TORONTO — Iamgold Corp. plans to pay about $110.6-million to buy the rest of Euro Ressources SA, which gets royalties from the Toronto-based company's Rosebel gold mine.

The draft offer, filed with European regulators and announced Friday before North American markets opened, outlines Iamgold's intention to pay €1.20 per share to buy out other shareholders in Euro Ressources. Iamgold already owns 4.9 per cent of Euro's shares. Its offer could result in it paying for about 59.3 million Euro shares, including 1.9 million issuable under stock options, or €71.25-million in all.

The acquisition would eliminate Iamgold's royalty obligation to Euro on the Rosebel mine and, based on current gold prices, reduce the mine's cash costs by $50 (U.S.) per ounce.

“This transaction is consistent with Iamgold's strategy of rationalizing our structure and significantly reducing cash costs at all of our operations,” Iamgold chief executive Joseph Conway said in a statement.

“We continue to demonstrate our focus on operational efficiencies and costs at our operations with the long term objective of reducing our cash costs below the industry average.”

The Canadian company, which acquired the Rosabel gold mine in South America when it bought Quebec-based Cambior Inc. in 2006, didn't provide an overall value for the takeover offer, which is conditional on Iamgold getting at least a majority of Euro's stock.

The move comes as Iamgold works to increase its reserves and production and cut costs as higher energy and labour costs offset gains from strong gold prices.

Catherine Gignac, an analyst with Wellington West, said the deal was a positive one for Iamgold, since it should bring their operating costs at Rosebel down to $430 an ounce in 2009 from the current $480 to $490.

“It reduces their cost base, and that is one of the key industry issues that the companies are facing right now, the crippling high costs,” Ms. Gignac said.

“Anything that can be done internally, such as this, buying back a royalty, is very material for Iamgold.”

Ms. Gignac maintained her target price of $9 (Canadian) per share for Iamgold, and recommendation of “market perform.”

Last month, Iamgold made a similar royalty deal with Barrick Gold Corp., when it purchased the participation royalty on the Doyon-Westwood property in northern Quebec for $13-million (U.S.) in cash.

That transaction eliminated the royalty obligation on the Doyon mine and immediately helped reduce cash costs at the operation by $140 an ounce.

The Doyon mine is nearing the end of its operating life and Iamgold is aiming to begin producing gold, silver, copper and zinc from its nearby Westwood deposit, about two kilometres east of Doyon, by 2010.

Iamgold said the Barrick royalty had also extended to the Westwood development project so future production from Westwood would now be free from royalty obligations.

In announcing the Euro deal, Iamgold said that offer provides “compelling value and liquidity” and a premium price that allows them to “crystallize value now” rather than retain a stake in Euro.

Euro responded to the announcement by saying its board would make a recommendation to shareholders once it has reviewed the full details of the unsolicited offer.

“Until the Board of Directors has completed its review, it will not comment further or speculate as to the future course of action it might take,” Euro said in a brief statement.

Iamgold is a mid-sized gold producer, with annual production of close to one million ounces from eight mines in North America, South America and Africa.

Its 2008 production was revised upward earlier this month by 30,000 ounces, or three per cent from previous guidance, to 950,000 ounces, at a revised cash cost of $485-$495 per ounce.

Iamgold shares traded at $6.91 (Canadian), up 10 cents or 1.5 per cent, on the Toronto Stock Exchange.