Endeavour Set to Become a Gold Producer

By: Richard Mills | Fri, Jul 9, 2010
Print Email

As a general rule, the most successful man in life is the man who has the best information.

An innovative merchant bank focused on the natural resource sector Endeavour Financial Corporation (EDV-TSX) has seen its stock price double in the last 12 months on the heels of some astute junior gold mining acquisitions.

Endeavour 2-Year Chart

Yet today Endeavour has a P/E ratio of just one. That's not a typo. In Q3 2010 EDV's basic earnings per share were $2.20 and it's currently trading at $2.20.

On June 25th 2010, Endeavour announced the signing of a US$100 million revolving line of credit provided by UniCredit Bank.

"We're pleased to have access to this facility which provides Endeavour with financial flexibility to fund new acquisitions." Endeavour CEO Neil Woodyer

Three days later EDV announced that they were entering into a definitive arrangement to acquire all of the remaining outstanding shares of Etruscan Resources (EET-TSX) - Endeavour currently owns 55% of Etruscan and, subject to shareholder approval, will acquire the remaining 45%. Etruscan controls about 10,000 sq. Km - the largest land position of any mining company in West Africa - and consequently may be well positioned for exploration success. In addition to Youga, an operating gold mine, Etruscan reported a gold resource of over three million ounces in West Africa and has recently produced a Feasibility Study for its Agbaou project in Côte d'Ivoire.

Under the terms of the Arrangement, Etruscan shareholders will receive C$0.48 per Etruscan share comprised of C$0.26 in cash plus 0.0932 of an Endeavour share, representing a premium of 33%. The cash component will use C$43 million of Endeavour's new line of credit.

"He who rejects change is the architect of decay." Former British Prime Minister Harold Wilson

Endeavour now has a significantly different profile - it will operate Etruscan's Youga Mine in Burkina Faso, an 80,000 oz producer, and is heavily invested in Crew Gold which operates the 250,000 oz per year Lefa Mine in Guinea. Between these two mines Endeavour has net production of 189,000 ozs of gold per year.

Endeavour Structure

Etruscan's minority shareholders will vote on the proposed buyout in August. Upon closing of the transaction, Etruscan shareholders will own 13.6% of Endeavour.

Endeavour has a long history of success in value creation in the mining industry:

Endeavour also has a good track record of financing and restructuring companies such as:

*Wheaton River Mineral Ltd.
**Bema Gold Corp.
Northern Orion Resources Inc.
UrAsia Energy Ltd.,
Pacific Rubiales Energy Corp.

*Endeavour provided numerous financings to Wheaton River Minerals - the acquisition of the Luismin gold-silver mine in Mexico, 25% of the Alumbrera copper-gold mine in Argentina and the Peak Gold mine in Australia.

**Endeavour financed Bema Gold Corporation's Refugio Mine in Chile and their Julietta and Kupol Mines in Russia ("Mining Deal of the Year" - Project Financing International Awards 2005).

Few investors are comforted when a company seemingly reinvents itself overnight - with this deal Endeavour metamorphoses from a merchant bank to a gold producer but shareholders could see a potentially significant re-rating from the New Endeavour's gold company profile.

Shareholders of both Endeavour and Etruscan might expect the deal to be accretive to both companies because:

Etruscan management has enjoyed tremendous success in building the largest exploration package in West Africa - Endeavour's management has a track record of nimble deal making and operational expertise. This could be a watershed moment for the company and its shareholders.

The second gold producer to come into the Endeavour stable was Crew Gold with Endeavour acquiring a 37.88 per cent interest (Severstal, through its affiliate Bluecone, almost immediately increased its stake in Crew Gold to 19.79 per cent, the company obviously approved of Endeavours involvement in Crew).


Conclusion

With these deals Endeavour takes control of its cash flow and eliminates the public perception of being a financially non-transparent holding company - after the consolidation with Etruscan EDVs mark-to-market "investment" accounting will be replaced with "operating" accounting thus creating transparency, additional stability and strength on the balance sheet.

The plan for Endeavour is to build an extremely powerful position along the greenstone belts of West Africa, many of which are underexplored. With so many resource companies in a state of virtual paralysis it's refreshing to see Endeavour expressing a clear vision on how to tackle a new challenge. This well thought out business plan should place Endeavour on every gold investors radar screen.

Is it on yours?

 

Richard Mills does not own shares in any company mentioned in this article.
No company mentioned in this report is an advertiser on aheadoftheherd.com

 


 

Richard Mills

Author: Richard Mills

Richard (Rick) Mills
www.aheadoftheherd.com

Richard Mills

Richard lives with his family on a 160 acre ranch in northern British Columbia. He invests in the resource and biotechnology/pharmaceutical sectors and is the owner of Aheadoftheherd.com. His articles have been published on over 400 websites, including: SafeHaven.com, WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider, Investing.com and the Association of Mining Analysts.

Please visit www.aheadoftheherd.com

Moderated investor friendly forums - Ahead of the Herd is powered by Community Intelligence.

Free highly acclaimed newsletter featuring today's investable junior resource companies.

If you are interested in sponsoring Richard's site please contact him for more information, rick@aheadoftheherd.com

Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Ahead of the Herd.com Media Group Inc.a division of Ahead of the Herd Holdings Inc. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Ahead of the Herd.com does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. The publisher, editors and consultants of Ahead of the Herd.com may actively trade in the investments discussed in this website and newsletter. They may have substantial positions in the securities recommended and may increase or decrease such positions without notice. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this website and publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law.

Copyright © 2009-2017 Richard Mills

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com