The gold industry has seen a flurry of deals over the last year as companies attempt to squeeze value from operations after years of subdued activity and low returns.
Canada's Endeavour, whose business is focused on West Africa, is seeking to gain control of Centamin assets including the Sukari mine and Cleopatra project in Egypt, as well as exploration projects in West Africa.
Centamin at the start of this month rejected a 1.47 billion pound ($1.89 billion) all-stock takeover proposal from Endeavour, saying it did not offer enough value to Centamin shareholders.
However, the CEO of Endeavour and the chairman of Centamin met in Perth, Australia, on Saturday and agreed to a reciprocal due diligence exercise.
"The objective...would be to allow both companies to further understand each other’s assets," Endeavour said in a statement.
It would be "a critical precursor" to determining whether a deal could be agreed that was in the best interests of both companies’ shareholders.
Centamin shares, which have underperformed Endeavour's over the last two years, were up 2.4% by 1016 GMT.
Centamin was not immediately available to comment.
RBC Capital Markets said the strategic rationale for a merger was strong but Endeavour may need to offer a higher premium depending on the outcome of the due diligence, while Peel Hunt said the two companies did not appear to be "completely on the same page".
Under English takeover law, Endeavour has a deadline of the end of the month to make a firm bid.
Given the time that has already passed and the need to carry out proper due diligence, Endeavour has asked Centamin to ask the Takeover Panel for extra time.
Centamin has "not yet done this and there can be no certainty that they will," Endeavour's statement said.
The combined entity would have produced 1.2 million ounces of gold in 2019 at an all-in sustainable cost - an industry benchmark - of $875 per ounce, which would make it one of the world's largest and lowest cost miners, Endeavour has said.
By Barbara Lewis
