Under the terms of a plan of arrangement, Alio will offer 0.48 common shares in exchange for each common share of Rye Patch, which represents a value of C$1.57 ($1.19) for each Rye Patch share.
Once the transaction is completed, Alio Gold and Rye Patch shareholders will hold around 53% and 47% of the combined entity, respectively.
The acquisition is expected to add 165,000oz of gold production this year from two open-pit, heap leach operations in Sonora, Mexico, and Nevada, US.
Alio Gold CEO Greg McCunn said: “This transaction is consistent with our strategy to create a leading mid-tier precious metals company.
“In addition to diversifying our asset base into one of the most attractive precious metal producing regions in the world, this transaction provides us with increased scale and liquidity to drive long-term shareholder value.”
The company expects to use cash flow generated from the acquisition to support the development of the Ana Paula project.
McCunn added: “We see regional growth opportunities in Nevada and coupled with our high-grade, high-margin Ana Paula project, this transaction establishes a strong platform for future growth.”
The combination will also provide increased market capitalisation and strong balance sheet.
The arrangement received approval from the respective board of directors of the two companies.
Subject to shareholder approval, the closure of the transaction is scheduled to take place around May.