UPDATE 2-ATW Gold to buy Kinbauri Gold for C$49.6 mln

* ATW Gold to buy Kinbauri for C$0.85/shr

* Offer at 55 pct premium

* Kinbauri looking to raise C$15 mln for El Valle project

* Kinbauri shares up 24 pct

* (Adds conference-call details, updates share movement)

July 14 (Reuters) - ATW Gold Corp (ATW.V) said it agreed to buy Kinbauri Gold Corp (KNB.V) in a stock deal valued at C$49.6 million ($43.21 million) to boost production.

Under the deal, ATW will issue 1.35 of its stock for each share of Kinbauri -- implying a purchase price of 85 Canadian cents per share based on ATW's Monday close.

The offer represents a 55 percent premium to Kinbauri's Monday close and also surpasses an unsolicited bid of 55 Canadian cents a share from Orvana Minerals Corp (ORV.TO) that was rejected earlier this year.

In June, Kinbauri had urged shareholders to reject Orvana's hostile bid, saying the offer failed to reflect the true value of Kinbauri and its flagship El Valle project -- which had been assigned a net present value of C$237 million by a scoping study. [ID:nBNG396039]

The ATW deal values Kinbauri at C$49.6 million, based on 58.4 million Kinbauri shares outstanding as of July 6.

In a conference call, Kinbauri, which is developing El Valle gold mine in Spain, said it was looking to raise about C$15 million for the project.

The El Valle project is expected to produce 145,000 ounces of gold per year beginning 2010 with an internal rate of return of 59 percent, according to Kinbauri's website.

Kinbauri shares surged about 24 percent to 68 Canadian cents, while ATW Gold shares were down 6 percent at 59 Canadian cents in afternoon trade on the Toronto Venture Exchange. ($1=1.148 Canadian Dollar) (Reporting by R. Manikandan and Ashutosh Joshi in Bangalore; Editing by Himani Sarkar, Vinu Pilakkott)