The Kemess brownfield site, shown in this 2015 photo, has existing facilities and infrastructure valued at $1 billion. Courtesy of AuRico Metals

Centerra Gold is acquiring AuRico Metals for $310 million. The major mining company will get AuRico’s Kemess property in north-central British Columbia, which contains the Kemess underground and Kemess East deposits.

In the friendly deal Centerra will acquire all of the issued and outstanding common shares of AuRico Metals for $1.80 in cash consideration per share. The deal is being financed with cash on hand and a new US$125-million acquisition credit facility.

Dennis Kwong, Centerra’s vice-president of business development and exploration said during a conference call that the acquisition is consistent with Centerra’s strategy of balancing growth and geopolitical risk.

"What’s clearly attractive to Centerra is the large resource base: about five million ounces of Measured and Indicated Resources combined," said Kwong.

The Kemess project also benefits from $1 billion of surface infrastructure already in place and advanced permitting, environmental approvals and a confirmed Impact and Benefits Agreement with First Nations in hand. AuRico has released a feasibility study for Kemess Underground, and a preliminary economic assessment for Kemess East.

The Kemess property, located about 250 kilometres north of Smithers, also hosts the former Kemess South open pit mine which operated between 1998 and 2011. The site still has existing infrastructure that can be used in the development of the underground block cave mine.

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While the focus of the acquisition was the Kemess Underground project, the Kemess East project could potentially extend the 12-year underground mine’s life by up to a further 12 years.

Centerra’s Mount Milligan mine, located south of the Kemess site, presents opportunities to bolster sales opportunities, Kwong said.

"In terms of concentrate marketing,” he said, “The Kemess concentrate is very clean and … from a marketing perspective we can combine the Kemess concentrate with our current Mount Milligan concentrate to give us greater flexibility in terms of marketing to Asian smelters and refineries."

The acquisition is not anticipated to affect the Centerra's three other development projects. The company’s Öksüt late-stage gold project in Turkey is fully funded, but the company’s other two projects, Greenstone in Ontario and Gatsuurt in Mongolia, still require further negotiations and permits.

Development of the Gatsuurt gold project depends largely on the speed of the negotiation of the Mongolian royalty regime. Once an agreement is reached the project could be put into production within 18 months.

The Northern Ontario Greenstone project, which Centerra owns 50 per cent of, requires further de-risking, including environmental assessment approval and negotiations with local First Nations before the project is ready to advance.

The next milestone for Kemess, according to Centerra, will be the receipt of the next permits for Kemess Underground, which are expected next year. The construction decision is expected by the end of 2018 or early 2019. Based on this timeline, with an anticipated four-year construction period, Centerra expects to reach commercial production in 2023.

The company said it expects the deal to close in January 2018.