The company said the merger will create a combined company with an aggregate market capitalization expected to be in the $700 million range.
Under terms of the agreement, each PMI share will receive 0.21 shares in the new company to be called Asanko Gold Inc.
As the buying company Keegan (TSX:KGN) shareholders will not exchange any of their securities in the merger.
Both Vancover-based companies are focused on developing gold businesses in Ghana.
PMI was one of the most active issues Wednesday on the Toronto Stock Exchange, with 5.2 million shares changing hands and rising nine cents to 83 cents. Keegan shares rose 1.5 per cent or six cents to $3.97.