Argonaut Gold to buy Prodigy Gold for $348 million

Argonaut Gold Inc, a mid-tier gold company yesterday said that it will acquire Prodigy Gold Inc for about C$341 million ($348 million) in a cash and stock deal.

Prodigy shareholders will receive 0.1042 of an Argonaut share and C$0.00001 in cash per Prodigy share, representing C$1.08 per share based on Argonaut Gold's 20-day volume-weighted average price and a premium of 54 per cent based on both companies' 20-day VWAPs as on 12 October, the last trading day prior to the announcement of the deal.

Post closing, Argonaut Gold will be owned approximately 78 per cent by current Argonaut Gold shareholders and 22 per cent by Prodigy's existing shareholders.

Vancouver-based Prodigy was formed though the merger of Kodiak Exploration and Golden Goose Resources. The company is currently evaluating the development of the Magino mine gold project in Ontario which contains 6.3 million ounces of gold.

Argonaut is a Reno, Nevada-based gold company engaged in exploration, mine development and production activities.

Its primary assets are the production-stage El Castillo Mine in the State of Durango, Mexico, the La Colorada Mine in the State of Sonora, Mexico, the advanced exploration stage San Antonio project in the State of Baja California Sur, Mexico, and several exploration stage projects, all of which are located in Mexico.

Argonaut said that the current production from two mines in Mexico and a strong pipeline of two developments projects in Canada and Mexico, and if both development projects are advanced to production, Argonaut is expected to enter the ranks of the intermediate producers and fulfill its stated goal of 3 million – 5 million ounces of gold production per year.  

The merged company will have in excess of 12 million ounces of measured and indicated gold resource including 1.2 million ounces of proven and probable gold reserve and a strong balance sheet with no debt.