April 26 (Reuters) - Shares of Fortuna Silver Mines Inc tumbled by as much as 17% on Monday after the Canadian company agreed to buy West Africa-focused gold miner Roxgold Inc in a cash-and-stock deal valued at about C$1 billion ($884.32 million).

The deal will further consolidate a fragmented gold sector and is the latest in West Africa following rival Endeavour Mining's $2 billion purchase of Teranga Gold last November.

But investors, skittish over pricey takeover deals on the back of higher gold prices, drove Fortuna shares down 17.5% to C$7.95. Roxgold's stock price was up 14.6% in mid-afternoon trading

Fortuna, which operates in Argentina, Mexico and Peru, is to acquire Roxgold's projects in Burkina Faso and Côte d'Ivoire with an expected annual gold equivalent combined production of 450,000 ounces.

Burkina Faso has been destabilised by extremist violence, but offers low production costs and big margins for miners, especially given the strong gold price.

Roxgold's high-grade Yaramoko gold mine in Burkina Faso has a 2021 production outlook of 120,000-130,000 ounces, while its Séguéla mine in Côte d'Ivoire is projected to produce more than 130,000 ounces annually for the first six years, pending a construction decision in mid-2021.

Fortuna Chief Executive Jorge A. Ganoza said the combined company is in a better position to self-fund the Séguéla gold project at a lower cost.

However, the deal is a departure from Fortuna's Latin America focus and could also drive investors who had silver production exposure elsewhere, PI Financial analyst Justin Stevens said.

He added Fortuna may need additional funding to keep Séguéla on track.

Appian Natural Resources Fund, Roxgold's largest shareholder, said it backed the deal.

Roxgold shareholders will receive 0.283 common shares of Fortuna and C$0.001 for each Roxgold common share held.

The exchange ratio implies a consideration of about C$2.73 per Roxgold share, a 42.1% premium to its last closing price.

After the merger, existing Fortuna and Roxgold shareholders will own about 64.3% and 35.7%, respectively, of the combined company.

($1 = 1.2439 Canadian dollars) (Reporting by Arunima Kumar in Bengaluru; additional reporting by Jeff Lewis in Toronto; Editing by Ramakrishnan M., Nick Zieminski and Barbara Lewis)