Hochschild Mining has agreed to acquire the issued and outstanding shares of Brazil-focused Amarillo Gold in a $105.8m (C$135m) deal.

Under the agreement, Hochschild will pay $0.31 (C$0.40) in cash for each share of Amarillo, which owns the Posse gold project in Brazil.

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In addition, Amarillo shareholders will receive shares in Lavras Gold, a new Canada-based exploration company with a focus on Brazil.

Lavras Gold will own a stake in the Lavras do Sul project, a 2% net smelter revenue royalty on certain Amarillo’s exploration properties, and $7.84 (C$10m) of cash.

Hochschild CEO Ignacio Bustamante said: “The acquisition of Amarillo enhances the company’s project pipeline and is the result of a long-term company review process of a wide range of growth opportunities.

“Posse is an attractive low-cost project with relatively near-term production and strong exploration upside potential.

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“With our significant experience in developing precious metal deposits in the Americas, Hochschild is ideally placed to take Posse to its next stage and generate strong sustainable value for the company and the project’s local stakeholders.”

The deal aligns with Hochschild’s long-term strategy to acquire and optimise American development stage projects.

Hochschild expects the acquisition to provide it with regional exploration opportunities and exposure to a high-quality project.

Amarillo president and CEO Mike Mutchler said: “This acquisition delivers an immediate and compelling opportunity for our shareholders to monetise their investment in Amarillo at an attractive valuation and significant premium to the current and historical trading price of Amarillo’s shares.”

Earlier this year, Amarillo Gold selected Metso Outotec’s crushing and screening solution for its Posse Gold project.