New Gold Inc. is taking over Western Goldfields Inc. in a share-exchange deal that will create a new mid-sized gold producer, the companies announced Wednesday.
New Gold will exchange one of its shares for each Western share, and throw in a microscopic cash payment of 1/100 of a cent per Western share.
Based on the companies' closing prices on the TSX on Tuesday, the offer represents a premium of 19.2 per cent for Western's stock, they said in a joint announcement.
New Gold stock closed down fell 23 cents to $2.07 in TSX trading. Western shares rose eight cents to $2.01.
The companies said their combined gold production from three mines is forecast to be about 335,000 ounces this year.
Mineable reserves will total 7.6 million ounces.
Based on year-end 2008 figures, the combined company will have cash of $171 million, long term investments of $77 million and debt of $275 million.
The boards of both companies have approved the deal. It requires the approval of two-thirds of the votes cast by shareholders of Western, and majority approval by New Gold shareholders.
Shareholder meetings are expected to be held in May, the companies said.
Once approved, existing New Gold shareholders will own 58 per cent of the combined company and Western shareholders 42 per cent.
There will be a new total of about 348 million shares outstanding.
The new company will operate the Mesquite Mine in California, Cerro San Pedro Mine in Mexico and Peak Mines in Australia.
New Gold shares have traded between 94 cents and $9.75 in the past year. Western has ranged from 50 cents to $3.90.
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