PERTH (miningweekly.com) – ASX-listed gold/copper explorer West African Resources has made a play for TSX-V-listed Channel Resources, which, like West African, owns projects in Burkina Faso.

West African is offering one of its own shares for four Channel shares. Channel shareholders will also receive one share purchase warrant for each two West African shares received in the transaction, with the warrant being exercisable at a price of 40c each, for a period of 36 months.

The companies, which signed a letter agreement on Wednesday, said that each outstanding Channel option would also be replaced or exchanged for one-quarter of a West African option.

If successful, the transaction would result in West African issuing some 29.84-million shares, resulting in Channel shareholders holding a 13.2% combined stake in the outstanding shares of West African.

The takeover offer represented a 100% premium on Channel’s recent trading price, based on West African’s share price on July 29.

Channel is exploring for gold at its Tanlouka asset, in Burkina Faso, and also held a mineral-bearing brine property in Canada. West African has a large land position in Burkina Faso, and has identified multiple targets for exploration, including the Boulsa gold project, which hosts the Sartenga prospect.

“Market conditions have taken a heavy toll on Channel in the past year; however, under the proposed transaction, Channel shareholders have the opportunity to benefit from West African’s ability to realise the value of Tanlouka and also participate in the exploration and development of its extensive landholdings, which are contiguous with Tanlouka, numerous gold prospects and its flagship Sartenga copper/gold project,” said Channel president and CEO Colin McAleenan.

West African MD Richard Hyde added that the company’s own shareholders would capitalise on near-term production potential resulting from the consolidation of shallow gold mineralisation at both Moktedu and Tanlouka, with the company directing its fleet of drilling rigs in the coming months at oxide mineralisation in both areas.

“Channel shareholders will also benefit from the growth potential of the large-scale Sartenga copper/gold project, which we will continue to diamond drill throughout the current wet season, and into 2014, allowing for resource estimate updates to be completed by the end of 2013 and again in 2014,” Hyde said.

The two companies noted that shareholders holding some 8% in Channel have already signed a lock-up agreement to support the takeover, granting West African the option to buy the shares even if the takeover offer did not proceed.

Meanwhile, West African had also committed to buying more than 29.6-million shares in Channel, at a price of 5c a share, through a private placement. Following the private placement, West African would hold a 19.9% shareholding in Channel.

The A$1.48-million raised in the placement would be used to fund transaction costs and for working capital purposes, Channel said on Wednesday.

The takeover offer was subject to regulatory approval as well as due diligence studies. The transaction was expected to close in late October.