LEXPERT MAGAZINE
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JUNE 2016 15
LEXPERT: is seemed like a pretty risky
play. As I understand it, the government
in Burkina Faso had fended off a coup at-
tempt in September 2015.
Morgan Carroll (Executive VP and GC, En-
deavour): As a West African gold producer,
we understand the political backdrop there
very well. e attempted coup was a short-
lived affair by an elite military unit linked
to the former president, but it gained no
traction with the general population, who
continued to back the transitional govern-
ment. at was then reflected in the No-
vember presidential elections, which were
certified open and fair and brought Roch
Marc Kabore to power.
LEXPERT: ere've also been disturbances
reported around True Gold's Karma mine.
Carroll: ere were historical disturbances
at the project, particularly in late 2014 and
early 2015. A key focus of our due diligence
was to ensure that True Gold had addressed
the concerns of the community, although
we are mindful that a strong social licence
to operate means ongoing effort, proper
life-of-mine CSR programs and strong is-
sue management by Endeavour.
LEXPERT: Did you have to bring in experts
in international law? Or local law firms?
Carroll: We relied on local counsel in
Burkina Faso to confirm our understand-
ing of the status of the Karma project and
its ability to operate in the future. Because
of the public-market nature of the
M&A
elements, we of course relied on our usual
advisors, Stikeman Elliott, in Vancouver.
LEXPERT: I guess that brings you in, John.
Both companies were Canadian-listed,
though the mines were African. Did you
have to travel to Burkina Faso at all, or were
all discussions held in Canada?
John Anderson (Stikeman Elliott LLP, for En-
deavour): e majority of the conversations
and negotiations occurred in Vancouver,
given True Gold's Vancouver head office.
In our experience, it is rare for the deal
teams to travel to, for example, a mine site
when the relevant head offices are located
in Canada.
LEXPERT: Despite the risk, the upside for
Endeavour must have been too good to
resist. Karma was about to pour first gold,
and the mine is seen as a low-cost producer,
right? Was that the bottom line?
Carroll: Times have changed in the mining
sector since the historic gold price highs in
2012. Lower long-term price assumptions
mean that aggressive cost management has
Guts, Glory and Gold
become a central driver of our business.
at also means that growth needs to come
from leaner, more efficient assets. We've
been quite successful at this in the rest of
our portfolio. Karma is an excellent fit, and
we believe that our experienced operations
team can get the best out of the ore body
in terms of ounces and costs. e asset
extends the average life of our operations,
and has encouraging upside exploration
potential. ... We've also been able to acquire
Karma without importing additional cor-
porate overhead. So, again, cost – and the
ability to operate at sustainably lower costs
– looms large as a motivator for or a vari-
able in an acquisition.
LEXPERT: Why agree to a buyout just as
your mine is about to pour its first gold?
Was this just about the premium offered —
around 25 per cent at the time of close — or
was True Gold also looking for something
else? Easier access to financing perhaps?
Carroll: No, I think it's more about scalabili-
ty of a business in the mining sector. Mines
take years to develop, finance and build.
If you're one of the lucky ones who finally
finish one off, the market doesn't give you
much time to show it where your next leg
of growth is going to come from. Single-
asset companies always wrestle with this.
So, as you imply, it's not just about the pre-
mium. True Gold would have been mind-
ful of what its shareholders – who are gold
investors – want. And those investors now
have more of what they want — a stake in a
bigger, more successful gold company with
better long-term growth, less risk and a
lower cost of capital. ... ey've also secured
a premium which is a good reward for the
risk their investors have already taken. On
the other hand, as we've shown, it's certain-
ly possible to grow from one asset, and I'm
sure the True Gold team would have made
a success of that, but it takes time, oppor-
A military coup might have scared off most investors. Not Endeavour Mining
INTERVIEW BY DAVID DIAS
Morgan Carroll
Executive VP
Corporate Finance
and General Counsel,
Endeavour Mining
John Anderson
Stikeman Elliott LLP
(for Endeavour)
ON THE DEAL
Gold miners know about risk, but that proposition takes on new meaning when the
mine happens to be in Burkina Faso — where a military coup last year briefly toppled
the government and led to civil uprising. This was the backdrop to Endeavour Mining's
acquisition of True Gold. Endeavour was no stranger to West Africa, though. With mines
across the region, the company was ready for the challenges that lay ahead.
