UPDATE 2-Canada's Endeavour Mining to buy Australia's Adamus

Mon Aug 22, 2011 8:27am EDT

* Deal valued at C$313.4 mln

* Adamus shareholders to get 0.285 of Endeavour stock for each share

* New entity expected to produce 172,000 ounces of gold in 2011 (Adds details of the deal, shares)

Aug 22 (Reuters) - Canada's Endeavour Mining Corp has agreed to buy Australia's Adamus Resources in a deal valued at about C$313.4 million, to create a West Africa-focused gold producer.

Deals are being fuelled by miners anxious to deploy the spoils from booming commodity markets. Gold has benefited from the ultra-loose U.S. monetary policy of recent years, with prices rallying towards $1,900 an ounce on Monday.

Gold miners, riding on record high gold prices, are looking for takeover opportunities and particularly companies with exploration permits in West Africa.

Adamus, which poured the first gold at its Nzema project in Ghana in January, had earlier said it was ramping up output from the processing mill to full capacity.

Ghana is Africa's second-largest gold miner behind South Africa and has benefited from record gold prices , with output rising 1 percent in 2010 to 2.97 million ounces.

Under the deal, Adamus shareholders will receive 0.285 of an Endeavour stock for each share held. Adamus shares jumped more than 9 percent on the news.

The new entity is expected to produce 172,000 ounces of gold in 2011 from Endeavour's Youga mine in Burkina Faso and Adamus' Nzema mine at a cash cost of $575-$625 per ounce.

The gold production rate is expected to be about 250,000 ounces per year by the end of 2013 from existing assets, the companies said.

On a fully diluted basis, existing Endeavour and Adamus securityholders will own about 55 percent and 45 percent, respectively, of the merged entity.

Endeavour plans to invest at least $160 million to repay Nzema's project debt and reduce gold hedging volumes.

"This (deal) enables accelerated growth through the combined portfolio of development and exploration projects," said Neil Woodyer, chief executive of Endeavour.

Woodyer will be the CEO of the new company, while Adamus' Mark Connelly will be the chief operating officer.

The new company's operational management will be led from Perth, Australia, the companies said in a statement.

Shares of Endeavour Mining closed at C$2.44 on Friday on the Toronto Stock Exchange. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Maju Samuel)

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