Primero Mining (NYSE: PPP), which runs the San Dimas mine in Mexico, will buy junior miner Cerro Resources NL in a deal worth $119 million.
Primero will offer 0.023 per Primero share in exchange for each Cerro share. It represents a premium of 77 percent over what Cerro closed at as of Wednesday.
Primero’s objective appears to be the Cerro del Gallo gold-silver project in Mexico, which is 69 percent owned by Cerro (the rest belongs to Goldcorp Inc. (TSX: G)). That project is quite lucrative, as it is estimated to hold up to 1 million ounces of gold equivalent reserves and nearly 2.3 million ounces including resources.
From the Financial Post:
“Although, upon completion, [Cerro del Gallo] will represent 15% of Primero’s market capitalization, it could ultimately deliver more than 55% of our total gold equivalent production,” he [Primero CEO Joe Conway] said.
It is expected that around 260,000 ounces of gold should be obtained by 2016, with Cerro providing Primero with another 95,000 ounces per year. All arrangements should be concluded by May of 2013.