Gold miner Lihir Gold made a A$1.1 billion (US$1 billion) friendly takeover offer for smaller West African gold miner Equigold, looking to expand outside its base in Papua New Guinea.
Lihir said on Thursday it will offer 33 of its shares for every 25 Equigold shares, valuing Equigold at A$5.33 a share, or a 24 percent premium to its close on Wednesday.
Directors of Equigold and Lihir have unanimously backed the proposed takeover, which they said will boost growth prospects for both companies.
The combined group, with 25 million ounces in gold reserves and operations in Papua New Guinea, Ivory Coast, and Victoria and Queensland states in Australia, would have a market value of about A$9 billion.
Equigold chairman Nick Girogetta said the takeover was an excellent deal for the company's shareholders.
"Furthermore, it gives us the financial muscle required to realize the full potential of our exploration tenements in Ivory Coast," he said in a statement.
The Bonikro project in Ivory Coast, in which Equigold has an 85 percent stake, is due to start up in July, with annual output expected to reach around 150,000 ounces in 2009.
Total cash costs for the merged group are expected to remain competitive the statement said, at less than $350 an ounce for Lihir's projects and about $330 an ounce from 2009 for Equigold, compared with gold prices around $1,000 an ounce this week.
Each company has agreed to pay a break fee of A$11.3 million to the other if the deal falls through.
Lihir is being advised by Caliburn Partnership, while Equigold is being advised by Euroz Securities.