Meridian Gold Inc. (TSE:MNG)and Britain's Brancote Holdings PLC plan to merge in a $363-million stock swap.

The companies said a merger would see their joint production increase by 75 per cent over the next two years to 700,000 ounces. The businesses said their cash production costs would be one of the lowest in the industry at $100 US per ounce.

Meridian owns the El Penon mine in Chile, while Brancote holds the Esquel mine in Argentina.

"After years of diligent searching for Meridian's next growth opportunity, Esquel is, without question, the best project we have identified that fits our business strategy," Meridian CEO Brian Kennedy said in a release.

Brancote chairman Richard Prickett said the friendly merger will enable company shareholders "to participate in Meridian's success at El Penon, which last year produced in excess of 300,000 ounces of gold at a very low cash cost."

"Meridian also brings to Brancote the financial resources to enable the development of Esquel," Prickett said.

Under the terms of the deal, each Brancote share will be exchanged for 0.1886 of a common share of Meridian, valuing each Brancote share at 178 pence.