The boards of gold producers AngloGold Ashanti and Centamin have agreed to a transaction for AngloGold to acquire all shares in Centamin in exchange for 0.06983 of a new AngloGold share and $0.125 in cash for each Centamin share.

The offer implies that Centamin’s share capital is valued at about £1.9-billion, or $2.5-billion.

Following the acquisition, Centamin shareholders will hold 16.4% of AngloGold’s enlarged issued share capital.

Centamin’s flagship asset is the Sukari gold mine, in Egypt, one of the world’s largest producing mines. Since production began in 2009, Sukari has produced more than 5.9-million ounces of gold.

"Today's transaction is highly compelling and builds on the strong foundation we have built. It adds to our portfolio the pre-eminent gold producer in Egypt and offers enormous geological potential that we are very well placed to develop," AngloGold chairperson Jochen Tilk said on September 10.

“[This] will add a Tier 1 asset to our portfolio. The transaction is free cash flow accretive in the first full year of production and net asset value accretive from day one. We will build on the good work by the Centamin team to realise the significant upside in Centamin,” AngloGold CEO Alberto Calderon added.

“This transaction is an endorsement of Centamin’s achievement in re-establishing Sukari . . . and occurs as the Egyptian government has taken important steps to attract foreign investment,” Centamin chairperson James Rutherford commented.

Centamin CEO Martin Horgan added that the company’s reinvestment phase, alongside consistent operational delivery, underlines the Tier 1 status of Sukari as a safe, low-cost and large-scale gold producer.

AngloGold said it was well-positioned to operate Centamin’s portfolio, given its experience in large-scale openpit and underground mines in Africa.

The acquisition would increase AngloGold Ashanti’s yearly gold production by about 450 000 oz to more than three-million ounces, while reducing combined total cash costs and all-in sustaining costs (AISC).

Additional upside is expected through the optimisation of the Sukari underground zones and adjacent exploration blocks.

The predominantly equity-based nature of the deal allows AngloGold to maintain balance sheet stability, while still letting the company fund growth.

Centamin shareholders, meanwhile, would benefit from upfront cash returns, as well as exposure to a larger, more diversified group with enhanced trading liquidity.

Centamin’s board said it intends to unanimously recommend the transaction to its shareholders, with directors having already provided irrevocable undertakings to vote in favour of the scheme and resolutions.

The transaction is expected to be completed in the coming months.

CENTAMIN OPERATIONAL UPDATE
Meanwhile, in a trading update published on September 10, Centamin noted that the Sukari gold mine had produced 93 278 oz of gold and sold 102 563 oz to date this quarter.

Cash costs were $715/oz produced and AISC $1 290/oz sold.

Capital expenditure for the quarter to date amounted to $36.1-million, which included investments in raising tailings storage facility two, buying openpit fleet equipment and rebuilding other equipment.

Additionally, the company reported adjusted group free cash flow of $75.5-million for the period. Centamin’s balance sheet remained robust, with cash and liquid assets of $244-million as of August 31 and total liquidity of $394-million, including the undrawn $150-million sustainability-linked revolving credit facility.

These figures precede the payment of the interim dividend for June 30 amounting to $0.0225 a share, with a total of $26.1-million due on September 27.

Centamin’s full third-quarter results would be released in October.

Horgan highlighted that the Sukari mine continued to perform safely, maintaining the positive operational momentum achieved during the second quarter into July and August.

He said strong production and cost discipline had allowed the company to benefit from robust gold prices, generating $76-million in free cash flow in the first two months of the third quarter, a 77% increase from the $43-million generated in the first half of the year.