Northgate Minerals announced on Wednesday that it will acquire Primero Mining for $370 million.
The new company, which will have a combined market capitalization of approximately $1.2 billion, will be a mid-tier gold producer and will tie together the San Dimas mine in Mexico; the Fosterville and Stawell gold mines in Australia; and the Young-Davidson gold development project in Ontario.
The gold production of the combined companies will be 320,000 gold equivalent ounces. Northgate expects production to increase to 550,000 ounces in 2013 coming from the addition of the Young-Davidson development project, expansion at San Dimas and other expansion projects.
The new company will be led by Joe Conway, current President and Chief Executive Officer of Primero.
In a statement, Northgate Minerals says that the Young-Davidson gold project in Ontario will provide sufficient cash flow to re-pay all corporate debt.
“We are executing on our strategy of low-risk growth through this consolidation,” said Conway.
“This is a unique opportunity that brings together two very complementary asset bases and groups of management. Young-Davidson is a significant development project in one of the best mining jurisdictions in the world. Our shareholders will benefit from the enhanced leverage to a diversified asset base and increased share liquidity.”
Goldcorp, which controls 35.5% of the outstanding shares of Primero, agreed to vote its shares in support of the arrangement. When the agreement is completed, Goldcorp will receive 46.7 million Northgate shares representing approximately 11% of Northgate’s outstanding shares.
Northgate Minerals Corporation is a gold and copper producer with mining operations, development projects and exploration properties in the Americas and Australia. Northgate currently owns and operates the Fosterville and Stawell gold mines in Victoria Australia, and is building the Young-Davidson gold mine in northern Ontario, which is targeting a 15-year mine life with average annual production of 180,000 ounces of gold commencing in 2012.
Primero Mining Corp. is a Canadian-based precious metals producer and owns 100% of the San Dimas gold-silver mine in Mexico.