* Hecla says the deal will expand gold production
* Offer price of C$4.75/shr is at 9 pct premium to Aurizon's Friday closing
* Combined company expected to have market value of about $1.64 bln
* Deal likely to close in second quarter of 2013
* Alamos says will not raise offer for Aurizon Mines
* Hecla shares rise 1 pct after market; Aurizon closes up 3 pct (Adds comments from Alamos statement, updates share movement)
By Bhaswati Mukhopadhyay
March 4 (Reuters) - U.S. silver miner Hecla Mining Co agreed to buy Aurizon Mines Ltd for about C$796 million ($774 million) to ramp up its gold production, topping an unsuccessful bid by the Canadian company's largest shareholder.
The deal will give Hecla control of Aurizon's Casa Berardi mine in Quebec, expected to add 125,000-130,000 ounces of gold this year.
"We are focusing on growing silver production but with the dearth of quality silver projects and mines we continue to invest in gold projects," Hecla Chief Executive Phillips Baker said on a conference call.
"We have taken this transaction to expand gold production." Hecla has been producing gold for more than 30 years.
Hecla, the second-largest U.S. silver miner by output, operates two silver mines -- Greens Creek mine in Alaska and Lucky Friday mine in Idaho -- and has exploration and pre-development properties in the United States and Mexico.
Hecla's total gold production was 55,496 ounces of gold in the year ended Dec. 31, 2012.
Baker said Casa Berardi has been on Hecla's radar since 2006 when Aurizon was developing the underground infrastructure to mine the ore body. He said the Casa Berardi mine has the same characteristics as Lucky Friday and Greens Creek.
"There is a huge amount of parallels between the two companies," Baker said in an interview with Reuters on the sidelines of the PDAC mining convention in Toronto.
"You are talking about companies that are both low volume, high-value underground mines. The mining techniques that are used are very similar, the expertise that is needed is very similar and so there's a lot of opportunities to move both companies' assets forward in a more efficient, better manner."
Aurizon in January rejected an unsolicited takeover offer of C$4.65 per share from Alamos Gold Inc, which already owns more than 16 percent of the company. Alamos's offer expires on March 5.
Alamos, the largest single shareholder in Aurizon, said it would not raise its offer and encouraged Aurizon's shareholders to continue tendering their shares until the deadline.
"The company that would be created by the combination of Alamos and Aurizon represents far greater value than the highly-leveraged, hedged, debt-laden, financially constrained company proposed by the Aurizon board through the Hecla merger," Alamos Chief Executive John McCluskey said in a statement late on Monday.
Hecla shares were up 1 percent at $4.10 after the bell. They closed at $4.07 on the New York Stock Exchange. Aurizon's stock, which has gained 28 percent since the Alamos offer in January, closed up 3 percent at C$4.49 on the Toronto Stock Exchange.
Alamos shares closed about 1 percent higher at C$14.24 on the Toronto Stock Exchange on Monday.
WHITE KNIGHT OFFER
Hecla's C$4.75-per-share offer to acquire Aurizon represents a 9 percent premium to Aurizon's Friday close of C$4.35 on the Toronto Stock Exchange.
"It is a white knight offer. The advantage for Hecla is that it is a friendly offer. It is a superior offer on a cash basis -- $514 million versus Alamos's $305 million maximum cash component. In this market, I suppose, the more the cash the more certainty of the offer," analyst Steven Butler of Canaccord Genuity said.
Aurizon said last month it was in talks with a number of potential buyers.
"Given Hecla's premium offer as well as cash consideration, break fee and Hecla's right to match, we don't believe Alamos will make a counter-offer for Aurizon," analyst Dan Rollins of RBC Capital Markets said.
The agreement gives Hecla the right to match any competing offer and requires Aurizon to pay a termination fee of C$27.2 million.
Thomson Reuters StarMine's intrinsic valuation suggests Aurizon's stock should be trading at C$3.34, compared with the offer price of C$4.75 and Friday's closing price of C$4.35.
StarMine's model takes into account analyst estimates for growth, usually over five years, and then models the typical growth trajectory of companies over a longer period of time.
Hecla said the combined company is expected to have a market capitalization of about $1.64 billion and will have 150 million ounces of silver reserves and 2.21 million ounces of gold reserves.
Under the deal terms, each holder of Aurizon may elect to receive either C$4.75 in cash or 0.9953 of a Hecla share.
The transaction, expected to close in the second quarter of 2013, will be fully financed and will not require the approval of Hecla shareholders.
Hecla, which has been mining precious metals for over 120 years, said it has received a commitment for a $500 million financing from the Bank of Nova Scotia.
BofA Merrill Lynch was financial adviser to Hecla, while Cassels Brock & Blackwell LLP was its Canadian counsel. ($1 = 1.0280 Canadian dollars) (Additional reporting by Julie Gordon in Toronto and Garima Goel in Bangalore; Editing by Supriya Kurane, Roshni Menon)