Latin America-focused Tahoe Resources (TSX, NYSE:THO) has inked a friendly deal to buy Canadian miner Lake Shore Gold (TSX:LSG) for about $540 million (Cdn$751 million), which adds two low-cost gold mines in Northern Ontario to its portfolio.
The intended merger — which values Lake Shore at about Cdn$945 million — would add the Timmins West and Bell Creek mines in Ontario to Tahoe’s current assets in Guatemala and Peru.
Tahoe will pay 0.1467 of its stock for each Lake Shore Gold share. The offer works out to Cdn$1.71, a 15% premium to Lake Shore shares, based on both stocks’ Friday close.
Lake Shore had 439.23 million shares outstanding as of Sept 30, according to a regulatory filing.
Tahoe would own 74% of the combined company once the deal closes — around April — while Lake Shore Gold shareholders will get 26%.
The new company is expected to produce 370,000-430,000 ounces of gold in 2016 at total cash costs of $675-$725 per ounce and all-in costs of $950-$1,000 per ounce.
Last year, Tahoe also bought smaller rival Rio Alto Mining in a cash-and-share deal valued at Cdn$1.4 billion to expand its presence in Latin America. Goldcorp (TSX:G) (NYSE:GG) sold its 25.6% stake in Tahoe for Cdn$998.5 million shortly after that.
Gold for immediate delivery has gained 11% so far this year after losing about 10% in 2015 for a third straight annual decline.