US Nickel Ltd says it will make an off-market takeover offer for Argent Minerals Ltd, which operates gold, silver, lead and copper assets in Australia.
US Nickel will offer four of its shares for every three shares in Argent it does not already own.
Investors reacted negatively to the news, with shares in both companies dropping more the six per cent on Tuesday.
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"The board is considering the terms of the takeover offer and intends to engage an independent expert to prepare a report on whether the takeover offers are fair and reasonable," Argent said in a statement.
US Nickel also said it would offer Argent an unsecured loan of $4 million to develop the Bullant gold project near Kalgoorlie in Western Australia.
Argent separately said current prices for silver, gold, lead and zinc will increase the operating cash flow from its Kempfield project, in NSW, to $251 million at 600,000 tones per annum or $297 million at one million tonnes per annum.
Argent has reviewed the cut off grades used to calculate resources at its Kempfield mine, given the 27 per cent increase in the silver price since April.
"The resources are characterised by higher grade zones, contained within larger envelopes of lower grade mineralisation that progressively become economic to mine and treat as prices increase," Argent chairman Kerry McHugh said.
Argent owns 51 per cent of Kempfield, which will increase to 70 per cent on completion of metallurgical testing.
Shares in Argent closed down 1.5 cents, or 7.5 per cent, at 18.5 cents, while US Nickel shares lost one cent, or 6.25 peer cent, to close at 15 cents.
