TSX-listed Teranga Gold Corporation reports that It has entered into a definitive agreement pursuant to which it will acquire a 90% interest in the Massawa gold project in Senegal
It will acquire this from a wholly-owned subsidiary of NYSE-listed Barrick Gold Corporation and its joint venture partner, Compagnie Sénégalaise de Transports Transatlantiques Afrique de l’Ouest SA, with the government of Senegal holding the remaining 10% interest in Massawa.
Barrick said it reached an agreement to sell the 90% interest in the Massawa projectfor up to $430 million.
Massawa is one of the highest-grade, undeveloped open-pit gold reserves in Africa and is located within trucking distance of Teranga’s flagship Sabodala gold mine in Senegal, creating the opportunity for significant capital and operating synergies.
The historical mineral reserves base of the Massawa project is 2.6Moz from 20.9Mt at 3.94 g/t Au, and this will augment Sabodala’s mineral reserves base of 2.4Moz from 55.7Mt at 1.35 g/t Au.
The proximity of the projects and the combination of Sabodala’s mill and Massawa’s high-grade ore (the Sabodala-Massawa Complex) are expected to scale Sabodala into a top tier asset.
“The Massawa acquisition is transformational for Teranga and – by creating a top tier gold complex – the first in the country – an important milestone for the gold mining industry in Senegal,” said Richard Young, Teranga’s President and CEO.
“We anticipate that production from the Sabodala-Massawa Complex, together with our Wahgnion Gold Mine in Burkina Faso, will increase Teranga’s targeted consolidated annual gold production and reposition Teranga as the next multi-asset, low-cost, mid-tier gold producer in West Africa, one of the world’s premier gold mining regions.”
Total aggregate consideration for the transaction is $380 million upfront plus a gold price-linked contingent payment, which will be in the form of cash and common shares of Teranga.
The expected higher production and lower costs from the Sabodala-Massawa Complex – driven by Massawa’s higher-grade ore and the anticipated synergies – together with Wahgnion’s production are expected to enable Teranga to transform into a low-cost, mid-tier producer with higher annual production and reduced per ounce costs.
Barrick will become Teranga’s second largest shareholder following completion of the transaction, where Barrick will hold approximately 11.45% of Teranga’s shares (calculated on a non-diluted basis) on a pro forma basis and be entitled to nominate one Board member so long as it retains at least a 10% ownership interest in Teranga (calculated on a non-diluted basis).
Tablo Corporation, controlled by Teranga director David Mimran, supports the transaction. Tablo is investing a further $45 million in this transaction to retain an approximately 21.2% ownership in Teranga.
“Since my initial investment in Teranga four years ago, I saw the opportunity to create a top tier gold producer in West Africa. I expect Teranga’s management team to quickly unlock the significant potential of Massawa’s high-grade reserves and deliver value to shareholders and our Senegalese stakeholders for years to come.
“This acquisition represents an opportunity to expand Senegal’s gold mining industry and contribute further to the development of the country and the communities we touch,” Mimran stated.
Barrick president and CE, Mark Bristow, said the group had been pursuing the best means of bringing Massawa – discovered by its legacy company Randgold Resources 10 years ago – to account for the full benefit of all stakeholders.
The agreement with Teranga, which will realise the full value of this asset and create a substantial new West African gold mining company with significant African ownership, is the outcome of this process.
He said that it is gratifying to continue the value-creating consolidation of assets in the gold mining sector, which started a year ago with the merger between Barrick and Randgold, followed shortly thereafter by the merger of the Nevada assets of Barrick and Newmont Goldcorp.
“In the case of Massawa, Teranga has the appropriate infrastructure and processing facilities approximately 25 km, and combining the orebodies and the geological prospectivity will add further benefits. This is a good example of an instance where assets we own might be better suited in combination with others,” Bristow said.
The transaction is expected to close in the first quarter of 2020 and is subject to receipt of the Massawa exploitation license and residual exploration license from the government of Senegal, as well as certain other acknowledgments and approvals from the government including Teranga’s integration plans for the Sabodala-Massawa Complex.
The transaction is also conditional upon the closing of Teranga’s concurrent debt financing, prospectus financing and private placement financing, each of which are also inter-conditional, as well as other customary closing conditions for a transaction of this kind.