April 26 (Reuters) – Canada’s Fortuna Silver Mines Inc said on Monday it would buy Roxgold Inc in a cash-and-stock deal valued at about C$1 billion ($884.32 million), marking its foray into the lucrative precious-metal mining region of West Africa.
Fortuna, which operates in Peru, Mexico, and Argentina, would acquire Roxgold’s projects in Burkina Faso and Côte d’Ivoire with an expected annual gold equivalent combined production of 450,000 ounces.
Despite the security risks of operating in Burkina Faso, the country is attractive for gold miners as the cost of producing the metal is much lower compared with the rest of the world. At a time of high gold prices, that translates into hefty margins for miners.
Fortuna’s deal comes more than five months after rival Endeavour Mining agreed to buy West Africa-focused Teranga Gold in a nearly $2 billion deal to become the region’s biggest gold miner.
Roxgold’s high-grade Yaramoko gold mine in Burkina Faso has a 2021 production outlook of 120,000-130,000 ounces, while its Séguéla mine in Côte d’Ivoire is projected to produce more than 130,000 ounces annually for the first six years, pending its construction decision in mid-2021.
“The combined company will be in a stronger position to continue accelerating the development of the Séguéla gold project at a lower cost,” Fortuna Chief Executive Officer Jorge A. Ganoza said in a statement.
Appian Natural Resources Fund, Roxgold’s largest shareholder, said it backed the deal.
Roxgold shareholders will receive 0.283 common shares of Fortuna and C$0.001 for each Roxgold common share held.
The exchange ratio implies a consideration of about C$2.73 per Roxgold share, a 42.1% premium to its last closing price.
After the merger, existing Fortuna and Roxgold shareholders will own about 64.3% and 35.7%, respectively, of the combined company.
($1 = 1.2439 Canadian dollars)
(Reporting by Arunima Kumar in Bengaluru; Editing by Ramakrishnan M.)