Aurizon Mines Ltd. (ARZ), a producer of gold in Quebec, rejected a C$780 million ($786 million) unsolicited takeover bid from Alamos Gold Inc. (AGI) and said it will explore other potential deals.

Aurizon has adopted a shareholder rights plan to find alternatives to the Alamos offer because the bid is “financially inadequate,” Vancouver-based Aurizon said in a statement today. A special committee of Aurizon directors is helping to assess alternatives.

Options include building on existing initiatives and holding discussions with third parties regarding “potential alternative transactions,” George Brack, chairman of the special committee, said in the statement.

Alamos, which operates the Mulatos mine in Mexico and owns projects in Turkey, said Jan. 14 it made the takeover bid to add Aurizon’s projects in the Abitibi region of northwestern Quebec. Aurizon shareholders would get either C$4.65 or 0.2801 of an Alamos share for each share they own. Alamos has already acquired 16 percent of Aurizon, making it the biggest shareholder of the company, according to data compiled by Bloomberg.

The rights plan, or so-called poison pill, typically allows a company to issue new shares to block a takeover in the event of an unsolicited bid. Although Alamos has said its proposal depends on Aurizon not adopting such a plan, the offer is still likely to prevail, said Brian Quast, a Toronto-based analyst at BMO Capital Markets.

March Meeting

BMO “views the potential for an interloper bid as low and expects the Alamos takeover bid to succeed in its current form,” Quast, who rates Aurizon a sell and Alamos a hold, said today in a note.

Aurizon Chief Executive Officer George Paspalas said the company’s Casa Berardi mine has high ore grades and ten years of estimated reserves, up from six years when it began operating in 2006.

“People want an asset like that,” he said in a phone interview today. “Put it in Quebec, where it rates very highly in terms of mining jurisdictions, and of course people want to have a look at this.”

The Alamos offer is opportunistic because Aurizon was trading near a multiyear low when it was announced and because this year will be “non-typical” for operations at Casa Berardi, Paspalas said. Aurizon is slowing output there for development work that will allow it to access new areas of the mine, according to a Nov. 8 statement.

Unsolicited Offers

The bid from Alamos is the second unsolicited offer for Aurizon in the past ten years. Northgate Minerals Corp., another Canadian gold producer, withdrew its bid in July 2006 after the British Columbia Court of Appeal upheld a judge’s ruling that the bid violated an agreement between the companies. Northgate was acquired by AuRico Gold Inc. (AUQ) in 2011.

Aurizon shareholders will meet March 7 to vote on the rights plan. Jo Mira Clodman, vice president of investor relations at Toronto-based Alamos, didn’t immediately return phone calls seeking comment on Aurizon’s statement.

Aurizon said its board and special committee received written opinions from Scotia Capital Inc. and CIBC World Markets Inc. that the Alamos offer was financially inadequate for shareholders other than Alamos.

Dundee Capital Markets Inc. is Alamos’s financial adviser and Torys LLP is its legal adviser.

Aurizon rose 0.2 percent to C$4.76 at 4 p.m. in Toronto. Alamos gained 0.6 percent to C$16.05.

To contact the reporter on this story: Liezel Hill in Toronto at [email protected]

To contact the editor responsible for this story: Simon Casey at [email protected]