Gold: Canadian Fortuna enters West Africa with the acquisition of its compatriot Roxgold

In West Africa, consolidation in the gold sector continues. After the successive takeovers of the junior Semafo and Teranga Gold by the British Endeavour Mining, it is now the turn of the Fortuna Silver Mines group to acquire its Canadian compatriot Roxgold, which is present in the sub-region.

Fortuna, which until now has operated exclusively in Latin America (Peru, Mexico and Argentina), will acquire Roxgold’s projects in Burkina Faso and Côte d’Ivoire. A transaction that, according to the terms of the press release, issued on April 26, will provide « a permitted feasibility stage development project, a robust exploration pipeline and key members of a seasoned management team of mine builders, developers and proven explorers in West Africa, » the Vancouver-based Canadian group said. Fortuna’s management also estimated the combined annual gold equivalent production of the two companies at 450,000 ounces.

In financial terms, the offer made by the purchaser would be by way of a share exchange (0.283 Fortuna shares for each Roxgold share) and would value the acquired mining company at approximately 1.1 billion Canadian dollars (US$887 million). This news immediately caused Roxgold’s share price to jump by 15%. In contrast, Fortuna Silver Mines was heavily punished by investors, with the company’s stock plummeting more than 18% at the close of trading on the Toronto Stock Exchange. This negative reaction partly reflects market participants’ unease about security in the volatile Sahel region.

From an operational point of view and given the current economic climate, the deal makes perfect sense. As Fortuna’s management team reminds us in the aforementioned note, the formation of the new consolidated group should be the prelude to « a low-cost platform for gold and silver production in the world’s fastest-growing precious metals producing regions ». In fact, with a cost per equivalent ounce of gold estimated at approximately $950 and a price currently trading at close to $1,800 (per ounce) on the international markets, the acquisition of Roxgold’s African operations is, on paper, a very attractive proposition, despite the security risks associated with the operation, particularly in Burkina Faso. In addition to its exploration portfolio in Côte d’Ivoire (in particular the Séguéla gold project), the Canadian company Roxgold holds five exploration licenses in Burkina Faso: Solna, Teyanga and Yantara in the northeast, Boussoura in the southwest, and Houko near Yaramoko in the center of the country.