Today, in a new and somewhat shocking announcement, three solid players in the gold industry announced they have signed a letter of agreement to complete a business combination, creating a new globally diversified intermediate gold company. The combination of Metallica Resources Inc., New Gold Inc. and Peak Gold Ltd. will create a new company that retains the name, New Gold Inc., and has a market cap of approximately $1.6 billion. The newly formed company will assume ownership of three operating gold mines in Australia, Brazil and Mexico, in addition to developmental stage projects in Canada and Chile.

Once the merger has been completed, the new company will have gold reserves of 3.2 million ounces, measured and indicated gold resources of 4.9 million ounces, and inferred gold resources of 3.0 million ounces. Though gold is their priority, the company will also have probable silver reserves of 65.3 million ounces and probable copper reserves of 986 million pounds.

Industry experts estimate total gold production of approximately 297,000 ounces in 2008, increasing to an expected 335,000 ounces in 2009 thanks to the New Afton mine, which is scheduled to commence production in late 2009. The company will also have nearly $500 million in cash and financing, which is available for future endeavors and further development of current projects as well as exploration of properties already under the ownership of the company.

The merger seems to offer nothing but positives for all parties involved, including the common stock owners of these companies. The companies bring their own specializations to the table, in addition to various existing mines and strategies for mining, opening enormous potential for future growth. Shareholders are expecting significant value from the new company. Former Metallica Resources shareholders will own 45.7% and former Peak Gold shareholders will own 37.8% of the combined company.

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