Intrepid will use part of its $140 million cash balance to buy-back shares at 30c each as part of a promise to return excess cash to shareholders.

The buy-back is a key condition of the merger.

Intrepid will then offer 1.078 shares for each Blackthorn share held, implying a 4% premium based on last closing prices.

The cash-backed value of 35.6c per Blackthorn share implies a 34% premium to the last closing price and an 82% premium to the three-month volume-weighted average price of Blackthorn shares.

Following the merger, Blackthorn shareholders will hold around 48% of the combined company with Intrepid shareholders to own the remainder.

If there is a 100% take-up of the buy-back by Intrepid shareholders, the merged company will have around $80 million cash.

The company’s key asset will be the Kitumba copper project in Zambia, which has a $US680 million ($A720.3 million) capital cost and a net present value of $461 million for an 11-year mine to produce 56,000 tonnes of copper per annum.

The enlarged entity will be fully funded to complete the definitive feasibility study with the aim of beginning construction in the first half of 2016.

Since settling a stoush over the Tujuh Bukit project in Indonesia this year for $80 million, Intrepid has been pondering its next move.

Activist shareholders successfully spilled the board in May, but shareholders voted against a A25.8c per share return of capital.

"This transaction follows an intensive review process by Intrepid’s team to identify an undervalued asset, into which our cash could be deployed to create more value for shareholders than simply returning all of it,” Intrepid chairman Ian McMaster said.

“Following an extended process of review and due diligence on numerous assets, our team has determined that the Kitumba copper project offers a lot more value than is currently recognised by the market, and we are confident that our cash resources can both add value and unlock this discount over time.”

Blackthorn recently sold its remaining 27.3% stake in the Perkoa zinc project to partner Glencore for $US10 million to focus on Kitumba.

“The valuation of the Mumbwa assets implicit in the merger transaction represents an attractive return on funds risked by Blackthorn shareholders on these assets to date,” Blackthorn chairman Mike Oppenheimer said.

“The cash resources of the merged group provide a stable platform from which to pursue value accretive growth principally from our existing assets in Zambia, but will also allow us to take advantage of business development opportunities.”

McMaster will chair the combined group with Oppenheimer as his deputy.

Blackthorn CEO Mark Mitchell will retain his role while Intrepid CEO Scott Lowe will be an executive director responsible for business development.

Lowe only joined Intrepid late last year and was previously managing director of Blackthorn.

The board will comprise three directors from each company.

Shareholders of both companies will be asked to vote on the transaction but the deal is unanimously recommended by both boards.

Intrepid shares were unchanged at A25.5c, while Blackthorn shares were unchanged at 26.5c.