PMI Gold to merge with Keegan Resources to form new West African gold company

THE BOURSE WHISPERER: PMI Gold Corporation (ASX: PVM) (TSX: PVM) and Keegan Resources (TSX: KGN) (NYSE MKT: KGN) have entered into a definitive arrangement agreement to combine their respective businesses to create a substantial West African gold development company.

The merger of equals will be known as Asanko Gold Inc. in reference to the West Ghana region in which the two companies currently hold their principal gold projects.

Asanko will be led by Peter Breese, the current president and CEO of Keegan and Collin Ellison, the current managing director and CEO of PMI.

Under terms of the merger PMI shareholders will receive 0.21 Asanko shares for each PMI share they hold.

As Keegan is the surviving corporate entity, existing Keegan security holders will not need to exchange their securities.

The merger will create a combined company with an aggregate market capitalization expected to be in the $700 million range.

Announcing the deal the two companies claimed Asanko will become a leading gold development company in West Africa with near term production expected from a united project comprised of two nearby gold deposits – Obotan and Esaase.

Other merger benefits outlined by the companies include:

–    Measured and Indicated Resources of combined projects equalling 6.94 million ounces at an average grade of 1.90 grams per tonne gold;

–    Additional Inferred Resources of combined projects of 2.65 million ounces at an average grade of 1.87 grams per tonne gold;

–    Over $340 million in cash on hand and no debt outstanding;

–    Obotan can proceed to construction quickly – approximately 200,000 ounces per year with first gold pour expected in 2014;

–    Esaase development to be funded from cash flow – additional 150,000 to 200,000 ounces per year by 2017; and

–    Asanko shares will trade on the TSX, ASX and NYSE MKT Equities Exchange upon completion of the merger.

“This is truly a unique and exciting opportunity to combine these two adjacent and near-term development projects and to have available some $340 million in combined cash to fund a Mid-Tier scale production growth profile starting in about two years,” Keegan Resources president and CEO Peter Breese said in PMI’s announcement o the Australian Securities Exchange.

“We expect significant synergies through the joint development of Obotan and Esaase which we expect will ultimately create one of the largest gold mining and exploration districts in Africa.”

Breese’s enthusiasm for the merger was shared by his PMI counterpart managing director and CEO Collin Ellison.

“We think the combination of these two companies with adjacent and complementary deposits, highly prospective exploration holdings on the Asankrangwa belt, outstanding self-funding financial flexibility and a combined management strength will allow both groups of shareholders to realize maximum value through Asanko Gold’s path to production and aggressive growth profile through to Mid-Tier Producer status by 2017,” Ellison said.