Iamgold

(IAG) - Get Report

said Thursday that it will acquire

Cambior

(CBJ)

for about $1.2 billion in stock to create the 10th-largest publicly traded primary gold producer in the world.

The new company will have a market capitalization of $3 billion and will operate under the Iamgold name.

Under the terms of the deal, Iamgold will swap 0.42 shares for each Cambior share. That ratio values Cambior at about $4.31, around 32% above its closing price Wednesday at $3.26.

After the merger deal was disclosed, it was trading up 51 cents, or 15.6%, to $3.77. Iamgold was taking a hit, losing $1.19, or 11.6%, to $9.06.

"While offering a significant premium to Cambior shareholders, this transaction is accretive to Iamgold shareholders on key metrics and achieves our stated goal of 1 million ounces of annual production by 2008," Joseph Conway, president and chief executive of Iamgold, said in a statement.

The combined company will produce 1.1 million ounces of gold a year and will have reserves totaling 9.7 million ounces.