On August 9th I sent out a bottom fishing alert on Endeavour Mining citing their growth projections which would enable them to become a mid tier gold producer as they further developed their West African assets.

Last week Endeavour announced a merger plan with Adamus Resources (ADU, ASX) which will solidify their position as a mid tier gold producer in West Africa and give investors a potential double from today's current share price.

If you've been holding off on getting your position don't worry. The stock is up about 15% since my last update but we are still in the summer slow season and there still potential for a triple digit capital gain with EDV over the short term.

Here are the highlights of the deal...

Endeavour Mining announced that it has entered into a definitive agreement with Adamus Resources where ADU shareholders will receive 0.285 shares of EDV for every share of ADU they hold.

This merger will add Adamus' Nzema gold mine assets to Endeavour's Youga and Agbaou projects giving the new company an estimated production of 172,000 oz's of gold in 2011. Gold production is projected to grow to 250,000 ounces by the end of 2013.

Once the deal is completed, EDV will pay off ADU's $60 million debt facility and another $100 million will go toward paying down the Nzema gold hedge.

This is a good deal for EDV shareholders. Once the market comes back to life in the fall, investors will see that Endeavour is trading well below their peer group valuation. Continued positive news flow from EDV should quickly build up the share valuation over the next 12 to 15 months.

With this merger Endeavour has become a focused, growth oriented, West African gold producer.

The Nzema project is an open pit design with a CIL processing plant that has the capacity of 2.1 tonnes of ore per year. The mine has JORC compliant reserves of 1.07 million ounces plus another 1.049 million ounces of resources not included in the reserve category.

The mine began production earlier this year and the first full quarter of production was completed in Q2 where 26,015 ounces were produced with a cash cost of $544 per ounce.

Adamus management had been estimating total production for 2011 would come in at 88,000 ounces and increasing to 100,000 - 105,000 ounces over 2012. At this point the mine has enough reserves for an eight year mine life. This estimate will change once the resource numbers are added in to proven reserves.

The Nzema project has a hedge attached to it which Adamus needed to complete their project financing. As of June 2011, 275,887 ounces of gold were hedged at US$1075 per ounce. There is a hedge schedule which would account for about 50,000 ounces of gold per year over 5.5 years. Once the deal with Endeavour is completed, EDV plans to pay down this hedge which will cost them around $100 million. Having followed Endeavour for several years now I can tell you that their management is as bullish on the price of gold as I am, and being unhedged should pay off handsomely for all shareholders.