(Reuters) - Miner Tahoe Resources Inc TAHO.NTHO.TO said it would buy Canada's Lake Shore Gold Corp LSG.TO for about C$751 million ($540 million) to add low-cost gold mines in Ontario to its portfolio.
Precious metals miners have been clamping down on costs amid a sharp decline in the price of bullion that has weighed on exploration spending, capital to sustain operations and dividends.
Spot gold prices XAU= have fallen nearly 40 percent from its peak of $1,920.30 an ounce in September 2011.
The deal comes after Goldcorp Inc G.TO sold its 25.6 percent stake in Tahoe for C$998.5 million last June.
Tahoe had also bought smaller rival Rio Alto Mining Ltd RIO.TO in a cash-and-share deal valued at C$1.4 billion last February to expand its presence in Latin America.
Lake Shore Gold operates Timmins West and Bell Creek mines in Timmins, Ontario, while Tahoe has a mine in Guatemala and two mines in Peru.
“The combination with Lake Shore Gold enhances Tahoe’s position as the new leader in precious metals by adding another low-cost operation in Timmins, one of the most prolific gold camps in the world,” Tahoe Executive Chairman Kevin McArthur said in a statement.
Tahoe will pay 0.1467 of its stock for each Lake Shore Gold share. The offer works out to C$1.71, a 15 percent premium to Lake Shore shares, based on both stocks’ Friday close.
Lake Shore had 439.23 million shares outstanding as of Sept 30, according to a regulatory filing.
The deal has an implied equity value of C$945 million, assuming the conversion of some debentures, the companies said.
Tahoe is expected to own about 74 percent of the combined company after the deal closes - likely in early April 2016 - while Lake Shore Gold shareholders will get 26 percent.
The combined company is expected to produce 370,000-430,000 ounces of gold in 2016 at total cash costs of $675-$725 per ounce and all-in costs of $950-$1,000 per ounce.
For the mining industry, all-in costs for producing gold was expected to have averaged at about $1,335 an ounce in 2015, down from nearly $1,700 in 2012, according to Thomson Reuters GFMS.
Tahoe’s U.S.-listed shares were down about 4 percent at $8.04 in premarket trading on Monday.
Reporting by Swetha Gopinath and Amrutha Gayathri in Bengaluru; Editing by Shounak Dasgupta
Our Standards: The Thomson Reuters Trust Principles.