Nevsun Resources has signed an agreement to acquire Canada-based Reservoir Minerals in a deal worth $365m.

The $1.1bn combination between companies is set to create a diversified mid-tier base metals company.

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The transaction will allow shareholders of Reservoir and Nevsun to participate in the ongoing cash-flow generation of the Bisha copper-zinc mine in Eritrea, and the growth potential of Timok copper project.

Reservoir owns the Timok copper and gold project in Serbia in a joint venture (JV) with the US-based mining company Freeport McMoRan.

Upon deal completion, existing Nevsun shareholders will own 67% of the combined company, with the remaining 33% owned by Reservoir shareholders.

"The upper zone, with its high-grade copper-gold resource and nearby infrastructure in a mining friendly jurisdiction, adds significant growth to Nevsun."

In March, Lundin Mining agreed to acquire part of Freeport’s stake in the Timok project for $262.5m.

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The proposed transaction is subject to a right of first offer (ROFO) that Reservoir had, which put the company first in line to purchase the stake.

Reservoir is set to receive $135m in funding from Nevsun to exercise the right, and will own 100% of the Timok project’s upper zone and 60.4% of the lower zone.

After acquiring the project from Freeport, the company will also become its operator.

Nevsun Resources president and CEO Cliff Davis said: "The upper zone, with its high-grade copper-gold resource and nearby infrastructure in a mining friendly jurisdiction, adds significant growth to Nevsun.

"With ongoing cash-flow generation from our Bisha mine, we have the financial strength and proven technical ability to move the Timok project forward in a timely manner."

The Timok project represents four exploration permits in the Timok magmatic complex in eastern Serbia and focuses on the Cukaru Peki deposit.

The agreement is expected to close in the second quarter of 2016.