Silver Lake Resources, an Australian gold producer, offered to buy Integra Mining for $426 million in shares to expand output.
Silver Lake is offering 1 new share for every 6.28 of its target, or 45.2 cents a share, Perth-based Silver Lake said today in a statement. That's a 44 percent premium to Integra's last closing price on August 3.
Acquiring Integra may double Silver Lake's annual output to as much as 250,000 ounces this fiscal year from operations in close proximity to each other in Western Australia state. Gold prices, up 2.5 percent in 2012, are gaining for a 12th consecutive year.
“The strategic and financial logic of the combination is clear, driven by the complementary nature of the two companies' projects and the strong organic growth profile of the combined business,” Les Davis, Silver Lake's managing director, said in the statement.
Silver Lake slumped as much as 12 per cent to $2.50, the most since September 26 and was at $2.585 in recent trading.
Integra rose as much as 30 per cent, and were recently up 8 cents at 39.50, for a 25 per cent advance on the day.
Integra's directors recommended the deal in absence of a higher offer. Integra shareholders will have a 40 per cent stake in the enlarged Silver Lake.
There have been $US5.9 billion of gold mining deals this year with an average premium of 22 per cent, according to data compiled by Bloomberg. That compares with a 2011 total of $US39 billion at an average premium of 24 per cent, the data shows.
RBC Capital Markets is financial adviser to Silver Lake and Macquarie Capital is advising Integra.