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Fortuna needs to receive 50 per cent of votes cast for the deal to succeed. In addition, at least two-thirds of votes cast on the Roxgold side must be in favour.

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Fortuna Silver Mines Inc. is facing some resistance from its significant retail shareholder base on the merits of its proposed $1.1-billion takeover of Roxgold Inc. , raising doubts about whether the deal will succeed.

Vancouver-based Fortuna on April 26 announced a friendly agreement to acquire Toronto-based Roxgold in an all-stock transaction. On the day the deal was announced, Fortuna’s shares sank by 18 per cent. Investors’ main concerns include silver specialist Fortuna straying out of its main bailiwick by buying a gold miner, the Americas-focused company increasing its risk profile by buying assets in risky West Africa, and the steep 40-per-cent premium being paid.

More than two weeks later, even as Fortuna’s management continues to push the merits of the deal based on the quality of Roxgold’s assets, its stock has fallen further, trading some 23 per cent below its predeal level.

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Despite the difficulties, Fortuna’s chief executive, Jorge Ganoza, said the company will “absolutely not” walk away from the acquisition. Institutional shareholders have been mostly supportive, he said. Meantime, he said only one institution indicated its intention to sell its Fortuna stake, because of a mandate preventing the fund from buying companies with West Africa exposure.

While blessed with mineral riches, West Africa is among the regions with the highest security risk in the world. And within West Africa, Burkina Faso, where Roxgold’s main operation is located, is particularly dicey. In 2019, 39 employees of Montreal-based Semafo Inc. were killed in an apparent jihadi attack while they were en route to work in Burkina Faso. In the aftermath, the company, which was later acquired by Britain’s Endeavour Mining Corp., closed the affected Burkina mine for about a year.

Mr. Ganoza says he’s well aware that some investors are concerned about West African risk but argues they need to get past that, and instead focus on the opportunity. “Mining is a frontier business, he said. “We are willing to go where the quality assets are.”

The deal, he says, has also been a victim of bad timing. “We could not have chosen a worse week to come out publicly with the announcement,” he said, referring to a broad-based weakness in the silver mining space that has seen the peer group fall by about 5 per cent.

Still, Fortuna’s losses are materially worse than its peers, partly because of selling by the company’s retail shareholders. One retail shareholder, identified by Refinitiv as Guy Buckley, told Mr. Ganoza earlier this week during a conference call that the deal had “blindsided” him. “I’ve got to be honest with you, some of my friends, they dumped their stock,” he said. “There were a number of them that felt you did the wrong thing.”

Mr. Buckley is holding on to his shares, and told Mr. Ganoza that he was confident that acquisition will indeed pay off.

Finding more believers like Mr. Buckley is key for Fortuna, because half of its shareholders are retail. Part of the company’s current strategy is engaging with newsletter writers, in the hope of favourable coverage. Just as institutional investors turn to sell-side analysts for their thoughts on a deal, retail investors likewise listen to the opinions of newsletter writers. Fortuna lately has presented to several writers in the business, including Dave Kranzler of Investment Research Dynamics, Trevor Hall with Mining Stock Daily, and Garrett Goggin with Stansberry Research. In an e-mail to the Globe, Fortuna spokesperson Carlos Baca stressed the independence of the views of the newsletter writers, saying the company doesn’t remunerate them for coverage and hasn’t paid any of them to write about the transaction.

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Fortuna still has time to turn investor sentiment around. Its shareholder vote on the transaction isn’t scheduled until June 28. Fortuna needs to receive 50 per cent of votes cast for the deal to succeed. In addition, at least two-thirds of votes cast on the Roxgold side must be in favour. There are also precedents for takeover deals that initially were given hostile receptions that ultimately passed; Kirkland Lake Gold Ltd.’s 2020 acquisition of Detour Gold Corp. is a prime example.

The current weakness of Fortuna’s shares means the company is potentially vulnerable to an opportunistic takeover approach by a competitor. But Mr. Ganoza said he’s seen no signs of any sharks circling but acknowledged there is some risk with any live M&A deal. “Every time you do a deal, you are putting things at risk,” he said.

Shortly after the deal was announced, several analysts speculated that another firm, such as West African specialists B2Gold Corp. or Endeavour might surface as an alternative bidder for Roxgold, but both have since ruled that out. B2Gold’s CEO Clive Johnson said in an interview this week that the company has a strict “contrarian” philosophy of making acquisitions at low prices during out-of-favour commodity cycles. Therefore, it makes little sense to beat an already expensive offer near the top of a multiyear bull market. “An acquisition of that nature wouldn’t meet our criteria,” he said.

And in a conference call with analysts on Thursday, Endeavour’s CEO, Sébastien de Montessus, said making a deal is out of the question since the company has already consummated two major acquisitions recently, including its $2.4-billion purchase of Teranga Gold Corp.

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