Canadian gold miners Alamos and AuRico to merge in $1.5-bn deal

Canadian gold miners Alamos Gold Inc and AuRico Gold Inc today agreed to merge in a deal valued at about $1.5 billion, creating a new leading intermediate gold producer.

The merger combines cash flow generating gold mines AuRico's Young-Davidson mine in Ontario, Canada, and Alamos' Mulatos mine in Sonora, Mexico.

Under the terms of the friendly deal, shareholders of Alamos Gold and AuRico Gold would each own half of a new company.

Alamos shareholders will receive one share in the combined business and $0.0001 in cash for each share they own, while AuRico shareholders will receive 0.5046 shares of the combined business for each share they own.

In addition, a new company, AuRico Metals Inc, will be formed and capitalised with $20 million to hold interests in certain AuRico mines, including Kemess project in British Columbia.

Upon completion of the deal, the merged company will hold a 4.9 per cent stake in AuRico Metals, while the remaining will be held in equal proportion by former Alamos and AuRico shareholders.

The merger terms include covenants not to solicit other acquisition proposals and the right to match any superior proposals. Both companies have agreed that $28.4 million will be paid to Alamos and $37.5 million to AuRico as termination fees if the merger is not completed.

The combined company will have a market cap of $1.5 billion and produce 375,000-425,000 ounces of gold in 2015.

John McCluskey, president and CEO of Alamos, said, "We believe the addition of the flagship, long-life Young-Davidson mine is just that opportunity. The combination of diversified production from three mines and a pipeline of low-cost growth projects in safe jurisdictions equate to a leading gold intermediate and a significant re-rate opportunity for our collective shareholders."

"This merger with Alamos represents a logical business combination that will create a premier intermediate gold producer with a diversified asset base that includes three low-cost producing mines, a significant organic growth profile, a pipeline of high-quality development projects, said, Scott Perry, president and CEO of AuRico.

Alamos owns and operates the Mulatos Mine in Mexico, and has exploration and development activities in Mexico, Turkey and the US.

AuRico Gold is a leading Canadian gold producer with mines and projects in North America that have significant production growth and exploration potential.

The Ontario-based company focuses on its core operations including the cornerstone Young-Davidson gold mine in northern Ontario, and the El Chanate mine in Sonora State, Mexico.

AuRico's project pipeline also includes the advanced development Kemess Property in northern British Columbia and the Lynn Lake Gold Camp in northern Manitoba.