Toronto-based gold miner Agnico-Eagle Mines Ltd. on Wednesday said it agreed to buy smaller rival Cumberland Resources Ltd. for about C$690 million (US$588.3 million) in shares.

The acquisition will give Agnico-Eagle ownership of the Meadowbank gold project in Nunavut, Alberta, currently under construction, which has proven and probable reserves pegged at 21.3 million tonnes, grading 4.2 grams per tonne, or 2.9 million ounces. Initial gold production is expected in early 2010.

The offer represents a 23.7 percent premium on the 20-day average weighted trading prices of the two companies, Agnico-Eagle said Wednesday.

"The acquisition of Cumberland is expected to enhance our already significant gold production and reserve growth and is a logical next step in our strategy of building a premier international gold growth company," Agnico-Eagle CEO Sean Boyd said in a statement.

Agnico-Eagle currently owns 2.6 per cent of Cumberland's shares on a fully diluted basis, bringing the Vancouver-based company's full value to about C$710 million (US$605.4 million), based on Tuesday's closing stock price.

Under terms of the bid, Agnico-Eagle will offer 0.185 of a share for each Cumberland share.

The boards of both companies have approved the deal, and directors and officers of Cumberland representing about 10.5 per cent of its stock have agreed to tender to the bid.

The companies have agree on a break-up fee of C$21 million to be paid to Agnico-Eagle.

The deal requires approval of two-thirds of Cumberland shareholders.

American Stock Exchange-listed shares of Cumberland surged US$1.38, or 23.3 percent, to US$7.33, and were trading up C$1.66, or 24.1 percent, at C$8.55 on the Toronto Stock Exchange.

Agnico-Eagle fell US$0.83, or 2 percent, to US$40.39 on the New York Stock Exchange and dropped C$1.27, or 2.7 percent, to C$46.69 on the Toronto Stock Exchange.