Vancouver-based Fortuna, which has operations in Peru, Mexico and Argentina, said the combined company would produce about 450,000 ounces of gold equivalent a year.

West-Africa focused Roxgold’s 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 miner.

Investors reacted negatively to the news, with Fortuna’s shares falling as much as 16% to C$8.09 during mid-morning trading in Toronto.

Fortuna’s chief executive officer, Jorge A. Ganoza said the acquisition of Roxgold will provide his company access to a complete business platform which brings low-cost gold production and a permitted feasibility-stage project in West Africa.

“[It also brings] a robust exploration pipeline and key members of a seasoned executive team of proven mine builders, developers and explorers,” Ganoza said in the statement.

Roxgold’s boss John Dorward said the transaction would provide the company’s shareholders with an immediate premium and a “unique opportunity” to participate in the creation of a new global mid-tier precious metals producer, with significant organic growth and cash flow generating potential.

M&A “second wave”
The gold sector has seen an influx of mergers and acquisitions in the past six months, fuelled by strong metal prices and pressure to replace reserves that have been mined.

Bank of America analyst Michael Jalonen predicted in a note early this year another round of consolidation for the industry in 2021 among small to medium-size gold miners.

Jalonen and his team noted that gold reserves have been falling since 2012, while gold output has remained stable. They added that an effective method to replenish depleted reserves was mergers and acquisitions.

Yamana Gold (TSX: YRI) (NYSE, LON: AUY) expanded its footprint in the precious metals-rich Abitibi region of Quebec, Canada, by acquiring all shares in smaller rival Monarch Gold late last year.

Endeavour Mining (TSX: EDV), already West Africa’s top gold producer, followed suit and bought Teranga Gold, in an all-share deal worth C$2.44 billion ($1.86 billion), which created a top 10 gold producer.

Another Canadian miner, Equinox Gold (TSX, NYSE: EQX) acquired in December Premier Gold Mines, spinning out the Nevada assets in a new US-focused gold miner — i-80 Gold Corp. The new company began trading in Toronto earlier this month under the symbol IAU.

In January, Agnico Eagle Mines (NYSE:AEM) merged with TMAC Resources, adding 3.5 million ounces of reserves in the process. That more than replaces Agnico Eagle’s reserves mined last year.

Most recently, Scottie Resources (TSX-V: SCOT) and AUX Resources (TSX-V: AUX) announced a potential merger that would consolidate the two companies’ gold-silver holdings in the Stewart mining camp in British Columbia’s Golden Triangle.

Junior Stratabound Minerals (TSX-V: SB), which is advancing its Golden Culvert project in southeastern Yukon, said last week it was acquiring California Gold Mining (CNSX: CGM) and its Fremont gold project in the US.