The merged entity will be called Asanko Gold and will have two gold projects in Ghana – PMI’s Obotan project and Keegan’s Esaase project, just 15km away.

The 200,000 ounce per annum Obotan project is set to pour first gold by 2014, while Essase will deliver 150,000-200,000ozpa gold by 2017.

The two projects combined have resources nearing 10 million ounces of gold.

Asanko will have cash of over $340 million and no debt.

Importantly, the transaction allows PMI to self-fund the $300 million Obotan development, while Esaase’s expected development costs of $260 million are likely to be funded from Obotan cashflow.

PMI shareholders will receive 0.21 Keegan shares for every share held and shareholders of each company will own an equal 50% stake in the new entity.

The new company will be listed in Toronto, New York and Sydney.

Keegan president and chief executive officer Peter Breese will be CEO of Asanko.

Breese was a former Norilsk Nickel CEO and was CEO of Mantra Resources until its takeover last year.

PMI CEO and managing director, Perth-based Collin Ellison, will be president of Asanko.

"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,” Breese said.

“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."

The chairmen of the boards of PMI and Keegan, Peter Buck and Shawn Wallace, will co-chair Asanko and the six-member board will comprise three members of each company.

Patersons Securities senior resources analyst Simon Tonkin acknowledged the positive aspects of the deal, but said there were also several disappointing aspects.

“The share base will be predominately located in Toronto therefore potentially reducing the liquidity on the ASX,” he wrote this morning, adding that there would be potentially less access to management.

He also noted that Asanko would be in the development phase for some time.

“With around $260 million of Obotan cash flows used to fund the Esaase project shareholders will have to wait several years to see any dividends,” Tonkin said.

He was also concerned about the lack of geographic diversification.

Patersons, which previously had a buy rating and $A1.54 price target on PMI, placed the company under review.

PMI shares jumped 12% in Canada, while Keegan’s stock only edged up slightly in Toronto and New York.

In Australia this morning, PMI shares jumped 9.3% or 7c to 82c.