Under the terms of the arrangement, Newstrike shareholders will receive 0.9 of a Timmins Gold common share and C$0.0001 in cash for each Newstrike common share, representing the equivalent of C$1.15 per Newstrike share.

The combination is meant to create an intermediate, Mexico-focused gold producer, underpinned by Timmins’ San Francisco Mine, located in north-central Sonora state. The two-pit open-cast mine is expected to produce between 115,000 and 125,000 ounces of gold in 2015 at a cash cost of $800 to $850 per ounce. Through the acquisition Timmins will acquire Newstrike’s Ana Paula gold project, which has a current resource estimate of 2.2 million gold ounces (pit-constrained) with another 3 million ounces of gold surrounding the Ana Paula zone, according to Newstrike. It acquired the deposit from Goldcorp (NYSE:GG, TSX:G) back in 2010. Timmins also owns the  Caballo Blanco open-pit heap leach project in Veracruz, Mexico; it filed an NI-43101 report on the project earlier this month.

“The combination of Timmins Gold and Newstrike will immediately position Timmins Gold as an emerging intermediate gold company supported by current production and a very attractive pipeline of development projects,” said Bruce Bragagnolo, CEO of Timmins Gold. Arturo Bonillas, President of Timmins Gold, added: “The assets and projects in both companies are highly complementary and we are excited about the many opportunities ahead for us to continue delivering value to Timmins Gold shareholders. This transaction provides significant benefits to Newstrike shareholders and is accretive to Timmins Gold on key financial and operating metrics.”

In connection with the announcement, Timmins Gold also said it will undertake a non-brokered private placement of Timmins gold shares up to C$10 million at a price of C$1.25 per share.