ENDEAVOUR
AND SEVERSTAL FIND SYNERGY IN CREW GOLD
June 9, 2010
By: Mineralstox.com
A week ago Canadian merchant bank Endeavour (TSX:EDV)
appeared to be warming up for a bare knuckle fight with Russian steel
giant Severstal (SVST-LSE) for control of Crew
Gold (TSX:CRU).
Just before the first bell, the boxing ring was deconstructed and they
are now working together to build a powerful mid-tier gold production
company.
Crew's LEFA gold mine in West Africa is now one of the top turnaround
stories in the global mining industry - production is up, costs are down
by almost 50% over last year and the company now has fresh capital and
large new shareholders. There is also a large exploration portfolio that
both groups are keen to develop.
Both companies are headed by master deal makers, Frank Giustra (Endeavour) and Alexei Mordashov
(Severstal). Both companies are gold focused
merchant banks, so the synergies were obvious.
"Endeavour and Severstal share a common
goal of maximizing the value of our investments in Crew Gold,"
confirmed Endeavour CEO Neil Woodyer. "We
are delighted to be working in tandem with Severstal
as a co-operative approach will allow each of us to best achieve the
value creation potential of our gold investment strategies."
Nikolai Zelenski, Chief Executive Officer of Severstal's Gold Division, commented, "we are
pleased to have reached an agreement with Endeavour and Crew that will
result in each of Crew's major shareholder groups being properly
represented on the board."
Interestingly, both Endeavour and Severstal have
other West African assets. Endeavour owns a controlling interest in
Etruscan Resources (TSX:EET), which produces 80,000 ounces of gold per
year in Burkina Faso, and Severstal owns 69% of
High River Resources, which has the Taparko-Bouroum
Gold Mine in Burkina Faso.
Severstal is integrated steel and mining with a
market cap of $10 billion. In 2009, Severstal
produced 16.7 million tonnes of steel. It has 92,000 employees. In 2007
it began acquiring gold assets with exploration fields in Russia,
Kazakhstan and Burkina Faso. Last year, Severstal's
gold mines produced 530,000 ounces of gold.
Endeavour is a gold investment company and merchant bank offering
financial advice (debt, equity, M&A and strategic business
development) and financings to natural resource clients. Endeavour
creates new growth companies as both an advisor and investor.
The three companies have agreed to a reconstituted board of nine
directors, four of whom will be nominees of Endeavour, three of whom will
be nominees of Severstal and two of whom will
be nominees of certain other shareholders.
"Endeavour and Severstal share a common
goal of maximizing the value of our investments in Crew Gold,"
states Neil Woodyer. "As active
shareholders, we both see operational efficiency at the LEFA Mine as a
key driver for organic value growth".
Higher production at Crew has lowered costs. A $75 million capital
program to be spent over three years refurbishing the asset will greatly
improve performance and contribute to lower cost per ounce. The LEFA mine
produced 57,930 ounces of gold in the quarter ended March 31, 2010
selling for an average price of $1,105 an ounce.
Endeavour's investment in Crew has more than doubled - at one point it
was up four times - and has had a big impact on Endeavour's share price. Endeavour
trades for substantially less than the combined value of its two major
West African investments.
With the uncertainty surrounding Crew now gone, this could further reduce
the discount to NAV the share price is now experiencing.
Severstal has about $2 billion in its petty
cash drawer, so this squabble over Crew Gold is a minor skirmish for
them.
A good brawl is fun to watch. But it seems certain that, in this case,
friendship is more profitable.
Full Article
For more information, please contact:
Vanguard Shareholder Solutions
Tel: 604.608.0824
Toll free: 1.866.341.4111
www.endeavourfinancial.com
investor@endeavourfinancial.com
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