AIC Mines (ASX:A1M) has agreed to combine with Demetallica to build a new Australian copper and gold mining company.

The recommended offer is at a price of about $0.39 per Demetallica share based on the last closing price of AIC mines, and Demetallica shareholders will own about 21% of the combined company.

AIC says the merge was a logical combination of its Eloise mine and processing facility with Demetallica?s Jericho copper deposit which are located 4km from each other.

AIC also says it has the potential for staged expansion to increase combined mine life to over 10 years and production to over 20,000pta Cu and 10,000ozpa Au in concentrate, which is a 60% increase on the current production rate at Eloise.