The two companies entered into a binding takeover bid implementation deed that paves the way for Centamin to offer Ampella shareholders one share for every five held.

Based on Monday’s closing prices and exchange rates, the offer values Ampella shares at 16c per share, a 113% premium to the last closing price and a 77% premium to the 20-day volume weighted average price.

Ampella’s largest shareholder, Taurus Funds Management, has entered into a pre-bid acceptance agreement for its 18.9% stake.

Ampella chairman Peter Mansell said the offer was recommended after careful consideration.

“By accepting the offer, Ampella shareholders will not only receive a substantial premium to market prices, but also gain the benefits of being part of a larger, profitable gold producer, while retaining some exposure to the exploration potential that the Batie West project offers,” he said.

“The board believes that Centamin is the ideal party to continue exploration at Batie West, given its larger balance sheet and ability to deploy operating cash flows to fund exploration and development activities, at a time when funding for junior gold companies is extremely challenging.”

Batie West in Burkina Faso has a gold resource of 3.25 million ounces and Ampella has spent the past year targeting an additional 300,000-400,000 ounces of free-milling oxide material to complete the feasibility study.

Centamin chairman Josef El-Raghy said the acquisition represented an expansion of the company’s exploration efforts and was the first entry into Burkina Faso.

“It is our belief that Ampella’s extensive license holding over a highly prospective and underexplored 100km-plus trend of gold mineralisation offers outstanding potential for further significant growth of the resource base,” he said.

Centamin was founded in Perth and still has an office there, but delisted from the Australian Securities Exchange in 2010, months before the Sukari gold mine in Egypt started production.

The company is listed in London and Toronto and has an African resource base of 18.7Moz gold.

The offer is subject to 90% minimum acceptances and Ampella has to retain at least $10 million cash until the end of January.

Ampella had almost $15.2 million at the end of September.

Analysts have come out in support of the deal.

Numis Securities in London said it looked like a good deal and expected it to go through, while SP Angel said it made sense for Centamin to seek cheap ounces in a depressed market.

“Centamin brings specialist knowledge in mine construction, production and ‘fine grinding’ needed by Ampella for development of the 3.5Moz Batie West gold project,” SP said.

“Centamin will continue to drill the project for a further one to two years but should also complete the feasibility study on the project this year.”

RBC Capital Markets said the deal gave Centamin some attractive exploration upside and expected the company to spend around $US10 million per year at Batie West in FY14 and FY15.

“Given Centamin's solid cash position (around $118 million at end-September) and free cashflow generation potential from Sukari, exploration will be comfortably funded, we believe,” analyst Jonathan Guy said, while retaining an outperform rating for Centamin.

Centamin shares gained around 1.2% in London and Toronto overnight.

Ampella shares were yet to resume trading.