Katanga Mining, which warded off a hostile bid from a mining group run by the former England cricketer Phil Edmonds in September, is set to buy rival Nikanor for $2bn (£1bn) in an attempt to create a cobalt and copper giant.
Canada's Katanga and AIM-listed Nikanor confirmed that their boards had recommended the cash and shares merger in a regulatory statement yesterday.
The deal would create a company with a market capitalisation of about $3.3bn, and the statement said it is hoping to create the largest global cobalt producer and Africa's largest copper producer by 2011.
The consolidated group will retain the name Katanga Mining, and will apply for a full listing on the London Stock Exchange within five months. It will also keep its primary listing on the Toronto Stock Exchange. Already, 78 per cent of shareholders in Nikanor, which is incorporated in the Isle of Man, and 48 per cent of Katanga shareholders are backing the deal.
Jonathan Leslie, the executive chairman of Nikanor, said that the merger would create an "African champion with phenomenal resources and potential". Both companies have significant mining interests in the Democratic Republic of the Congo. The state-owned mining company Gecamines has a 25 per cent interest in both companies' mining projects in the country.
Martin Kabwelulu, the minister of mines, said the DRC government supported the deal. He said: "The DRC has 10 per cent of the world's copper reserves and less than 1 per cent of its production. This transaction is a significant milestone in the transformation of the DRC's mining sector towards production."
The approval of the DRC government is crucial. In August, Mr Edmonds' Central African Mining & Exploration (Camec) launched a hostile bid for Katanga. One day later, the government withdrew a key licence held by Camec in the country, smashing its share price by 24 per cent and, in effect, killing its all-share offer.