Endeavour Canada Holdings Corporation (EDV) Earnings Call Transcript & Summary

I will be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Sébastien de Montessus, CEO of Endeavour Mining; and Richard Young, CEO of Teranga Transaction, to begin today's conference.

Good morning, everyone. Thank you, operator. My name is Sébastien de Montessus, President and CEO of Endeavour Mining. Welcome, and thank you very much for joining us today. As we announced the combination with Teranga to create a new top 10 senior gold producer. We are, with Richard, incredibly excited about this transaction as it makes sense on so many levels and offers a strong opportunity for re-rating for both sets of shareholders. I'm happy to be joined by Richard Young, CEO of Teranga, as, together, we will outline why this is such a compelling transaction. Afterwards, we'll be happy to take any questions you may have. Before we start, I'd like to draw your attention to the disclaimer on Slide 2. Let's now turn to Slide 3, which provides a high-level summary of the transaction rationale. We believe that this transaction follows the successful M&A trend we're currently seeing across the industry. There are many examples where good companies, not necessarily needing to do M&A, have come together and have immediately created value for their shareholders. We believe that this transaction will do the same. First, and of utmost importance, this combination has a very compelling industrial logic. It combines 2 high-quality West African asset portfolios at a time when both companies have recently completed investment phases and are now generating healthy cash flows. As such, the future looks bright for both companies and even brighter together. Secondly, as a result of this combination, we will create a new top 10 senior gold producer with very strong attributes. Production will be diversified across several flagship mines and across 3 countries. And we will also have an industry-leading growth pipeline and arguably the largest and highest-quality exploration portfolio in West Africa. We are also doing this transaction because we see strong re-rating potential. In fact, Richard and I agree that we'll -- while both our respective companies have strong re-rating potential on a stand-alone basis, we see an even larger upside through this combination. And we see this as a catalyst to accelerate our re-ratings for both sets of shareholders. The combined company will have among the most attractive trading multiples compared to its senior gold peer group. In addition, we believe that the re-rating would be supported by enhanced capital market profile. As you might have seen, the other large news of the day is our intent to list on the London Stock Exchange as a premium issuer. Yes, premium and not standard as some other companies recently announced. This is a big distinguishing factor as it will create the largest premium listed pure gold producer in London with a target to be included in the FTSE 100. This should further help our combined re-rating due to inflow demand from indexation. And of course, the company would have strong attributes with strong cash flow generation and a robust balance sheet, capable of sustaining an attractive dividend yield. Before we dive into the presentation further, Richard, would you like to say a few words?

Well, Sébastien, thank you. Yes, I would, and good day to everyone. Today is a milestone day for Teranga. As Sébastien has outlined, and will outline as he goes through the presentation, our merger with Endeavour creates what we believe on the Teranga side is a best-in-class senior gold producer. When I look at the merger through the lens of Teranga shareholders, there's a lot to like. The new senior gold producer will have things that Teranga shareholders are looking for and expect when they invest in Teranga, and that is among the lowest all-in sustaining costs of any senior gold company as well as, Sébastien noted, the best growth profile. And what's new for Teranga shareholders is a more diversified production base with 6 core mines across 3 countries, a stronger balance sheet, an attractive dividend, and the scale and liquidity required to attract generalist investors. Our Board believes, as Sébastien mentioned, that Endeavour targeting a premium listing on the London Stock Exchange, they will likely become a FTSE 100 listing, and there's a lot of follow-on index buying that comes from that, that will truly help with the re-rate. Similar to our mass acquisition, as Sébastien will lay out, there are very real opportunities to achieve meaningful financial, operating and capital synergies with this combination. Over the last 3 years, Teranga stock has been a top performer. This combination provides a modest premium but, more importantly, offers participation in what we believe is the best-in-class senior gold producer trading at very attractive valuation. I'm proud of the Teranga team and what we've accomplished together. We've taken Teranga from a single asset producer with one stand-alone mine in Senegal to a low-cost, mid-tier gold producer over the past 2 years. Today, Sabodala-Massawa is a Tier 1 asset, high grade, low cost, with the significant potential to materially increase resources and reserves over the next 12 to 24 months. Our second mine, Wahgnion, has far surpassed expectations and, with the recent revision to our mine plan, will continue to outperform for many years. We expect these 2 mines to produce more than 500,000 ounces of gold per year at very low cost. That's for at least the next 5 years. Our exploration pipeline includes Golden Hill and Afema, 2 rapidly advancing projects with all indications that they will be future mines. As we have built our asset base, we have made a name for ourselves as responsible miners with a strong social license in each of the 3 countries that we operate in. At this point, I'd like to take a moment to thank our host governments in West Africa for supporting us as we work to build our company and achieve our vision. We believe the company is in very good hands with Séb and his team, who share our vision of what a responsible miner is. I would also like to thank all of our shareholders for their support, and a specific call-out to our largest shareholder, David Mimran. David had a strong belief in our mid-tier ambition from day 1. And without him, we would not be where we are today. Finally, I'd like to thank all of our employees who comprise the Teranga family for their commitment and hard work. With that, I'll turn the call back over to Séb.

Thanks, Richard. Diving into the presentation on Slide 4. We see the exciting company this will create. All our combined assets are located within West Africa. So clearly, our DNA is West Africa, supporting the compelling industrial logic of this transaction. We will enhance our strategic position in the region with an extensive presence across the entirety of the West African Birimian Greenstone Belt with 6 core mines across 3 countries. This solidifies our leading position in the mining-friendly jurisdictions of Côte d'Ivoire and Burkina Faso and now in Senegal, too. As I've mentioned, we will be a top 10 global gold producer with an average annual production of over 1.5 million ounces of gold, an all-in sustaining costs amongst the lowest in the industry. For those Endeavour shareholders who may not be too familiar with the Teranga assets, let me take you through their portfolio on Slide 5. We are confident these assets will integrate well with our existing West African operating platform and believe that this combination represents an opportunity to capture unique synergies. What stands out is that each asset brings its own significant contribution to the overall portfolio with an attractive strategic rationale. First, the jewel in the crown, Sabodala-Massawa mining complex in Senegal. Teranga did an amazing job consolidating the Massawa project with Sabodala earlier this year, the combined operation has the potential to become Endeavour's highest quality mine with above 400,000 ounces of annual production, low cost, long mine life and significant reserves. This asset also provide us with a new operating platform in Senegal, which is a very stable mining-friendly jurisdiction. Moving across to Burkina Faso. We are adding the Wahgnion mine, which Teranga successfully built and commissioned in 2019 and which produces approximately 150,000 ounces at an all-in sustaining cost of roughly $900. This asset will be a strong cash generator. As we saw with the SEMAFO transition, we expect to capture significant local synergies by integrating Wahgnion into our well-established West African platform, and of course, we like the exploration upside. Patrick is going to be happy and have fun. The developments made at Sabodala-Massawa and Wahgnion over the past 12 months have been game-changing for Teranga. This was shown by a 700% increase in operating cash flow to $75.6 million in Q3 compared to last year supported, of course, with higher gold price. The third asset also in Burkina Faso is the Golden Hill project, which is located within tracking distance of our Houndé mine. The project already has 800,000 ounces of M&I resources and 700,000 ounces of inferred resources, which we will aim to grow further. Given its close proximity to our Houndé plant, we see potential to consider the development project -- development of this project as a satellite to Houndé, which will significantly lower capital costs and potentially accelerate the development time line. And finally, not on the page but making headlines more and more at Teranga is the Afema joint venture in Côte d'Ivoire, where an initial resource is expected to be announced in the coming months. Turning to Slide 6. You see our familiar bubble chart, which shows how our various assets fit into our portfolio. Put simply, our strategy has been to move assets into the bottom right box, which is above 10 years mine life and below $850 all-in sustaining cost. As you can see, Sabodala-Massawa is well positioned, and with the expansion planned next year, it will clearly become our highest quality asset. If we look at the pie chart on the right, you can see that the combined entity has production which will be well diversified across 3 countries with resources and reserves further diversified across 4 countries given the strong project pipeline. Over the page on Slide 7. We believe this transaction has the potential to create significant synergies across the corporate, regional and mine site level as we leverage our West African operating model and integration platform. Following the acquisition of SEMAFO and as part of the broader integration process, we undertook a comprehensive evaluation of our organizational structure and made a number of changes to ensure we are well set up for future growth. At the corporate level, we aim to leverage our recent experience with the SEMAFO acquisition to deliver significant synergies. In total, we were able to identify more than $35 million in annual synergies from the SEMAFO transaction, and we are confident we can create additional value for shareholders through our combination with Teranga. As I mentioned, the integration team is already in place, and we'll be able to quickly transition the people and operations from Teranga to the Endeavour management model, which, as Richard said, is a very similar model. So we're very confident on the ability to integrate. We also have a clear path in sight for G&A cost savings, which we expect to start coming through in the first year post close. At the regional and country level, we will be able to draw on the benefits of being the largest gold producer in each of Senegal, Burkina Faso and Côte d'Ivoire, where we have strong community and government relations, which are beneficial to all our stakeholders. And our existing platform in Burkina Faso will enable a rapid integration of Wahgnion and Golden Hill. Finally, at the mine site level, we believe we can achieve significant synergies in areas such as optimization of mining fleet, processing flow sheet upgrades, procurement and supply chains and leveraging of our centralized support services. In addition, there is potential to realize significant synergies by operating Golden Hill as a Houndé satellite deposit. What is most interesting for me is looking at the map on the right. The Endeavour, SEMAFO and Teranga transaction has consolidated the highly prospective Houndé belt. Our footprint now spans 3 mines, 2 projects and the largest exploration tenements on this belt. With an annual production of over 600,000 ounces coming from this belt, we believe that this will be comparable to other world-class belts. On Slide 8, you can see that this transaction will lead progress into the senior category with total gold production above 1.5 million ounces per year. While we are not doing this combination solely for the purpose of size, this added scale does factor in the screening of large global investment funds. As a larger company, we expect to see improved access to capital and enhanced trading liquidity as we become more investable for both generalist and resource-focused funds alike around the world. Moving to Slide 9. You can see our position relative to the senior producer peer group, with all-in sustaining cost below $900 per ounce, I would say, maybe even $850, we are very well positioned among the peer group. This metric is very important for both Teranga and Endeavour. Both companies have dedicated the last several years to building a robust business that operates at low cost. As such, it was important for both of us to not dilute ourselves sales by combining with higher cost assets to maintain a high-quality portfolio. Turning to Slide 10. Many of you will be familiar with our portfolio of assets, which will be bolstered by the addition of the Teranga assets. As a combined entity, we have strong exposure across the full mining cycle. Starting on the left, I believe we have some of the most exciting greenfield projects in West Africa, which gives us significant optionality when looking at future growth. We have more than 10 significant greenfield projects where we see promising potential for additional discoveries. On the development front, we already have Fetekro and Kalana. Fetekro has had some significant recent success with an increase in the resource to 2.5 million ounces and an acceleration of the pre-feasibility study to early '21. We can also add now the Golden Hill project and the Afema exploration to Bantou and Nabanga, which we acquired from SEMAFO earlier this year. Looking at our producing mines. We have 6 core producing operations and 8 mines in total, Sabodala-Massawa plus Ity and Houndé from the heart of the combined business, with Boungou mine and Wahgnion all representing additional opportunities for mines in Endeavour's target box. This expanded optionality across our portfolio gives us enormous flexibility for the future, and each of these projects will compete for capital within our disciplined approach around capital allocation. Moving to Slide 11. You see here that the combined business will have a strong balance sheet compared to other senior producers. On the right-hand side of the slide, you can see we're very well positioned among our peer group based on net debt to trailing 12-month EBITDA. We will also be moving to the right as we continue to generate significant cash. This robust balance sheet and strong cash flow provides a strong ability to pay an attractive dividend yield going forward. As you noted, we declared our first dividend last week, and this combination provides further confidence in the sustainability of our ability to fund dividends. In fact, we expect to build a strong net cash position in '21 while paying dividends and growing organically, which would give us further ability to increase our shareholder returns program as part of our capital allocation framework. As part of the transaction, we are also pleased to have the continued strong support of our major shareholder, La Mancha, Naguib Sawiris, who has committed to invest $200 million in support of the combination. In addition, we will be undertaking a comprehensive refinancing of the combined entity's debt package. The main benefit here is generating on the order of $40 million per year in savings by replacing high cost financings and less favorable offtake agreements, which are currently on the Teranga balance sheet. We will also have a financing structure that is more flexible than the existing arrangements and reflective of our positioning as a new senior producer. As we move to the next slide, I will note that Endeavour recently declared its first dividend as a key step on the path to a sustainable dividend policy. Our first dividend of $60 million, representing approximately a 1.6% yield on an annual basis, will be payable to shareholders during Q1 based on the record date to be set before the transaction closes. We want to ensure that our long-term shareholders, who have stood with us through the last several years of growth and deleveraging, are rewarded for their patience. Following this first dividend, we expect to declare dividends on a semiannual basis with the goal of maintaining a similar annual dividend yield until we have reached a net cash position of $250 million, which, in fact, might be as early as Q2. At that time, we will reassess our capital allocation priorities and consider further augmenting our shareholder return program against other potential uses of capital. On the right-hand side of the page, you can see that our first dividend positions us very competitively against our new senior producer peer group. Being a dividend payer opens us up to an entirely new class of shareholders for whom this is critical consideration. As we mentioned at the start of the presentation, the combined company will be well positioned among its peers with a great opportunity for a re-rating. On Slide 13, you can see how we stack up against the senior gold producer, where we are clearly valued at a discount based on price to net asset value, enterprise value to EBITDA and free cash flow yield. I hope you will agree that there is significant potential for us to move up this chart as we deliver on our commitments and demonstrate the additional value that we can create. Moving to Slide 14. As I mentioned earlier, the other important news of the day is our intent to list on the London Stock Exchange as a premium issuer, following the completion of the transaction. You can see how our production compares to the LSE listed peer group. With the removal of Randgold, the LSE has relatively limited option for those seeking significant diversified gold production exposure. On completion of the listing process, we will be the largest premium London-listed pure gold producer and the second overall, and we further believe that we will be well positioned for inclusion in the FTSE 100 index. We expect indexation to add strong incremental shareholder demand, therefore, further supporting our re-rating potential. The next item to note is the great support that we have from a group of core shareholders, as shown on Slide 15. On the Endeavour side, La Mancha has agreed to vote its current approximately 24% position in favor of the transaction. On the Teranga side, both Tablo and Barrick have agreed to support the transaction. Between the 2 companies, they control approximately 33% of the voting shares of Teranga, and they have committed to vote in favor of the transaction at the upcoming Teranga shareholder meeting. Both Tablo and Barrick bring extensive know-how operating in Africa with David Mimran, owner of Tablo, an experienced and well connected business man in both Senegal and Côte d'Ivoire. Overall, we are very pleased to have all 3 as supporters of the combined company. And obviously, as you have seen, both Boards have also unanimously been supporting this transaction. On Slide 16, we have set out how the transaction creates benefits for both sets of shareholders. For Endeavour, in addition to the assets, which we've addressed at length, there is a strong economic rationale to pursue this acquisition, which I hope to have made clear throughout this presentation. The transaction is immediately accretive on a NAV per share basis. On cash flow per share and earnings per share metrics, it is neutral over the next 2 years and then significantly accretive beginning '23 when the Massawa expansion is fully realized. All of this accretion occurs without accounting for the impact of the synergies we expect to realize. Endeavour shareholders will also benefit from a more diversified entity to support ongoing dividend payments moving forward. Teranga shareholders, as Richard explained earlier, can expect to realize an immediate premium and lock in a strong share price appreciation since the Massawa acquisition. The combined entity will be a larger, more diversified and operationally and financially de-risked company with a proven track record of project development and a clear road to further value upside. The transaction also significantly enhances growth optionality for Teranga shareholders within an expanded portfolio and a stronger balance sheet. Let me take a moment to summarize the benefits for both companies. This combination creates a top 10 global gold producer with over 1.5 million ounces of annual gold production at low all-in sustaining costs. Both companies will contribute in a balanced manner to the combined entity's value. The combined entity will have strong cash flow generation capability and a strong balance sheet with the capacity to simultaneously fund growth and pay dividend while building a strong net cash position in '21. We will also have the scale and liquidity to attract generalist investors with a combined market cap of over $6 billion and an attractive valuation relative to the peer group. Both group of shareholders have the potential to benefit from a re-rating, driven by attractive valuation metrics, underpinned by a sustainable dividend policy, an LSE listing and potential inclusion in the FTSE 100. Finally, we can reiterate that we have strong support from 3 cornerstone investors who can all contribute their extensive relationship and experience operating in Africa. Clearly, the rationale for this transaction is compelling, and the pathway for shareholder value creation we have outlined is achievable. In closing, let me summarize our combined vision for the company that will become after this transaction as shown on Slide 17. We want to create a resilient and sustainable business for the long term, reward our loyal shareholders while attracting new ones and remain the partner of choice in the communities where we operate. To that end, we believe that this combination supports this objective, given how compelling it is. Richard and I are excited to think about what we are able to do together, delivering on our shared ambition as we embark on this exciting journey. Richard and I will be now happy to take any questions you may have. Operator?

[Operator Instructions] And the first question comes from the line of Raj Ray from BMO Capital Markets.

Congrats, Sébastien and Richard, on a great transaction. My first question is on the due diligence, mutual due diligence [indiscernible] given that we saw until last week. And given the COVID pandemic, how long would [indiscernible] du diligence hover? And how much of that were you able to accomplish?

Sure, Raj. Well, both companies have been doing due diligence together since April. So following shortly after the announcement on the SEMAFO transaction. In the case of Endeavour, we were pretty familiar with Massawa, given that we did due diligence when it was a Randgold asset. So we knew well the asset. It's been, I would say, with Richard's team, is a bit -- it's been nearly 6 months that we've been working on this and making it. It's not something that happened yesterday. We've been carefully monitoring the steps done between Teranga and Massawa through their transaction. We've been able to -- despite COVID-19, we've been able to do a first wave of different site visits during the summer, in fact, in August. And then we've been able to do a second wave of visits over the last 3, 4 weeks, which have been successful on both sides. Extensive work has been done, redoing reserves and so on. So we had a very strong level of confidence on both sides. Was a bit unfortunate that the leak was made last week, but the leak came where we were finalizing terms. So we were very close to the finish line. And therefore, the leak didn't impact the way we were progressing towards this transaction. But Richard, you may want to comment also on your side?

Thank you, Sébastien, and Raj, that's a great question. So what we did for Endeavour's principal assets, we rebuilt the resource and reserve models. We reviewed all metallurgy and test results. We reviewed all the costs. For some of the other assets, it wasn't as detailed, but it was a thorough review, and we're very comfortable and excited with that -- those assets. And we think that, in particular, the core assets have tremendous growth opportunities.

Yes. The other thing I would add, Raj, is this is a combination between 2 companies that know each other very well. There is not that many strong and good operators in West Africa. So Richard and I and our teams are seeing each other on a very frequent basis. Obviously, we feel that we have a very similar culture -- if you take, for example, Paul Day, the current GM at Wahgnion, we are used to work with him very comfortable. Very comfortable also with the experienced team that Richard has at Sabodala and Massawa . So we were extremely comfortable in proceeding from a technical standpoint. The genesis of this beyond the regular discussions that Richard and I have been having is -- I've been pushing about 18 months ago for Teranga and Massawa to really combine because Massawa, on a stand-alone basis, was not making the numbers in order to progress. And therefore, Richard did the right move in combining Sabodala with Massawa, and it became extremely logical for both of us to move forward on this transaction.

My second question is based for you, Sébastien, on your portfolio. So you got 8 operating assets, among them Agbaou and Karma short mine life. And you've got 2 great development assets in Fetekro and, within Teranga, the Golden Hill that has [ the synergies for ] Houndé. If you look at your current portfolio, do you think you -- this is the optimal portfolio and has the potential for addition of more assets in that?

Sure. Well, I think over the 3, 4 last years, we've been active in managing the portfolio, making sure that we do focus management on the right assets and, in particular, assets which are able to generate the right level of returns that we're expecting for our shareholders. As you pointed out, and I think in the presentation, we clearly outlined that we had 6 core assets -- Agbaou and Karma are lagging a bit behind, in particular, in terms of mine lives and cost. So I wouldn't be surprised if over the next few months, once the closing of this transaction, if we start optimizing the portfolio around those assets.

And just 2 more questions on that side, if I may. First up, on the redomicile -- sorry, the LSE listing, premium listing. Beyond the redomiciling, is there any other conditions that you need to meet to do that? And also, are you [indiscernible] the premium listing and the Canadian listing at the same time? And the second question is on the dividend timing. Just back to when you expect to pay that out? Will detail -- before the transaction closes?

Sure. Well, first of all, what's important is we view this listing as complementary to the Canadian listing. So we're not expecting any impact for Canadian and North American investors that are through the Tier 6. The timing for the U.K. listing is obviously post-closing of this transaction. I would anticipate that it's probably going to take about 6 months post-closing to prepare for this premium listing. So I would target around end of Q2, beginning of Q3 for the LSE listing. Becoming premium, there is different ways in becoming premium. So yes, we're confident that we can meet those criteria and, again, meeting those criteria without any particular impact for Canada.

Okay. And second on the dividends timing?

So on the dividend, as you saw, as part of our Q3, Endeavour stand-alone has decided to move forward with a $60 million dividend representing about 1.6% dividend yield. So this will be paid prior to the closing of the transaction to Endeavour shareholders, so somehow in -- around beginning of January, beginning mid-January. And then what we say with Richard is that the combined group will have a very strong balance sheet with very limited net debt upon closing, in particular, with the $200 million capital injection from La Mancha. Therefore, we are in a position, given the strong cash flow and the low cost of the combined group, that we're extremely confident in generating strong cash flow going forward and to maintain a minimum dividend of at least 1.6% yield going forward. The objective is to reach, as quick as possible, a net cash balance of $250 million for the company and, once we've reached that net cash balance, to progressively increase the dividend yield based on the cash flow generated. So at this stage, in terms of timing, what we said is that the next dividends will be paid on a semiannual basis. So we would expect the combined group to benefit from first semiannual dividend as part of our Q2 results and then the second one as part of our year-end results 2021.

The next question comes from the line of Fahad Tariq from Credit Suisse.

I have 2. I'll ask them one by one. On the first as you think about your development pipeline, I know previously, the thinking was in early 2022, there would be an investment decision on either Fetekro or Kalana. Has that timing changed now because you have -- obviously, you're a larger company now so you've already achieved the growth, but also maybe you need more time to look at the entire portfolio and think about what assets make sense in terms of development? Anything on the timing would be helpful.

Thanks, Fahad. I mean, no changes on that front. I mean obviously, Sabodala-Massawa project is progressing. There are some CapEx in '21, and then the bigger ones will come in '22 and '23. On our side, for new projects, as we said, nothing before end of '21, beginning of '22. So we'll continue to progress both feasibility studies for Fetekro and Kalana, and only one will be launched in '22 based on merits and returns. So there is no changes on that front. Then what we like with the -- this transaction is basically being able to increase the pipeline for future projects. So we still have the Bantou project that we got through the SEMAFO acquisitions that we need to progress in terms of drilling. And then we have this Golden Hill project that we need to further drill and that will nicely, potentially fit as a satellite to Houndé. So that's another one. And then it's really going to be about the amazing exploration portfolio that this combined group is getting both on the core assets. As you know, we still have a lot of exploration potential on our core assets, Houndé and Ity. We see amazing potential on Massawa and on Wahgnion, which is great. And then we've got a big, big number of targets, including the exciting Afema, but not to mention all the exploration also from the SEMAFO portfolio, including the ones at Agbaou and Boungou. So a lot to be done, and which is why with Richard, we're confident that this combined group has then all the right features going forward to create its organic growth without having to move into other M&A.

Okay. That's clear. My only other question was, I think previously, you had mentioned that some of the countries in which you operate in West Africa, they are part of a similar economic block in terms of setting the taxation or royalty structure. Does Senegal -- is Senegal also part of that West African block? Or is it a separate kind of regulatory jurisdiction with separate royalties and separate taxation?

Yes, exactly, Fahad. I mean, Senegal is part of the same West African economic monetary Union as Côte d'Ivoire and Burkina Faso and Mali and Niger. So this is part also of the attractiveness, using the same currency, having the same central bank and, therefore, aligning progressively both in terms of taxes but also in terms of mining codes. So this is why this portfolio and this combination between the 2 companies is so natural and so attractive.

The next question comes from the line of Jonathan Guy from Berenberg.

And congratulations on the transaction. Just looking forward, you have 1.5 million ounces a year of production. You've flagged there's a couple of assets that become noncore and you've got some great projects in Fetekro and Golden Hill, which you can bring into the portfolio. But is -- from this point forward, is the ambition to maintain at 1.5 million ounces? Or do you see yourself ultimately being a 2 million-ounce producer? And what are your thoughts on further M&A? Is this it for the next couple of years? Or are you still looking?

1.5 million ounce, we said in the past that being between 1 million to 1.5 million was probably the right spot. Simply because this is a tough business where you need to replace depletion every year, and you're talking about reserves. So with the combined group at 1.5 million ounce, we're going to have to replace about 1.5 million ounce of reserves which is probably about 3 million ounces of resources, which, thanks to the quality of the portfolio and the exploration portfolio in particular, we believe this is feasible. But there is no intention, I mean, to go beyond the 2 million ounce. We have a lot of projects. So we'll see how those different projects taxing progressively into the pipeline. And yes, I think we're very, very happy. We have now the right, I would say, portfolio, diversified geographically. I think that was the missing point following the SEMAFO transaction, which is some concerns by some investors on being too exposed to Burkina, which we don't feel because we are extremely happy in Burkina Faso. But obviously, this combination with Teranga gives a much broader geographical exposure, highly focused geographically but, at the same time, diversified over 3 countries, a strong pipeline, both in terms of project and exploration. So we've got everything we need going forward to grow organically.

And look, just to ask, I mean, you guys -- you've got La Mancha, you've got Tablo, you've got Barrick. And obviously, you guys, the management team. I mean, there's 4 people with sort of fairly -- or 4 groups with fairly significant experience in the industry there. Are you all in absolute agreement about the strategy? Or do you expect Barrick or Tablo to exit at some point? What's -- how will the strategy change as these 2 other groups have come into the tent?

Well, the way we look at it is -- and based on the support agreements that we got from all set of shareholders is that they are all happy for this combination to happen. And they are all happy with the potential re-rating that we would be expecting from this combination. La Mancha and Naguib Sawiris will be about 19% at closing, following their $200 million top-up, so 19%, largest shareholder, in the combined group. Tablo, David Mimran, will be about 7% in the combined group; and Barrick, about 4%. And I mean it's known that Barrick down the road will be selling progressively their stake. I mean, I don't think that their strategy is to keep investment in other gold mine companies. But I know and believe that they want to continue to enjoy the re-rating of this combination. So I won't expect them to come out shortly. And David Mimran is committed. The Mimran family have been extremely successful operating in West Africa across different businesses and, in particular, in Senegal and in Côte d'Ivoire. I do believe that David is also personally a friend, and he is extremely committed to see the success of this transaction and committed to the long term in seeing some strong value creation. So we have good core shareholders that are here for the long term and, in particular, to support the re-rating that we are expecting from this amazing combination.

Sébastien. It's Richard. Sorry, Jonathan, can I just add to that? And I echo Sébastien's comments, but I think they need to be emphasized. So as we move being Teranga into that mid- tier status, there were a number of options for us and options that would have included a larger upfront premium. But both David and Mark truly believed in what we're creating and the opportunity for a re-rate. So of all the choices that we would have had, they were very, very strongly in favor of this. They believe in the combined entity, this new best-in-class senior gold stock that's being created. So not only are they happy, they fundamentally are very, very supportive in believe to their core in the re-rate that the Endeavour shares are going to have over the next few years as we execute. Sorry about that, Sébastien.

No, no, it was important to further give color. So thanks, Richard.

The next question comes from the line of Wayne Lam from RBC Capital Markets.

Congratulations on the combination. I was just curious are there any specific country level approvals required for this transaction within the countries that you guys operate?

Thanks, Wayne. There is no regulatory requirement, but obviously, we do have and entertain strong relationships with the host countries where we operate. And therefore, both Richard and I have been informing this morning, each of the 3 key countries where we operate. We have strong relationships in Côte d'Ivoire and in Burkina and Richard may want to comment, but I've seen how strong also the relationship of Teranga in Senegal, where they are the largest gold producer. Richard?

Apologies we lost Richard. He [indiscernible].

Okay. No problem. Yes. So I mean, we -- no particular requirements and strong relationship on both sides where we operate. And therefore, both governments, 3 governments have been already informed and are supportive of this transaction.