UPDATE 2-Miner Rio Alto's shares drop on deal to buy Sulliden
* Deal for C$300 mln in stock
* Rio Alto shares drop on price concerns
* To pay 0.525 in stock, equals C$1.12 per share
* Combined annual output potential pegged 300,000 ounces (Recasts with analyst comment, stock moves)
May 21 (Reuters) - Canada's Rio Alto Mining Ltd said on Wednesday it would buy Sulliden Gold Corp Ltd for about C$300 million ($275 million) in an all-stock deal to create a Peru-focused gold miner.
After the announcement Rio Alto's stock fell on concerns the price it was paying was steep.
The friendly takeover will combine Rio Alto's producing La Arena gold mine with Sulliden's nearby Shahuindo project to create a combined company with near-term production potential of about 300,000 ounces of gold per year.
The proximity of the operations to each other, Shahuindo's decent gold grades and Rio Alto's experience at developing open pit heap leach projects made the acquisition a good fit, said Christos Doulis, an analyst at PI Financial in Toronto.
"But the price raises some question marks. Did they pay too much? It values an unbuilt asset at a similar level to a built 200,000 ounce-a-year project today," Doulis said. Continued...