Argonaut Gold to buy Prodigy for C$341 million

Mon Oct 15, 2012 4:00pm EDT
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(Reuters) - Mexico-focused Argonaut Gold Inc (AR.TO: Quote) will buy Prodigy Gold Inc PDG.V for about C$341 million ($348 million), taking control of Prodigy's Magino project in Ontario as it looks to expand its output to half a million ounces a year.

Argonaut's shares, which have risen 45 percent so far this year, fell 9 percent to C$9.56 on the Toronto Stock Exchange on Monday.

"Argonaut has traditionally focused on heap leach operations in Mexico. This is an Ontario milling operation and it is in a jurisdiction that they haven't previously operated in," Stonecap Securities analyst Christos Doulis said.

The offer, almost entirely in shares, works out to C$1.08 per share, based on Argonaut's 20-day average share price, Argonaut said. Prodigy shares rose 48 percent to a high of C$1.02 in early trade on the Toronto Venture Exchange on Monday.

Vancouver-based Prodigy's Magino project, located in the Goudreau-Lochalsh gold district of the Wawa gold camp, contains indicated resources of 6.3 million ounces of gold.

"The best place to look for gold is around other gold mines, the Magino project was a past producer, it is next to a current producer," Argonaut Gold's chief executive Pete Dougherty said in a conference call.

The addition of the project, which is still in the preliminary economic assessment stage, could transform Argonaut into a gold producer with annual output of more than 500,000 ounces, analyst Doulis said.

Prodigy CEO Brian Maher said Argonaut's cash flow will help make Magino financially more viable. Argonaut had cash and equivalents of $21.44 million as of June 30, according to Thomson Reuters data.

Prodigy shareholders will receive 0.1042 of an Argonaut Gold share and C$0.00001 in cash per share, the company said.   Continued...