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An excavator clears out rocks at a gold mine operated by Endeavour Mining in Hounde, Burkina Faso on Feb. 11, 2020.

Anne Mimault/Reuters

Endeavor Mining said it is in talks with smaller West African-focused miner Teranga Gold over a merger which if it proceeds would mark the latest in a series of deals involving the gold-rich region.

Teranga’s shares rose 4.3 per cent in Toronto on Tuesday, while Endeavour’s were down 5.5 per cent at 1718 GMT, signaling potential investor doubts about the benefits of a combination.

Endeavor, which is 24.12 per cent owned by Egypt’s Sawiris family, has been on the acquisition trail this year as gold prices have gained on the back of global stimulus.

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Further consolidation in West Africa brings with it the possibility of economies of scale which could help miners manage increasing security costs, especially in the unstable Sahel.

“The combination of Endeavour and Teranga would further solidify Endeavour as West Africa’s leading gold producer - though a low premium offer for Teranga would leave too much value on the table,” Raymond James analyst Craig Stanley said.

In March Endeavour acquired Semafo to become Burkina Faso’s biggest gold producer, increasing its focus there despite rising insecurity.

Endeavor had a market capitalisation of $5.23 billion as of Monday’s close, while Teranga was valued at $2.2 billion.

A deal with Teranga, if completed, would add another operating mine – Wahgnion – to Endeavour’s four existing mines in Burkina Faso, and also give it exposure to Senegal.

Teranga last year bought Barrick Gold’s 90 per cent stake in Senegal’s Massawa project.

The CEO of Barrick Gold, which operates Mali’s biggest gold mine, has been among the loudest industry voices calling for consolidation.

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But with gold prices - and company valuations - at eye-watering levels, mining executives have been trying to reassure investors that they are not going on buying sprees or paying hefty premiums.

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