TORONTO (miningweekly.com) – Canadian precious metals miner Primero Mining on Monday announced that it had struck a deal to buy miner Brigus Gold for $220-million that would see the two companies form a new North American mid-tier gold producer, with operations in Ontario and Mexico.

Primero offered 0.175 a share for each Brigus share. The exchange ratio represented C$0.91 a Brigus share, based on Primero's closing price of C$5.22 a share on the TSX on Friday, which implied a 43% premium to Brigus' 20-trading day volume weighted average price and a 45% premium to Brigus' closing price.

Brigus shareholders would also receive 0.1 of a common share in a newly incorporated company (SpinCo) for each Brigus common share as part of the arrangement agreement.

The SpinCo would hold Brigus' interests in the Goldfields project, in Saskatchewan, and the Ixhuatan and Huizopa projects, in Mexico, and would be capitalised with about C$10-million in cash.

At the close of the transaction, Brigus shareholders would hold a 90.1% interest in the SpinCo and Primero would hold the remaining 9.9% interest.

The combined company was expected to produce 250 000 oz to 270 000 oz of gold equivalent ounces in 2014, at below average cash costs. That could rise to about 400 000 oz in 2017.

"This acquisition is immediately accretive to our production and cash flow. It also diversifies Primero geographically, into a very prospective and proven mining jurisdiction that our team is excited to operate in.

“Primero has the financial resources to invest in the development and expansion opportunities at the Black Fox mine to realise its full potential. We believe that with further investment, the Black Fox mine will grow and continue to create significant value for shareholders. Primero also has the financial and management resources necessary to advance the adjacent Grey Fox project at the same time as developing the Cerro del Gallo project, in Mexico,” president and CEO Joseph Conway said.

In another recent merger, diversified Russian mineral resource company Intergeo last week announced that it had agreed to acquire Vancouver-based miner Mercator Minerals, to create a new copper-focused base metals company with a strong growth profile and strong financial backing.

Primero’s TSX-listed stock on Monday fell 7.09% to C$4.85 apiece and of Brigus jumped 32.67% to C$0.79 apiece.