(Reuters) - U.S. silver miner Hecla Mining Co (HL.N) will buy Aurizon Mines Ltd ARZ.TO (AZK.A) for about C$796 million ($774 million), topping an unsuccessful bid by the Canadian company's largest shareholder to gain control of a gold mine in Quebec.
Hecla shares fell more than 11 percent to $4.11 in early trading, while Aurizon shares rose as much as 6 percent to C$4.60 on the Toronto Stock Exchange.
Hecla, the second-largest U.S. silver miner by output, offered C$4.75 per share to acquire Vancouver, British Columbia-based Aurizon, the companies said.
The offer price represents a 9 percent premium to Aurizon's Friday close of C$4.35 on the Toronto Stock Exchange.
In January, Aurizon rejected an unsolicited takeover offer of C$4.65 per share from Alamos Gold Inc (AGI.TO), which already owns more than 16 percent of the company.
Alamos, the largest single shareholder in Aurizon, could not immediately be reached for comment.
Aurizon operates the Casa Berardi mine in Quebec, from which it expects production of 125,000-130,000 ounces of gold in 2013.
Aurizon said last month it was in talks with a number of potential buyers.
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 and Aurizon together create a unique precious metals company with three long-life, high-grade, low-cost mines in some of the best mining jurisdictions in the world," Hecla Chief Executive Phillips Baker said in a statement.
The combined company is expected to have a market capitalization of about $1.64 billion, Hecla said.
Hecla, which has been mining precious metals for over 120 years, expects to produce about 8 million to 9 million ounces of silver this year from its primary silver mines.
It operates the Greens Creek mine in Alaska and Lucky Friday mine in Idaho and has exploration and pre-development properties in four silver mining districts in the U.S. and Mexico.
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.
"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, the better," analyst Steven Butler of Canaccord Genuity said.
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 said it has received a commitment for a $500 million financing from the Bank of Nova Scotia (BNS.TO).
The agreement provides Hecla with a right to match any competing offer and requires Aurizon to pay a termination fee of C$27.2 million.
BofA Merrill Lynch was financial adviser to Hecla, while Cassels Brock & Blackwell LLP was its Canadian counsel.
($1 = 1.0280 Canadian dollars)
(Editing by Supriya Kurane)