UPDATE 3-Endeavour Mining in merger talks with Teranga as West African dealmaking heats up

(Adds context on consolidation, Sahel, updates share price move)

TORONTO, Nov 10 (Reuters) – Endeavour Mining Corp said on Tuesday it was in talks with smaller West African-focused gold mining company Teranga Gold over a potential merger, which would be the latest in a series of deals in the gold-rich but risky region.

Teranga shares rose 4.9% in Toronto while shares of Endeavour fell 4.5% by 1540 GMT in a sign investors in the latter aren’t convinced of the benefits of a deal.

Endeavour, which is 24.12% owned by Egypt’s Sawiris family, has been on the acquisition path this year as prices of safe-haven gold have gained on the back of global stimulus.

It acquired Semafo in March to become Burkina Faso’s biggest gold producer, increasing its focus on the country despite rising insecurity.

As of Monday’s close, Endeavour had a market valuation of C$5.23 billion ($4 billion), while Teranga was worth C$2.2 billion.

Bloomberg had previously reported that Endeavour Mining was exploring a purchase of Teranga, citing people with knowledge of the matter.

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

Teranga bought Barrick Gold’s 90% stake in the Massawa project in Senegal last year in a $430 million deal.

Further consolidation of the many junior miners operating 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 region.

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

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

($1 = 1.3022 Canadian dollars)

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