 Sept 2017
AVNEL TRANSACTION
Source: Market data as per 28 June 2017