Shares of Silver Lake dropped as much as 14.0% as at 0010 GMT to top losses on the benchmark S&P/ASX 200, which was down 1.1%. The Red 5 stock slipped about 3.7%.
Under the agreement, each Silver Lake shareholder will receive 3.434 Red 5 shares for every Silver Lake share held.
Upon implementation of the transaction, Red 5 shareholders would hold around 51.7% of the merged entity, while Silver Lake stakeholders will own the remaining 48.3%.
The miners said the combined company would be led by Russell Clark as chairman and Luke Tonkin as managing director and CEO. They added that Struan Richards would be appointed as chief financial officer of the firm.
“The increased scale, diversification and financial strength of the new company that will be formed via this transaction will be primed for continued strong cash flow generation and further growth,” said Luke Tonkin, current Managing Director of Silver Lake Resources.
(By Shivangi Lahiri; Editing by Lisa Shumaker, Chizu Nomiyama and Rashmi Aich)