Tahoe Resources to buy Rio Alto Mining for $1.12 billion

Mon Feb 9, 2015 10:06am EST
 
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By Euan Rocha

TORONTO (Reuters) - Canadian gold miner Tahoe Resources Inc (THO.TO: Quote) (TAHO.N: Quote) said on Monday it has agreed to acquire smaller rival Rio Alto Mining RIO.TO in a cash-and-share deal valued at C$1.4 billion ($1.12 billion), in a bid to expand its presence in Latin America.

The deal is the latest sign that precious metal miners, who went through an extended quiet phase amid a sharp decline in the price of bullion, are slowly coming to grips with new market realities and beginning to focus on long-term growth once again.

Last month, Canadian gold miner Goldcorp Inc G.TO agreed to buy Probe Mines Ltd PRB.V in an all-stock deal that valued the metals exploration company at C$526 million, in a bid to win control of the Borden Gold project in Ontario.

Tahoe said its offer values Rio Alto at C$4 a share, a 22.1 percent premium to Rio Alto's closing price of C$3.28 a share on Friday on the Toronto Stock Exchange.

Shares in Tahoe slid 8.1 percent to C$16.22 on the TSX, while those in Rio Alto surged 12.2 percent to C$3.68.

"What comes out of this is a cash flow machine, we have a very strong unleveraged balance sheet, and we've got production growth with very low capital risk," Tahoe Chief Executive Kevin McArthur said in an interview.

Tahoe controls the Escobal silver mine in Guatemala, while Rio owns the La Arena gold mine and the Shahuindo gold project, both located in Peru.

The miners see the deal creating a leading intermediate precious metals producer, with a larger market capitalization that is expected to appeal to a bigger institutional shareholder base and lead to increased trading liquidity.   Continued...