09:44 AM EDT, 03/27/2024 (MT Newswires) -- (Adds analyst comment and updates shares.)

Alamos Gold ( AGI ) opened up nearly 6% in Toronto after the company on Wednesday said it agreed to acquire Argonaut Gold ( ARNGF ) for shares worth US$325 million to add the recently opened Magino gold mine in Ontario while spinning out Argonaut's other mines in the United States and Mexico.

Alamos is offering 0.0185 of its shares and one share in the spin out company for each Argonaut share. Argonaut's two largest shareholders, with a 40% stake, have agreed to tender their shares to the offer, while the board's of both companies have endorsed the deal.

Alamos said the acquisition will offer synergies by combining the operations of its Island mine with Argonaut's adjacent Magino mine, raising Alamos' production to over 600,000 ounces per year, up from 529,300 in 2023, with a goal of eventually boosting output to over 900,000 ounces annually, while offering up to US$515 million in operating synergies.

"This is a logical and attractive transaction for both companies. The combination of the adjacent Island Gold and Magino mines will immediately unlock tremendous value, with significant longer-term upside through further optimizations of the combined operation, and ongoing exploration success ... Together, Island Gold and Magino will create one of the largest and most profitable mines in Canada , further enhancing our leading position as a Canadian focused intermediate gold producer," Alamos chief executive John McCluskey said in a release.

Alamos estimates its offer is worth C$0.34 of its shares, while valuing the spin-out company at C$0.06 per share. In all, it expects to issue 20.3-million shares valued at about US$276 million to Argonaut's investors. .

"Today's transaction further cements Alamos's operating position in Canada, a tier-1 jurisdiction. Overall, we view the acquisition positively given the significant synergy upside potential leveraging Alamos's strong operation track record at Island as well as the company's further expansion into tier-1 mining jurisdictions," National Bank Financial analyst Shane Nagle wrote.

Alamos shares were last seen up C$1.08 to C$19.53 on the Toronto Stock Exchange, while Argonaut shares were up C$0.085, or 28%, to C$0.385.

Price: 19.42, Change: +0.97, Percent Change: +5.27