The deal is expected to position Alamos as the proprietor of one of the largest and most cost-efficient gold mines. Credit: Red ivory via Shutterstock.com.

Alamos Gold has signed a definitive deal to acquire all issued and outstanding shares of Argonaut Gold, a move set to consolidate two significant mining operations in Ontario, Canada.

The $325m (C$441.9m) friendly buyout is expected to position Alamos as the proprietor of one of the largest and most cost-efficient gold mines in the country.

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It includes Argonaut’s Magino mine, which is adjacent to Alamos’ Island Gold mine.

The combination of these two operations is anticipated to unlock substantial value through shared infrastructure, with synergies projected to reach around $515m.

Upon completion of the deal, Alamos Gold’s production is set to surge past 600,000oz of gold annually, with the potential to exceed 900,000oz in the longer term.

In conjunction with the acquisition, Argonaut’s assets in the US and Mexico will be spun off to its shareholders, forming a new junior gold producer, SpinCo.

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This entity will inherit the Florida Canyon mine in the US, along with the El Castillo Complex, La Colorada operation and Cerro del Gallo project in Mexico.

The terms of the agreement dictate that each Argonaut common share will be exchanged for 0.0185 Alamos common shares and one SpinCo share.

Alamos is set to issue around 20.3 million common shares as part of the transaction, which equates to an equity value of around $276m on a fully diluted in-the-money basis and an enterprise value of $516m.

Upon finalising the transaction, current Alamos and Argonaut shareholders will own around 95% and 5% of the combined entity, respectively.

Alamos president and CEO John McCluskey said: “This is a logical and attractive transaction for both companies.

“The combination of the adjacent Island Gold and Magino mines will immediately unlock tremendous value, with significant longer-term upside through further optimisations of the combined operation, and ongoing exploration success.

“Together, Island Gold and Magino will create one of the largest and most profitable mines in Canada, further enhancing our leading position as a Canadian-focused intermediate gold producer.”