Canadian miner McEwen (TSX, NYSE: MUX) agreed to buy smaller rival Canadian Gold (TSXV: CGC) to add the mothballed Tartan mine in Manitoba and exploration properties in Ontario and Quebec.The preliminary deal would see Canadian Gold shareholders receive 0.0225 of a McEwen common share, for an offer price of C$0.35 per Canadian Gold share, according to a statement issued Monday. This represents a 26% premium to the 30-day volume weighted average price of the Canadian Gold shares as of Friday’s market close, McEwen said.Based on about 209.1 million shares outstanding, the deal values Toronto-based Canadian Gold at about C$73 million ($53 million). No specific timeline for the acquisition’s completion was disclosed.The proposed deal comes as McEwen – which recently changed its name from McEwen Mining to mark a shift toward a broader resource play – ramps up gold and copper production and pursues new assets. The company, which has three producing gold and silver mines in Nevada, Ontario and Argentina, also holds a 46% stake in Argentina’s Los Azules, one of the world’s ten biggest undeveloped copper deposits.Shares of Canadian Gold rose 3.3% to C$0.315 in Toronto Monday afternoon – below McEwen’s offer price. That gave the company a market capitalization of about C$66 million. McEwen fell 5.3% to C$14.74 for a market value of about C$784 million.Tartan mineCanadian Gold’s main asset is the Tartan mine, a past-producing, high-grade property near the city of Flin Flon that benefits from existing infrastructure and high exploration potential. The company also owns greenfield exploration properties in the Hammond Reef and Malartic South projects, which sit next to some of Canada’s largest gold mines and development projects in Ontario and Quebec.Production at Tartan could restart within 24 to 36 months, McEwen said. Tartan already has access to a skilled mining workforce and doesn’t require the construction of a mining camp. Its “substantial” exploration potential got a boost from Canadian Gold’s recent decision to option the adjoining Tartan West property, McEwen added.Tartan is “a high-grade gold deposit with strong exploration potential in Canada,”Rob McEwen, chairman and chief owner of the mining company that bears his name, said in the statement. “The existing infrastructure, including the mine ramp, roads, and power, provides an opportunity to restart operations within a relatively short timeframe.”Rob McEwen already owns 33% of Canadian Gold’s outstanding shares, while McEwen Inc. holds about 5.6%, according to the Canadian Gold website. Canadian Gold executives hold a 7.9% stake.Stockholders’ OKThe proposed transaction must be approved by two thirds of the votes cast by Canadian Gold shareholders, as well as a simple majority of the votes cast by minority Canadian Gold shareholders. Canadian Gold shares held by McEwen Inc. and Rob McEwen won’t be included in the minority shareholder vote.A special meeting of Canadian Gold shareholders is expected to take place by Dec. 31.Tartan produced 47,000 oz. gold between 1987 and 1989. Two recent deals allowed Canadian Gold to expand the property’s strike length from 8 km to 29.5 km along a key regional shear zone.The mine’s proposed development offers many similarities to McEwen’s Fox complex in northern Ontario, according to the companies. These include ramp access, mining method and the design of the proposed process plant.The letter of intent announced Monday paves the way for McEwen and Canadian Gold to sign a definitive arrangement agreement setting out the final terms and conditions of the proposed deal. Additional details will be disclosed once a definitive deal has been reached.Existing Canadian Gold shareholders would own about 8.2% of the combined company if the transaction goes ahead.
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