Teranga Gold to Acquire Gryphon Minerals for U$63 Million
Gryphon Minerals is focused on gold mining in Burkina Faso. The company has a 90% ownership in the Banfora gold project, a high grade open pit mine located in Burkina Faso, West Africa.
Canadian gold miner Teranga Gold Corporation (ASX:TGZ) announced this morning that the company will acquire Gryphon Minerals Limited (ASX:GRY) for a total consideration of approximately U$63 million.
Largest Shareholder Backs Gryphon Acquisition
The acquisition will be done by way of a “scheme of arrangement”. Each Gryphon share will be exchanged for 0.169 Teranga share on the Toronto Stock Exchange (TSX) or Teranga CDI on the ASX.
Gryphon Minerals is focused on gold mining in Burkina Faso. The company has a 90% ownership in the Banfora gold project, a high grade open pit mine located in Burkina Faso, West Africa which has a measured and indicated gold mineral resource of 2.98 million ounces. The inferred gold mineral resource currently stands at 0.66 million ounces.
Both parties announced that Teranga’s largest shareholder, Tablo Corporation, intends to exercise its right to participate in the equity placement and contribute approximately $9million. Tablo has a 13% ownership in Teranga.
Teranga Advances to become Mid-Tier Gold Producer
Teranga believes that the acquisition advances Teranga towards becoming an established and more diversified mid-tier gold producer as the transaction increases the company’s proven and probable reserve base by 35%. Gold production could grow by around 50% by 2019 while costs are expected to remain steady, thus increasing Teranga’s profitability.
The acquisition is also expected to improve Teranga’s balance sheet as the pro-forma cash balance is expected to improve to $80million including Gryphon’s cash and the anti-dilution offering.
Richard Young, Chief Executive Officer of Teranga Gold is pleased with the acquisition: “This is an outstanding opportunity to add another high quality gold asset to Teranga’s portfolio and to create a multi-jurisdiction gold producer with diversified production and cash flows.” Mr Young believes that the project will not only immediately increase Teranga’s gold reserves, but also provide the company with additional exploration potential and enhance the “cost and cash flow profile”.
Wise-owl recommended to buy Teranga Gold in May 2015 at $0.72 as we are attracted to its recent operating performance, financial position, and organic growth potential over the medium term. Teranga is well positioned to benefit from any cyclical recovery in gold market.
Author: Simon Herrmann
Jun 20, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.