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Katanga Mining and Nikanor have agreed a merger to create Africa's largest copper producer and return £226 million to Nikanor shareholders.

The two companies, Toronto-quoted Katanga and AIM counter Nikanor, claim strong shareholder support for the proposed merger, which is to be effected through the issue of 0.613 of a Katanga share and cash equivalent to 108p for each Nikanor share. Under the plan, Katanga's boss Art Ditto will head the merged group, which would have assets of £1. 7 billion and be a significant global copper producer and the number one cobalt producer in the world.

The terms would give Nikanor holders 60 per cent of the combined group. Nikanor says it has received irrevocable undertakings to accept from shareholders representing 48 per cent of Katanga's equity, including key local player George Forrest and RP Capital, an investment group that came on board to stimulate such a merger.

For its part, Katanga claims the support of 78 per cent of Nikanor's shareholding, including the powerful Israeli Gertler clan and, again, RP Capital. Less overjoyed is entrepreneur Phil Edmonds' Central African Mining & Exploration Company (CAMEC), which had built up a 27 per cent Katanga stake and launched a bid for it.

This foundered when the Congo authorities queried the source of some of CAMEC's licences, and CAMEC's shares, which had hit 97p last year, fell to 20.25p. CAMEC still has an appreciable chunk of Katanga shares and is watching developments closely, while its advisers argue the present merger terms are worth much less to Katanga holders, especially following Katanga shares' 20 per cent fall in sterling terms since August to around 800p.

However, in terms of local credibility and influence, the Katanga-Nikanor deal is claimed to have a distinct edge. Nikanor shares, which have swung between 410p and 715p this year, are up 31.5p today to 620p on what even a member of the CAMEC camp suggests is 'probably a done deal'.

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