VANCOUVER — Vancouver’s Eldorado Gold became the largest foreign-based gold producer in China on Tuesday when it completed a friendly $2-billion takeover of Australian miner Sino Gold.

Eldorado announced Tuesday it has acquired all outstanding ordinary shares of Sino, an Australia-based miner with two operating mines and another under construction in China.

That gives Eldorado a total capital value of $7.7 billion — based on a $14.42 closing price of Eldorado shares on the TSX on Dec. 14 — and moves it to the upper ranks of the world’s largest mid-tier gold producers.

It also brings the company closer to its objective of annually producing one million ounces of gold per year within four years.

UBS Investment Research said in a note that it expects China to be “a major driver of growth” for Eldorado through ongoing operation of its existing mines — including Tanjianshan mine in China’s Qinghai province — and properties and projects it picked up in the Sino deal.

UBS continues to target Eldorado at $16 US per share, with a neutral rating.

The deal gives Eldorado Sino’s interests in the Jinfeng gold mine in southern China’s Guizhou province (the second largest gold mine in China), the White Mountain gold mine in northeast China’s Jilin province and the Eastern Dragon gold project in northern China’s Heilongjiang province.

UBS forecasts Eldorado’s gold production could increase from approximately 600,000 ounces in 2010 to over 890,000 ounces in 2013.

In spite of that growth, UBS expects Eldorado’s gold production costs to remain relatively low — $350 an ounce.

Gold was trading for more than $1,100 an ounce in New York on Tuesday.

Sino shareholders got 0.55 Eldorado shares for each Sino share.

Eldorado issued 135 million shares to accommodate the transaction, and now has 537 million shares outstanding.

Eldorado was trading at $11.38 when it originally announced the takeover on Aug. 26, and closed at $14.02 in Toronto on Tuesday, down 40 cents.

Eldorado already owned a 19.8-per-cent stake in Sino Gold through a transaction last June.

When the full takeover bid was announced in August, Sino president and CEO Jake Klein disclosed that takeover discussions had been underway for four years.

Klein is now providing consultancy services to Eldorado.

The transaction was previously described by Kerry Smith of Haywood Securities as a “good strategic fit.”

In an interview, Eldorado chief operating officer Norm Pitcher echoed that observation.

“I don’t think this transaction was a big surprise to most of the investment community, and that’s why they’re now saying it makes a lot of sense,” Pitcher said.

“People had looked at the two companies for a while and envisioned them coming together at some point. From a consolidation standpoint and our position in China it does make a lot of sense.

“As of last night we have four pure gold mines in production and we have two more mines in construction. All of these are fairly new operations.

“These aren’t mines that have been running for 10 or 15 years. These are mines that have been running for two and three years. That’s a very good spot to be in, in a rising gold price environment.”

Pitcher said Eldorado wanted to acquire additional properties in China, but also felt that Sino Gold’s holdings were attractive irrespective of their location.

“We have looked at China as a good place to do business for several years now. We think it has great geologic potential and that there are quite a few small mines there that should be bigger mines.

“There is quite a bit of room for consolidation in the mining sector in China.”

Going forward, the combined entity will have a significant presence in China and Turkey along with exposure in Greece and Brazil, the company said in a news release.

Eldorado will continue to be headquartered in Vancouver, the company said.

Some notable shuffling of Eldorado’s board of directors was also announced.

Former Sino board chair James Askew and former Sino director Peter Cassidy were named additional directors on the Eldorado board.

Robert Gilmore, a director of Eldorado since 2003, was named to succeed Hugh Morris as chair of the board while Morris will continue to serve as a director.

ssimpson@vancouversun.com