ACACIA IN TALKS WITH ENDEAVOUR ABOUT MERGER

London - African gold producer Acacia Mining has held talks with Endeavour Mining about a merger that could create a £3bn Africa-focused gold miner.

London-listed Acacia, which is majority owned by Canada’s Barrick Gold, said the two companies had held preliminary discussions that “may or may not result in agreement of a transaction”.

Toronto-listed Endeavour, which has gold mines in west Africa, also confirmed that discussions had taken place. It would be a good deal for both parties and a good deal for London because it brings another sizeable gold business Jonathan Guy, Numis A combination of the two companies would meld Acacia’s assets in Tanzania with Endeavour’s mines in Côte d’Ivoire, Burkina Faso, Mali and Ghana.

It could also create a company with more money to focus on exploration in Africa, at a time when gold supply is set to peak by the end of the decade.

Acacia has been exploring in Burkina Faso’s Houndé belt, where Endeavour is currently building a project. It would also result in a gold company with over 1m ounces of annual production, Mr. Guy said. “It would be a good deal for both parties and a good deal for London because it brings another sizeable gold business.”

After dropping from a peak of over $1,800 in 2011 to just above $1,000 in late 2015, gold prices have since rebounded to $1,197 a troy ounce, boosting shares in gold miners that have spent years trying to reduce their debts and cut costs.

Shares in Acacia have risen by 151 per cent over the past year, giving the company a market capitalisation of £1.72bn as of January 12. In March Endeavour bought True Gold Mining for C$240m, giving it access to a mine in Burkina Faso.

Its shares have risen by 220 per cent over the past year, for a market cap of C$2.132bn. The merger could give the combined company greater scope for exploration at a time when gold miners have been focused on expanding their existing assets.

Barrick Gold has said it does not expect its total gold production to expand in the next four years, leading many to forecast a supply shortage by the end of the decade.

Brad Gordon, chief executive of Acacia, told the Financial Times in November the company had developed an exploration pipeline with over 60 targets in Africa and was still looking to acquire more assets on the continent. “You’re seeing production profiles falling off a cliff in a few years— and that’s why strategically we’ve swum against the tide,” he said.

But Mr Gordon noted that the window for exploration was shrinking as other junior mining companies started to get access to capital. Last year Endeavour said it wanted to spend $35 to $40m annually on exploration over five years, targeting discovery of 10m to 15m ounces of gold.