Sino Gold owns the Jinfeng and White Mountain gold mines in China and Eldarado operates the Tanjishan mine in China, as well as other mines and projects in Brazil, Turkey and the U.S.

The offer turns the tables on recent deal activity involving Chinese entities investing in offshore resources and shows that China's vast mineral reserves can also be keenly sought after by Western investors.

Eldorado entered China in 2004 recognizing that it was quickly emerging as the most important gold producing country in the world, Eldorado Chief Executive Paul Wright said in a joint statement by the companies.

Eldorado, which already owns 19.8% of Sino Gold, is offering 0.55 of its shares for each Sino Gold share.

The offer values Sino Gold shares at A$7.24 cents each based on the closing price of Eldorado on the Toronto Stock Exchange on August 25. That is a 21% premium to Sino Gold's closing share price on the same day of A$5.97, the companies said.

Sino Gold Chief Executive Jake Klein said the deal will give the company's shareholders the opportunity to participate in the creation of a "leading intermediate gold producer" on attractive terms.

A meeting of Sino Gold shareholders to approve the deal is scheduled for late November, with the transaction expected to be completed in early-to-mid December, the companies said.

Eldorado shareholders will end up with 75% of the combined group, which will apply to be listed on the Australian Securities Exchange.

The deal, which will also need approval from Australia's Foreign Investment Review Board, includes mutual break fees of A$21 million.