Centamin buys West African miner to diversify away from Egypt

LONDON (Reuters) - Gold-miner Centamin said it agreed to buy West African-focused Ampella Mining for A$40.9 million in a move which will give it exposure to projects outside Egypt, where its operating licence is in jeopardy.

A court case over Centamin's mining licence in Egypt, home to its only producing mine, Sukari, plus unrest in the country and a sharp fall in the gold price have wiped out more than half the stock market value of the company over the last 14 months.

Centamin's acquisition of Australian-listed Ampella will provide it with a development project in Burkina Faso, expanding the company's reach into West Africa from its base in Egypt, and in Ethiopia, where it has exploration licences but not production.

Centamin said on Tuesday Ampella's board had recommended its offer which will give Ampella shareholders one new Centamin share for every five Ampella shares, equivalent to an offer price of A$0.16 per share.

"This transaction will begin to diversify Centamin's risk around the biggest albatross in its investment case: Egypt," analysts at investment bank Nomura said.

"Centamin now has a second leg to the investment case beyond the Sukari asset and for a modest price of around 4 percent of the company, the trade-off appears to be a positive one."

Analysts at brokerage Peel Hunt were also positive on the fact that Centamin was acquiring gold assets at a time of severe distress for the industry.

Bullion has lost about a quarter of its value this year, hitting stocks of companies such as Ampella, which has found gold but is not yet producing. Ampella's shares have fallen by 75 percent this year.

Nomura said the $11.5 per ounce acquisition cost to Centamin, which has a market capitalisation of around 486 million pounds, was dramatically lower than it might have been two years ago, when it estimates the market was valuing West African gold resources at between $80 and $100 per ounce.

Centamin shares were trading up 1.6 percent at 1326 GMT.