Silver Lake Resources has signed an agreement to merge with Doray Minerals through a scheme of arrangement to create a new mid-tier growth-focused gold producer.

As part of the terms of the agreement, Silver Lake will offer 0.6772 shares to Doray shareholders in return for each of their shares in the company.

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Following the completion of the transaction, Silver Lake shareholders will own 62.7% of the combined entity and Doray shareholders will hold the remaining 37.3%.

The merger is said to be a move to combine the companies’ Mount Monger and Deflector high-grade gold operations in Western Australia, with a combined FY19 pro-forma production guidance of around 240,000 gold equivalent ounces.

Silver Lake Resources managing director Luke Tonkin said: “The combination of the complementary Silver Lake and Doray assets is being done for the right reasons at the right time and creates a stronger company in a low- risk jurisdiction with financial strength and further growth opportunities.”

The combined entity is expected to have a mineral resource base of 4.6 million gold equivalent ounces.

According to Silver Lake, the Mount Monger and Deflector operations offer several in-mine and near-mine brownfield exploration opportunities to the new company.

With advanced exploration prospects, the companies intend to capitalise on development opportunities to extend the mine lives at both operations.

“This transaction puts us in a position to not only compete, but to be a sustainable and relevant player in the global gold industry.”

Doray Minerals managing director Leigh Junk said: “This is a compelling transaction for Doray and provides the financial strength to fully unlock the value of Deflector.

“Both companies have recognised the challenges of being a significant producer in the gold business and this transaction puts us in a position to not only compete, but to be a sustainable and relevant player in the global gold industry.”

The transaction is subject to certain conditions, including an independent expert’s opinion, shareholder and court approvals.