TORONTO (miningweekly.com) – After failing to secure adequate shareholder support for a proposed merger with TSX- and ASX-listed PMI Resources in February, Canada’s Askanko Gold on Tuesday launched a second takeover bid, aimed at creating a mid-tier West Africa-focused gold miner.

The two companies announced in a joint statement that they had entered into a definitive agreement whereby Asanko would acquire all the common shares of PMI, thereby creating a clear pathway to 400 000 oz/y of gold output.

Under the terms of the deal, each PMI shareholder would receive 0.21 Asanko common shares for each PMI common share, which valued PMI shares at C$0.441 apiece, representing a premium of 79% to the 20-day volume weighted average share prices of the PMI shares on the TSX as on Monday.

Following closing, PMI and Asanko shareholders would hold about half each of the combined company.

The all-scrip transaction would combine the neighbouring Esaase and Obotan gold projects, in Ghana, with a combined resource base of 7.5-million ounces in the National Instrument 43-101-compliant measured and indicated categories and 2.9-million ounces in the inferred category. The combined projects also have 4.8-million ounces categorised as proven and probable reserves.

In February this year, the two companies announced that a merger at the same exchange ratio was terminated by mutual agreement, when it became apparent that the merger, while enjoying majority support from PMI shareholders, would not achieve the ‘supermajority’ support legally required.

However, since then, Asanko, which had changed its name from Keegan Resources in February, had significantly de-risked the Esaase project by revising the mine and metallurgical models, which had resulted in a stronger prefeasibility study and had arranged $150-million in project financing.

The companies added that the volatility in both the gold price and the value of gold equities had also added “considerable weight” to the transaction’s potential benefits to shareholders of both companies through reduced corporate costs, capital and operating synergies and balance sheet strength.

These factors had resulted in the unanimous support for the merger from both boards and from some of the companies' largest shareholders.

“The combination of the Esaase and Obotan gold projects into an integrated mining operation is an overwhelmingly accretive transaction for both Asanko and PMI shareholders due to the inherent synergies that can be captured through co-developing the projects.

“The combined Esaase-Obotan resource base is located within a 15 km radius and has the potential to support gold production of about 400 000 oz/y for over ten years, making it a flagship operation from which to build our company and realise our vision of becoming a mid-tier gold mining company,” Asanko president and CEO Peter Breese said.

The combined company will also boast a strong balance sheet with $280-million in cash and a $150-million debt facility arranged for project construction.

PMI president and CEO Peter Bradford added that this transaction would deliver increased certainty to the development and success of the combined Esaase and Obotan gold projects at a time when the standalone financing and development of either of these mines was challenging.

“In combination with the agreed exchange ratio, I believe that this is a compelling transaction for PMI shareholders and we are pleased to have the support of key shareholders for the transaction as well as the unanimous support of the board,” he said.

Bradford added that for Ghana, the transaction and resulting certainty of financing and development ensured continued growth of the gold sector and new jobs at a time when the rest of the gold industry in Ghana is scaling back their activities and reducing employee numbers.

Asanko’s TSX-listed shares on Tuesday closed down 2.86% at C$2.04 apiece, while PMI’s TSX-listed stock jumped 44.64%, or C$0.125 a share, to C$0.405 apiece.