Wed, 29 Jan 2020

Centamin Unanimously Rejects Endeavour's Proposal

ACCESSWIRE
04 Dec 2019, 18:37 GMT+10

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO, OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE 'CODE') AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. THERE CAN BE NO CERTAINTY THAT ANY FIRM OFFER WILL BE MADE.
Centamin plc

('Centamin' or 'the Company')
(LSE:CEY)(TSX:CEE)


BOARD OF CENTAMIN UNANIMOUSLY REJECTS ENDEAVOUR'S PROPOSAL

PERTH, AUSTRALIA / ACCESSWIRE / December 4, 2019 / The Board of Centamin plc ('Centamin' or the 'Company') notes the announcement by Endeavour Mining Corporation ('Endeavour') on 3 December 2019 regarding the unsolicited preliminary proposal for a potential all share combination between Centamin and Endeavour (the Proposal).

Centamin regularly considers potential strategic opportunities and does so through the correct communication channels and with non-disclosure agreements in place in order to best protect shareholders' interests. Centamin has communicated to Endeavour several times its willingness to engage on this basis and Endeavour has repeatedly refused to engage in a proper manner and allow the sharing of non-public information in order to better assess the value to shareholders of the potential combination. As a result, the Board of Centamin has reviewed the Proposal and the available public information on Endeavour with its financial and legal advisers and has concluded that the Proposal materially undervalues Centamin and that Centamin is better positioned to deliver shareholder returns than the combined entity.

·The Board believes that the Proposal is skewed in favour of Endeavour's shareholders and fundamentally undervalues Centamin:

o The exchange ratio in the Proposal would result in Centamin shareholders owning only 47% of the shares of the enlarged company. However, Centamin would contribute:

  • 100% of H1 2019 free cash flow[1]
  • 100% of 2018 free cash flow1
  • 100% of H1 2019 dividend distribution1
  • 100% of 2018 dividend distribution1
  • 57% of Measured and Indicated resources2
  • 69% of Inferred resources2

o In addition, the above percentages do not take into consideration that whilst Centamin had cash and liquid assets as at 30 September 2019 of US$289 million[2] and no debt, Endeavour had gross debt and financial obligations of US$729 million[3] and net debt of US$599 million[4] as at 30 September 2019 and financial liabilities related to hedging and streaming obligations. Therefore, a significant portion of the cash flows derived from Endeavour's assets will not accrue to shareholders

·The Proposal does not justify changes to the investment case for Centamin's shareholders:

o The Board believes that Endeavour has failed to demonstrate that the logic of the Proposal outweighs the risks to Centamin's established policy of distributing significant cash returns to shareholders

  • The Proposal puts at risk Centamin's shareholders' ability to continue receiving dividends at historic levels and exposes the Company to Endeavour's substantial US$729 million5 gross debt obligations, including debt obligations of US$310 million maturing in 2021[5]
  • The Company's strong track record of replacing reserves at Sukari means that despite producing more than 3.7Moz of gold to date, Sukari still has a current reserve life of more than 15 years
  • Centamin's shareholders would have material exposure to the deteriorating operating environment in Burkina Faso, where approximately 44% of Endeavour's attributable resources are located
  • Centamin shareholders are being asked to exchange their more liquid, London-listed Centamin shares for less liquid, TSX-listed Endeavour shares. Based on the last six months average daily value traded, Centamin's shares are 1.8x[6] more traded than Endeavour's shares.

·The Board believes that the quality of Centamin's asset base deserves a premium:

o Endeavour's Proposal would result in Centamin's shareholders exchanging 100% direct exposure to a world-class gold asset for a reduced 47% exposure to the same asset within a broader portfolio of lower quality, higher risk assets.

Josef El-Raghy, Chairman of Centamin, said: 'The Board strongly believes that Endeavour's proposal significantly increases financial and operating risk without any material benefits to our shareholders. Centamin's stated strategy has always been to maximise returns for all of its shareholders, having returned approximately US$500 million to shareholders since 2014. In addition, despite numerous requests, Endeavour has refused to enter into a customary non-disclosure agreement to allow the Board to further assess the Proposal. It is the Board's belief that the Proposal made by Endeavour sits in stark contrast with Centamin's strategy and we strongly advise our shareholders to take no action.'

In conclusion, Centamin's Board unanimously rejects the Proposal and strongly advises shareholders to take no action. The Company will communicate with its shareholders again in due course with further details.

Centamin shareholders should note that the announcement made by Endeavour does not amount to a firm intention to make an offer under Rule 2.7 of the Code. There can be no certainty that an offer will be made.

The person responsible for the release of this announcement on behalf of Centamin is Josef El-Raghy, Chairman.

For more information, please visit the website www.centamin.com or contact:

Centamin plc

Ross Jerrard, Chief Financial Officer
+44 (0)1534 828 700
Ross.jerrard@Centamin.com

Alexandra Carse, Investor Relations
+44 (0) 7700 713 738
alexandra.carse@Centamin.je

BMO Capital Markets

Gary Mattan
Tom Rider
Pascal Lussier-Duquette
Neil Elliot
+44 (0)20 7236 1010

Buchanan Communications

Bobby Morse
Chris Judd
+ 44 (0)20 7466 5000
centamin@buchanan.uk.com

Important Notice

BMO Capital Markets Limited ('BMO'), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Centamin and no one else in connection with the above and will not be responsible to anyone other than Centamin for providing the protections offered to clients of BMO nor for providing advice in relation to the subject matter of this announcement or any other matters referred to in this announcement.

Information Concerning Endeavour

The information concerning Endeavour contained in this Announcement is based solely on publicly available information.

Scientific and Technical Information

Information of a scientific or technical nature in this Announcement pertaining to the Sukari Gold Project mineral reserve and resource estimates is based on information of a scientific and technical nature that was included in the Company's annual financial statements for the year ended December 31, 2018 which is available under Centamin's profile on SEDAR at www.sedar.com. The underlying information was prepared by and under the supervision of Norman Bailie, Centamin's Qualified Person(s) and independent Qualified Person(s) as below:

• Open Pit Mineral Reserve Quinton de Klerk of Cube Consulting Pty Ltd

• Underground Mineral Reserve Adrian Ralph of Cube Consulting Pty Ltd

• Mineral resource (underground) Mark Zammit of Cube Consulting Pty Ltd

• Mineral resource Arnold van der Heydyn of H&S Consultants Pty Ltd

Please refer to the technical report entitled 'Mineral Resource and Reserve Estimate for the Sukari Gold Project, Egypt' effective on 30 June 2015 and issued on 23 October 2015 and filed on SEDAR at www.sedar.com, for further discussion of the extent to which the estimate of mineral resources/reserves may be materially affected by any known environmental, permitting, legal, title, taxation, sociopolitical, or other relevant issues as well as details of the qualified persons and quality control.

Information of a scientific or technical nature in this Announcement pertaining to the Doropo Project mineral resource estimates is based on information of a scientific and technical nature that was included in the Company's quarterly report for the three months ended 30 September 2019 which is available under Centamin's profile on SEDAR at www.sedar.com. The underlying information was compiled by the Company's geologists, Pierrick Couderc and Fidele Kakou, under the supervision of the Company's Qualified Person, Norman Baillie, Group Exploration Manager, and independent Qualified Person, Rupert Osborn of H&S Consultants Pty Ltd.

A Qualified Person is as defined by the National Instrument 43-101 - Standards of Disclosure For Mineral Projects of the Canadian Securities Administrators ('NI 43-101'). Named Qualified Persons have verified the data disclosed, including sampling, analytical, and test data underlying the information or opinions contained in this announcement in accordance with standards appropriate to their qualifications.

All Mineral Reserves and Mineral Resources for Centamin have been estimated in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and NI 43-101. All Mineral Resources are reported exclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Dealing Disclosure Requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

The defined terms used in this section 'Dealing Disclosure Requirements of the Code' are defined in the Code which can be found on the Takeover Panel's website.

Publication on Website

A copy of this announcement will be made available (subject to certain restrictions relating to persons resident in restricted jurisdictions) at www.centamin.com no later than 12:00 noon (UK time) on 5 December 2019 (being the business day following the date of this announcement) in accordance with Rule 26.1(a) of the Code. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Forward-looking Statements

This Announcement (including information incorporated by reference) contains 'forward-looking statements' and 'forward-looking information' under applicable securities laws (collectively, 'forward-looking statements'), including statements relating to the Proposal, statements with respect to future financial or operating performance, estimates of mineral reserves and resources and the timing and amount of future production, revenues, margins, costs and expenditures. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as 'believes', 'expects', 'expected', 'budgeted', 'forecasts' and 'anticipates'. Although Centamin believes that the expectations reflected in such forward-looking statements are reasonable, Centamin can give no assurance that such expectations will prove to be correct. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Centamin about future events, and are therefore subject to known and unknown risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. In addition, there are a number of factors that could cause actual results, performance, achievements or developments to differ materially from those expressed or implied by such forward-looking statements, including the results of Proposal; general business, economic, competitive, political and social uncertainties; the results of exploration activities and feasibility studies; assumptions in economic evaluations which prove to be inaccurate; currency fluctuations; changes in project parameters; future prices of gold and other metals; possible variations of ore grade or recovery rates; accidents, labour disputes and other risks of the mining industry; climatic conditions; political instability; decisions and regulatory changes enacted by governmental authorities; delays in obtaining approvals or financing or completing development or construction activities; and discovery of archaeological ruins. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information or statements. Forward-looking statements contained herein are made as of the date of this Announcement and the Company disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements.

Endnotes

1. The information pertaining to Endeavour is based on Endeavour's published information. The contribution analysis presented reflects the percentage Endeavour or Centamin would contribute to the combined entity:

Combination Analysis Contribution (%)
(Units)
Endeavour Centamin MergeCo Endeavour Centamin
Financials
H1 2019 Free Cash Flow(1)
(US$ mm)
$ (85) $ 33 $ (52) -- 100%
FY 2018 Free Cash Flow(1)
(US$ mm)
$ (151) $ 59 $ (93) -- 100%
H1 2019 Dividends(2)
(US$ mm)
-- $ 35 $ 35 -- 100%
FY 2018 Dividends(2)
(US$ mm)
-- $ 145 $ 145 -- 100%
Debt(3)
(US$ mm)
$ 729 -- $ 729 100% --
Reserves & Resources (Attributable Basis)
Proven & Probable Reserves(4)
(mmoz Au)
7 7 15 51% 49%
Measured & Indicated Resources(4)
(mmoz Au)
13 16 29 46% 54%
Inferred Resources(4)
(mmoz Au)
2 4 6 36% 64%

Source: Company filings

1. Refer to Endnote 2.
2. FY 2018 dividends for Centamin as per Centamin's FY2018 Annual Report,. H1 2019 dividends for Centamin as per Centamin's H1 2019 Interim Financial Report.
3. Endeavour debt represents the sum of Endeavour's outstanding RCF (US$310 million), face value of its convertible senior bond (US$330 million) and equipment finance obligations (US$89 million) as per Endeavour's Q3 2019 financial statements.
4. Refer to Endnote 3 for details on mineral reserves & resources for Endeavour and Centamin.

2. The table below illustrates the free cash flow calculation for both Endeavour and Centamin based on GAAP compliant financial metrics:

Endeavour

Centamin

Units

H1 2019(1)

2018(2)

H1 2019(1)

2018(2)

Operating Cash Flow

(US$ mm)

$85

$251

$116

$223

Capex

(US$ mm)

($170)

($402)

($45)

($88)

Profit Share Payments to EMRA

(US$ mm)

($39)

($76)

Free Cash Flow

(US$ mm)

($85)

($151)

$33

$59


Source: Company filings
1. Based on Endeavour's and Centamin's H1 2019 Interim results and represents financials over the last 6 months.
2. Based on Endeavour's and Centamin's FY 2018 Annual filings and represents financials for the full year.

3. Mineral reserves & resources estimates for Centamin are set out in the table below:[7]

100% Basis Attributable Basis
Tonnage Grade Contained Tonnage Grade Contained
(mmt) (g/t Au) (koz Au) (mmt) (g/t Au) (koz Au)
Sukari (100%)
Proven Reserves
148.4 1.09

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