Market Overview

Teranga Gold to Acquire High-Grade Massawa Gold Project, Accelerates Repositioning as Low-Cost, Mid-Tier Producer



Massawa to transform neighbouring Sabodala into top tier complex, and extend mine life with higher grade(1)

CDN$140 million (US$106 million) bought deal equity offering announced

(All amounts are in U.S. dollars unless otherwise stated)

TORONTO, Dec. 10, 2019 /CNW/ - Teranga Gold Corporation ("Teranga" or the "Company") (TSX:TGZ, OTCQX:TGCDF) has entered into a definitive agreement pursuant to which it will acquire a 90% interest in the Massawa Gold Project ("Massawa") from a wholly-owned subsidiary of Barrick Gold Corporation ("Barrick") (TSX:ABX, NYSE:GOLD) and its joint venture partner, Compagnie Sénégalaise de Transports Transatlantiques Afrique de l'Ouest SA ("CSTTAO") (collectively, the "Vendors") with the Government of Senegal holding the remaining 10% interest in Massawa (the "Transaction").

Massawa is one of the highest-grade undeveloped open-pit gold reserves in Africa(2). It is located within trucking distance of Teranga's flagship Sabodala Gold Mine ("Sabodala") in Senegal, creating the opportunity for significant capital and operating synergies(3). The proximity of the projects and the combination of Sabodala's mill and Massawa's high-grade ore (the "Sabodala-Massawa Complex") are expected to scale Sabodala into a top tier asset.

"The Massawa acquisition is transformational for Teranga and – by creating a top tier gold complex – the first in the country – an important milestone for the gold mining industry in Senegal," said Richard Young, Teranga's President and Chief Executive Officer. "We anticipate that production from the Sabodala-Massawa Complex, together with our Wahgnion Gold Mine ("Wahgnion") in Burkina Faso, will increase Teranga's targeted consolidated annual gold production and reposition Teranga as the next multi-asset, low-cost, mid-tier gold producer in West Africa, one of the world's premier gold mining regions."

Total aggregate consideration for the Transaction is $380 million upfront (the "Upfront Consideration") plus a gold price-linked contingent payment (the "Contingent Consideration" and together with the Upfront Consideration, the "Consideration"). The Consideration will be in the form of cash and common shares of Teranga ("Teranga Shares"). See below for details on the financing of the Transaction.

Transaction Highlights

  • Teranga to acquire one of the highest-grade undeveloped open-pit gold reserves in Africa(2)

    The historical mineral reserves base of the Massawa project is 2.6Moz from 20.9Mt at 3.94 g/t Au and is one of the highest-grade undeveloped open-pit gold reserves in Africa. This will augment Sabodala's mineral reserves base of 2.4Moz from 55.7Mt at 1.35 g/t Au (see Appendix, Tables 1 and 2).

  • Significant opportunity for capital and operating synergies(3) and value creation

    Massawa's reserves are located within 30 km of the Sabodala plant, thereby reducing initial phase 1 and phase 2 capital costs included in the Massawa Feasibility Study. Life of mine sustaining capital for Sabodala is expected to increase due to extension of the mine and processing life, mainly for mine equipment and additional tailings storage facility capacity.

  • Sabodala-Massawa Complex anticipated to create a top tier gold asset

    Based on the historic Massawa reserves, with no changes to the existing mine and plant capacities at Sabodala, the Sabodala-Massawa Complex offers significant anticipated benefits, including targeting higher annual gold production with an optimized mine schedule that combines the existing Sabodala ore with higher-grade ore from the Massawa project. As a result, cash margins and free cash flows(4) are expected to increase commensurate with the increased production. 

  • Pro forma Teranga anticipated to transform into low-cost, mid-tier gold producer

    The expected higher production and lower costs from the Sabodala-Massawa Complex – driven by Massawa's higher-grade ore and the anticipated synergies – together with Wahgnion's production are expected to enable Teranga to transform into a low-cost, mid-tier producer with higher annual production and reduced per ounce costs.

  • Barrick to become Teranga's second largest shareholder

    Following completion of the Transaction, Barrick will hold approximately 11.45% of Teranga Shares (calculated on a non-diluted basis)  on a pro forma basis and be entitled to nominate one Board member so long as it retains at least a 10% ownership interest in Teranga (calculated on a non-diluted basis).

  • Cornerstone shareholder supports transaction, increases share position 

    Tablo Corporation ("Tablo"), controlled by Teranga director David Mimran, supports the Transaction. Tablo is investing a further $45 million with this Transaction to retain an approximately 21.2% ownership in Teranga (calculated on a non-diluted basis).

"Since my initial investment in Teranga four years ago, I saw the opportunity to create a top tier gold producer in West Africa," stated Mr. Mimran. "I expect Teranga's management team to quickly unlock the significant potential of Massawa's high-grade reserves and deliver value to shareholders and our Senegalese stakeholders for years to come. This acquisition represents an opportunity to expand Senegal's gold mining industry and contribute further to the development of the country and the communities we touch."

Barrick president and chief executive Mark Bristow said the group had been pursuing the best means of bringing Massawa – discovered by its legacy company Randgold Resources 10 years ago – to account for the full benefit of all stakeholders. The agreement with Teranga, which will realise the full value of this asset and create a substantial new West African gold mining company with significant African ownership, is the outcome of this process.

"Teranga has the appropriate infrastructure and processing facilities approximately 25 kilometres away from Massawa, and combining the orebodies and the geological prospectivity will add further benefits," Bristow said.

The Transaction is expected to close in the first quarter of 2020 and is subject to receipt of the Massawa exploitation license and residual exploration license from the Government of Senegal, as well as certain other acknowledgments and approvals from the Government of Senegal including Teranga's integration plans for the Sabodala-Massawa Complex. The Transaction is also conditional upon the closing of Teranga's concurrent debt financing, prospectus financing and private placement financing, each of which are also inter-conditional, as well as other customary closing conditions for a transaction of this kind.


Massawa was discovered by Randgold Resources Limited, which merged with Barrick effective January 1, 2019. On July 23, 2019, Barrick voluntarily filed a technical report under National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101") on the Feasibility Study of the Massawa Gold Project, Senegal (the "Massawa Feasibility Study"). The Massawa Feasibility Study disclosed mineral resource statements as well as mineral reserve estimates as of December 31, 2018, which remain current for Barrick as of the date hereof. As the mineral resource and mineral reserve estimates pre-date Teranga's agreement to acquire Massawa, Teranga is treating them as "historical estimates" under NI 43-101, but they remain relevant as the most recent mineral resource and reserves estimates for Massawa. Further drilling and resource modelling would be required to upgrade or verify these historical estimates as current mineral resources or reserves for the combined Sabodala-Massawa Complex and accordingly, they should be relied upon only as a historical resource and reserve estimate of Barrick, which pre-dates Teranga's agreement to acquire Massawa. A Teranga "Qualified Person" under 43-101 has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves for the combined Sabodala-Massawa Complex and Teranga is not treating the historical estimate as current mineral resources or mineral reserves. 

Massawa contains 2.6 million ounces of proven and probable historical mineral gold reserves calculated at a gold price of $1,200/oz. Approximately 80% of the ore is expected to be processed through whole-ore leach carbon-in-leach ("CIL") with the balance processed through a BIOX® circuit.

The Massawa Feasibility Study envisioned building all phase 1 and phase 2 infrastructure for approximately $333 million and later adding a BIOX® circuit to process refractory ores in the later stages of the mine life for an additional $80 million, for a total capital cost of $413 million.

The Massawa standalone operation was expected to produce an average of approximately 200,000 ounces of gold per year over the first 10 years(5).

Sabodala-Massawa Complex

Massawa's permits and the Sabodala mine license are contiguous with each other (see Appendix, Figure 1). Massawa hosts historical mineral reserves of 2.6Moz from 20.9Mt at 3.94 g/t Au(6) and Sabodala's mineral reserves are 2.4Moz from 55.7Mt at 1.35 g/t Au(7).

Sabodala currently mines between 35 and 40 million tonnes of material and processes over 4 million tonnes of ore per year. Teranga plans to integrate the high-grade ore from the Massawa deposits into an optimized combined mine plan for Sabodala, leveraging its existing infrastructure, plant, mobile equipment and personnel.

Minimal changes are required to Sabodala's existing CIL plant and infrastructure to process free-milling ore from the Massawa project. This reduces the initial phases of capital costs included in the Massawa Feasibility Study. Teranga is targeting to commence processing free-milling ore from the Massawa deposits at its existing CIL plant in the second half of 2020.

Teranga intends to mine and process Massawa's high-grade reserves on a priority basis and it is anticipated that by 2021, more than half of the ore processed through the Sabodala plant could potentially be sourced from the Massawa deposits. Based on the Massawa Feasibility Study and Sabodala's current mine plan, the Sabodala-Massawa Complex is expected to increase Sabodala's existing gold production profile. 

Teranga and Barrick have invested significant resources in due diligence to gain a better understanding of the technical details of the Massawa orebodies to help Teranga develop an optimized, integrated mine plan for the two properties. This includes detailed resource modelling for the mineralogical characterization, the chronology of metallurgical test work to determine BIOX® as the process of choice for the refractory ore in a retrofitted Sabodala plant and a revised life of mine plan that optimizes the timing of the Sabodala and Massawa orebodies for processing as well as annual operating and capital costs.

This detailed due diligence work will form a basis for initiating a pre-feasibility study (the "Combined PFS") that the Company plans to complete for the integrated Sabodala-Massawa Complex within six months of closing of the Transaction. The Combined PFS will target the mining of the Massawa deposits beginning in the second half of 2020 as currently targeted by Teranga. In advance of an integrated definitive feasibility study, the Company will embark on a drill program to expand the resource base of the Massawa project. The definitive feasibility study, which is expected to be completed in 2021, will assess the optimal size of the retrofit and the timing of implementation for processing of the refractory components of the Massawa ore.

The streaming agreement in place with Franco-Nevada (Barbados) Corporation ("Franco-Nevada") dated December 12, 2013, as amended (the "FN Stream"), entitles Franco-Nevada to 6% of Sabodala's future gold production. The FN Stream does not extend to the Massawa gold project area. However, pursuant to the FN Stream, Teranga must ensure Franco-Nevada is not disadvantaged as a result of the displacement of Sabodala ore and therefore Teranga will continue to deliver the anticipated ounces based on Sabodala's most current standalone life of mine operating plan.

Financing the Transaction

Funding the Upfront Consideration

The Upfront Consideration totals $380 million and consists of approximately $300 million in cash and an aggregate of approximately $80 million in Teranga Shares issued to Barrick and CSTTAO. 

In total, $225 million of the Upfront Consideration will be funded under an acquisition facility agreement (the "Acquisition Facility") by Teranga's existing lender, Taurus Funds Management Pty Ltd. ("Taurus"), which has agreed to lend $200 million, and $25 million to be provided by Barrick as a part of the lending syndicate under the Acquisition Facility. The balance of the Upfront Consideration will be funded by Teranga through the Offering and Private Placement to Tablo Corporation, each as outlined below.

In respect of the share component of the Upfront Consideration, approximately 19.2 million Teranga Shares will be issued to Barrick and approximately 1.6 million Teranga Shares will be issued to CSTTAO at an indicative price of CDN$5.10 per Teranga Share, being the same price per Teranga Share as underlying the Subscription Receipts sold in the concurrent Offering outlined below and the Teranga Shares sold to Tablo Corporation in the concurrent Private Placement outlined below (and based on a US dollar / Canadian dollar exchange rate of $1.00 = CDN$1.3235).

The completion of the Acquisition Facility, the Offering and the Private Placement are all inter-conditional with the completion of the Transaction.

Debt Financing

Details of the Taurus Acquisition Facility are as follows:

  • interest rate of 7.85% per annum on drawn amount, paid quarterly in arrears;

  • early repayment of the Acquisition Facility is permitted at any time without penalty;

  • the Company will enter into an offtake agreement for Massawa's life of mine gold production – the offtake agreement contains a buyout provision; and

  • upon execution of the Acquisition Facility agreement, Taurus will be granted 4,000,000 four-year call rights over Teranga Shares (settled with cash) at a strike price equal to 120% of the 5-day volume weighted average price of Teranga on the date of announcement of the Transaction.

Equity Financing

Concurrent with the announcement of the Transaction, Teranga has entered into an underwriting agreement with a syndicate of underwriters (the "Underwriters") led by Cormark Securities Inc. and Canaccord Genuity Corp., as co-lead underwriters and joint book-runners, to issue, on a bought deal basis, CDN$140 million ($106 million) of subscription receipts of Teranga (the "Subscription Receipts") at a price of CDN$5.10 per Subscription Receipt (the "Offering"). A portion of the net proceeds will be used to fund a portion of the Upfront Consideration with the balance of proceeds being used for exploration drilling across Teranga's portfolio, Transaction-related costs and for working capital purposes.

Each Subscription Receipt shall represent the right of the holder to receive, upon satisfaction or waiver of certain release conditions (including closing of the Transaction) (the "Release Conditions"), without payment of additional consideration, one Teranga Share, subject to adjustments and in accordance with a subscription receipt agreement to be entered into upon closing of the Offering (the "Subscription Receipt Agreement").

On December 10, 2019, Teranga expects to file with the securities commissions or other similar regulatory authorities in each of the provinces and territories of Canada other than Quebec, a prospectus supplement to Teranga's base shelf prospectus dated August 8, 2019 relating to the issuance of the Subscription Receipts.

The gross proceeds from the sale of the Subscription Receipts, less 50% of the Underwriters' fee and the expenses of the Underwriters incurred in connection with the Offering, will be deposited and held in escrow pending the satisfaction or waiver of the Release Conditions by Computershare Trust Company of Canada, as subscription receipt and escrow agent under the Subscription Receipt Agreement. If the Release Conditions are not satisfied or waived prior to May 31, 2020 (subject to extensions in limited circumstances), the escrowed proceeds of the Offering will be returned on a pro rata basis to the holders of Subscription Receipts, together with the interest earned thereon, and the Subscription Receipts will be cancelled and have no further force and effect, all in accordance with the terms of the Subscription Receipt Agreement.

Teranga has applied to have the Subscription Receipts listed for trading on the TSX. The Closing of the Offering is expected to occur on or about December 18, 2019 and is subject to TSX and other necessary regulatory approvals.

The securities to be offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Act"), or under any state securities laws, and may not be offered, sold, directly or indirectly, or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. This release does not constitute an offer to sell or a solicitation to buy such securities in the United States, Canada or in any other jurisdiction where such offer is unlawful.

Concurrent Tablo Corporation Private Placement

In order to fund a portion of the Upfront Consideration, and in connection with the exercise by Tablo Corporation of its pro rata pre-emptive rights, Tablo Corporation has also entered into a subscription agreement with Teranga to purchase approximately 11.7 million Teranga Shares from Teranga at the same price as the Subscription Receipts sold in the Offering, for gross proceeds of $45 million (the "Private Placement"), concurrent with, and conditional on, the closing of the Transaction.

The Closing of the Private Placement is subject to TSX and other necessary regulatory approvals.

Barrick, CSTTAO and Tablo Corporation Teranga Share Ownership

Following the completion of the Transaction, the Offering and the Private Placement, Tablo Corporation, having exercised its pro-rata participation rights, will hold a total of approximately 35.5 million Teranga Shares, representing approximately 21.2% of the issued and outstanding Teranga Shares (calculated on a non-diluted basis), Barrick will hold a total of approximately 19.2 million Teranga Shares, representing approximately 11.45% of the issued and outstanding Teranga Shares (calculated on a non-diluted basis), and CSTTAO will hold a total of approximately 1.6 million Teranga Shares, representing approximately 1% of the issued and outstanding Teranga Shares (calculated on a non-diluted basis)

Investor Agreement

In connection with the Transaction, at the completion of the Transaction, Barrick and Teranga will enter into an investor agreement (the "Investor Agreement"), pursuant to which, among other things, so long as Barrick retains at least a 10% equity ownership in Teranga, it will be entitled to nominate one member to the Company's board of directors, and will also be entitled to customary pre-emptive, anti-dilution and piggyback registration rights. The Investor Agreement will also provide that Barrick may not increase its pro rata equity ownership position in Teranga for 18 months from the effective date of the Investor Agreement and thereafter it may only increase its pro rata equity ownership position in Teranga by an incremental 5% from month 18 to month 24 prior to the expiry of the full 24-month standstill commitment period.

Contingent Consideration

The gold price-linked Contingent Consideration is as follows:


if the average gold price for the three-year period immediately following closing of the Transaction (the "three-year average gold price") is equal to or less than $1,450 per ounce, nil;


if the three-year average gold price is greater than $1,450 per ounce and up to, but not more than, $1,500 per ounce, $25 million; or


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