AuRico Gold Inc. has agreed to buy fellow Canadian gold miner Northgate Minerals Corp. as consolidation among gold miners continues in the wake of record gold prices.
The deal scuttles Northgate’s previous plan to buy Primero Mining Corp. for C$370 million.
AuRico, a Toronto-based gold and silver producer with mines and projects in Mexico, is offering 0.365 of a share for each Northgate share.
Northgate closed in Toronto Friday at C$3.10, while AuRico last changed hands at C$13.72. According to the TSX website, Northgate has about 292 million shares outstanding.
The deal creates an intermediate gold producer with five operating gold mines, a sixth mine targeting production in 2012 and three gold development projects in Mexico, Canada, and Australia.
Northgate is building the Young-Davidson gold mine in northern Ontario, targeting a 15-year mine life and average annual production of 180,000 ounces of gold starting in 2012.
AuRico said the merged company will be fully unhedged with projected growth from about 475,000 gold equivalent ounces this year to 730,000-plus gold equivalent ounces in 2013.
Shareholders of AuRico and Northgate will own about 62% and 38%, respectively, of the new company. Northgate shareholders are expected to vote on the deal at a special meeting in October.
In the wake of the cancelled deal with Primero, Northgate has paid a C$25 million break-up fee to Primero.
Comex gold recently touched highs around $1,900 an ounce.
