Norton Gold Fields - which mines gold at the Paddington mine in Western Australia, and produced 33,000oz in the first quarter of this year - said today it would offer four Norton shares for five Bellamel shares.
At Norton's 33c closing price on Tuesday this week, this values each Bellamel share at 26.4c, a 28% premium to Bellamel's closing price on May 27 and a 30.6% premium to volume weighted average price for Bellamel's shares for the three months prior to Norton's bid.
The offer puts a $23.76 million price tag on the junior - and, in the absence of a higher offer, Bellamel's board of directors have accepted the bid.
According to Norton the key driver of the merger is early access to new ore feed for the Paddington mill from Bellamel's tenement package.
The merger will increase Norton's resources immediately by 1.68 million ounces thanks to the addition of Bellamel's Binduli South tenements, 40km south of the Paddington operation.
Paddington has 4.8Moz resources already at Paddington, feeding the 3Mtpa processing plant.
By 2010 the company intends to boost production to 250,000ozpa, with another 50,000oz of gold production potentially available from a tailings re-treatment operation.
Bellamel's Fort William deposit could then add a further 25,000ozpa to Paddington's production, and a 50,000ozpa heap leach operation is also feasible from other deposits on Bellamel's tenements.
Norton managing director Jon Parker told MiningNews.net the company was a natural owner for Bellamel's properties, which were a good fit with Norton's strategy.
"Our plan is to grow in a sensible manner and the acquisition of Bellamel will be very easy for us to integrate and it will fit under the Paddington mine umbrella," he said.
"Bellamel's tenements [are] relatively high-grade and soft ore, and will be a very good complement to our life of mine plan; we can add value to them and they can add value to our company."
Bellamel's Fort William deposit will be an immediate priority for Norton and, provided the merger goes ahead, the deposit could be part of the Paddington operations within 6-9 months.
"Our plan is to splice in Fort William definitely with our life of mine plan. We've got a series of deposits to develop over the next 10 to 15 years and we'll bring Fort William into operation in a way that is good to us in terms of mining and its contribution to our blended mill feed."
The second focus will be the potential heap leach operation.
The offer is conditional on 90% acceptances, and Parker told MNn the offer was a good deal for Bellamel's shareholders.
"We're offering a healthy premium to the current market price, and as it as a scrip-for-scrip transaction, the shareholders who decide to continue with Norton have the advantage of our development profile and the growth we have for our company," he said.
At this stage, none of Bellamel's executive team will be joining Norton's board.
The explorer listed last year at 40c, a 100% premium to its 20c offer price, after raising $10 million during its initial public offering.
The company still has $7 million in the bank, a tasty sweetener for Norton, which had $34.6 million in cash on hand last quarter.
Parker said Norton would also be looking at additional opportunities beyond the Bellamel takeover.
Shares in Bellamel rose 2.5c to 23c on the announcement, while shares in Norton also gained 0.5c to 33.5c.