Australian mining firms Emerald Resources and Renaissance Minerals have agreed to merge in an all-stock deal that aims at creating synergies to develop gold projects in northeastern Cambodia, the companies said in a joint announcement yesterday.

The merger will create a combined entity with a market capitalisation of about A$95 million ($71 million) and approximately A$20 million ($15 million) in cash.

“The merged entity will create a well-funded gold development company which is well placed to develop its assets and pursue any value enhancing opportunities which may arise,” the firms said in a joint filing to the ASX.

The deal is focused on Renaissance’s Okvau and adjacent O’Chhung exploration licences, which cover approximately 400 square kilometres in Mondulkiri province. An extensive survey of the Okvau project has defined a 1.13 million ounce gold resource at 2.2 grams/tonne.

A pre-feasibility study completed last July estimated that a capital investment of $120 million could put a mine into operation producing around 91,500 ounces of gold per year for eight years.Emerald already holds a 10 per cent stake in Renaissance, having subscribed for half of a $3.4 million capital raising earlier this year.

The Perth-based gold mining company, which had previously focused on oil and gas exploration in the US, also entered agreement last February in which it would earn a possible 51 per cent interest in the Okvau project by conducting a definitive feasibility study and environmental impact assessment, and a two-year exploration program worth $3 million.

As part of its merger proposal, Emerald will acquire all remaining shares of Renaissance by offering 1.55 new Emerald shares for every Renaissance share.

“Having developed a strong partnership with Emerald following the successful joint venture of the Cambodian gold project, this merger represents a natural progression for both companies and provides a robust corporate platform for the development of the Okvau gold deposit,” Renaissance chairman Hamish Halliday said in a statement.

“A successful merger will create an emerging gold producer with a highly credentialed management team, a strong balance sheet and a company very well positioned to deliver growth for all shareholders,” he added.

Richard Stanger, president of the Cambodian Association of Mining and Exploration Companies (CAMEC), said the merger announcement did not come as a surprise as it offers synergies in streamlined operations.

“It was logically going to happen,” he said. “The merged company will have less compliance costs and a simpler structure that is much easier to operate.”

Importantly, the merged entity will have $15 million in cash and no debt – putting it in a choice position to move ahead with development of a proven gold resource.

“It’s in a pretty good position,” Stanger said, adding that the experienced management team would be certain to capitalise on the opportunity.