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By: Peter Szafranski, MineralStox.com
In a bold move, Endeavour Financial announced they had acquired a major stake
in Crew Gold Corp.
(CRU-TSX), which produces 200,000 oz of gold, 3 million
ounces in reserves and another 2 million ounces of inferred gold resources.
The deal was worth $92 million for a 38% stake. That works out to about 11 cents
a share for Crew.
Crew, which was a $20 stock for a few years earlier this decade, had several
producing assets, now has one – the LEFA mine in Guinea. LEFA, which started
production in 2008, is expected to produce 200,000 oz of gold in 2010.
There are few details available yet. But the purchase comes at a time when
Guinea is experiencing some politically instability. Also, the last quarterly
cash costs at LEFA were $1000 per ounce – not leaving much room for profit.
Endeavour obviously believes they’re buying at the bottom. Elections are
supposed to happen in Guinea in the near term. Crew will likely use Endeavour’s
money to improve the asset, which needed some debt restructuring (a $20 million
debt payment was missed in October 2009), and improvements in the physical
structure such as the mill and the mining fleet.
This transaction has exactly the same modus operandi as Endeavour used three
months ago when it purchased 54% of Etruscan Resources
(EET-TSX). Etruscan,
another West African gold producer, was facing a financial crisis, which
Endeavour came in and solved with a funding.
While Endeavour controls Etruscan, it should be noted they only have 3 of 6
board seats at Crew Gold. However, the fact that top EDV decision makers Mr.
Frank Giustra and Mr. Neil Woodyer have gone on the board of both companies
speaks to how important this strategy is to them.
As large shareholders in two junior producers, Endeavour now has a significant
say – or powerful moral suasion – over 280,000 oz of production and 3.5 million
ounces of reserves and another 2 million ounces of resources, for a total
expenditure of roughly $140 million.
