China’s Zijin Mining Group Co Ltd has agreed to buy Canadian miner Continental Gold Inc for 1.3 billion Canadian dollars (US$1bn), but a top executive with the target company said increased security concerns in Colombia pose a risk to the deal.

Announced on Monday, the offer by state-backed Zijin for Continental aims to secure Continental Gold’s flagship Buritica gold project in Colombia.

“Zijin doesn’t have any experience in Colombia, and we have obviously had some incidents in the past,” Continental Chief Financial Officer Paul Begin told Reuters News Agency.

“But if a major security incident happened at any project, it would be considered a material adverse change and they would have an out if they wanted to,” he said.

Four employees of Colombia-focused Continental were killed in a single month last year, one near Buritica and the others at a different exploration site.

Zijin’s cash offer of 5.50 Canadian dollars (US$4.13) a share represents nearly a 13 percent premium to Continental’s Friday’s close.

Continental’s shares were up nearly 10 percent in Monday afternoon trading in Toronto.

The deal marks the second acquisition of a Canadian gold miner in as many weeks as miners look to boost reserves and take advantage of firmer bullion prices. Last week, Canada’s Kirkland Lake Gold Ltd offered to buy Detour Gold in an all-stock deal valued around 4.3 billion Canadian dollars (US$3.23bn).

The Buritica project has measured and indicated gold reserves of 165.47 tonnes and an inferred reserve of 187.24 tonnes, Zijin said. Zijin expects its gold reserves to exceed 2,000 tonnes after the purchase, with output eventually increasing by about 20 percent. It expects the Buritica project to generate robust profit and cash flow after becoming operational in 2020.

Buritica, whose high-grade ore and hearty output estimates make it a rare find, is shaping up as a key test for the future of large-scale underground mining in Colombia, whose mostly unexplored mineral riches have miners rubbing their hands.

Continental’s Chief Executive Ari Sussman said the project is expected to reach production next year and the “timing is right for Continental to sell to a more experienced mine operator.”

In a separate statement, Newmont Goldcorp Corp said it would tender its 19.9 percent stake in Continental.

The deal also requires Canadian and Chinese government approvals, Begin said.

Canada last year blocked a proposed 1.5 billion (US$1.130bn) Canadian dollars takeover of construction company Aecon by Chinese state builder China Communications Construction Co Ltd on national security grounds.

Continental shareholders are to vote on the deal in January. Begin said he expected to receive all approvals in late March or early April.

Zijin said in early November it would buy partner Freeport McMoran Inc’s copper-gold assets in Serbia for up to $390m.

Source: https://www.aljazeera.com/