VANCOUVER — Gold producer Centamin (TSX: CEE; LON: CEY) has been searching for exploration upside in West Africa, and it looks like the company found a fit in Australian junior Ampella Mining (ASX: AMX) and its portfolio of assets that occupy roughly 3,500 km2 along the border of Burkina Faso and Cote d’Ivoire.
On Dec. 10 Centamin announced an off-market takeover that values Ampella at around US$36 million. Shareholders of Ampella will receive one Centamin share for each share held, which equates to around US14.65¢ per share, or a 113% premium based on Ampella's closing share prices at the time of the deal. Centamin also locked up a pre-bid acceptance agreement with Taurus Funds Management, which is Ampella's largest shareholder with an 18.9% stake.
Ampella's flagship project is the resource stage Batie West property, which lies 450 km southwest from Burkina Faso's capital of Ouagadougou near the Cote d'Ivoire border. Batie West encompasses around 2,350 km2 and occupies a 150 km long, gold bearing shear zone that occurs along the southwest margins of the Boromo Greenstone Belt.
In early March Ampella released an updated resource – under Joint Ore Reserves Committee (JORC) standards – on Batie West's Konkera deposit that transitioned roughly 95% of the project's in situ gold into the indicated category. The estimate incorporates five contiguous prospects across a strike length of 5 km, including Konkera East, Konkera Main, Konkera North, The Gap and Kouglaga.
The slice of Konkera's indicated resource that sits within 250 vertical metres of surface, which could potentially be amendable to open pit mining, totals 34.2 million tonnes grading 1.8 g/t Au for 1.9 million contained oz. Inferred resources tack on another 12 million tonnes averaging 1.7 g/t Au for 578,000 contained oz.
Ampella had been in the process of scoping work on a 3 million tonnes per annum carbon-in-leach operation at Konkera that would have produced roughly 150,000 oz of gold per year, but Centamin indicates it will undertake further exploration programs before commencing with an updated mine plan.
In 2012 Ampella consolidated its Batie West land position by applying for three permits covering an additional 1,200 km2 across the border in Cote d'Ivoire. The company announced the results of early surface sampling across three prospects – including Doropo West, Varale, and Kalamon – in mid-October, which were highlighted by 52.9 g/t Au, 44.5 g/t Au, and 26.9 g/t Au in chip samples.
Ampella focused its reconnaissance work on artisanal workings and reported that gold mineralization appeared to be associated with multiple parallel sets of shallow dipping brittle fracture zones in granitoids that host laminated quartz veins with strong pyrite-sericite alteration selvages.
BMO Capital Markets analyst David Haughton, who maintains a "market perform" rating on Centamin, along with a 95¢ price target, notes that "the opportunistic transaction does not come as a surprise, and although slightly dilutive, remains relatively immaterial when compared to [Centamin's] liquidity and market capitalization. The main rationale is the significant exploration upside."
Centamin's Chairman Josef El-Raghy explained in a release that the company was looking to make an "exploration drive" into a "stable and attractive destination for mining investment", which would offer strong potential for near term resource expansion. Centamin's sole exploration assets prior to the deal were four early stage licenses in the northern Tigray region of Ethiopia.
The company has been grappling with political uncertainty at its Sukari gold mine in Egypt over the past year, and reported earnings of US$43 million during the third quarter. Centamin has traded within a 52-week window of 41¢ and $1.04, and closed at 78¢ per share at the time of writing. The company maintains 1.1 billion shares outstanding for an $870 million press time market capitalization.
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