Gold miners Alamos Gold Inc. (NYSE: AGI) and Richmont Mines Inc. (NYSE: RIC) announced Monday morning an agreement under which Alamos will acquire all shares of Richmont in an all-stock deal valued at $770 million. Alamos will exchange 1.385 newly issued common shares for each common share of Richmont.

The combined company expects to produce more than 500,000 ounces of gold in 2017, primarily from three “core, low-cost, long-life operations in Canada and Mexico.” That is well below the production of giants like Barrick Gold Corp. (NYSE: ABX) or Newmont Mining Corp. (NYSE: NEM), which last produced 5.2 million and 4.9 million ounces, respectively.

The transaction does, however, move the combined company near to the top of the heap. Sibanye Gold Ltd. (NYSE: SBGL), the world’s tenth-largest producer in 2016, mined 1.5 million ounces of gold.

Gold production has fallen over the past few years, and mining companies have tried to adjust by reducing costs. Acquiring new assets has not figured into the big miners’ plans either. But that could change as the price of gold rises and the seniors look over the juniors for likely acquisition candidates that could spur growth following years of neglect.

According to Bloomberg Intelligence, situation in the gold fields is getting dire:

Due to fewer and smaller discoveries, reduced mine life and a lower gold price since 2013, the amount of economically viable gold in the world is declining. Major producers’ reserves have fallen 40 percent since 2011.

The deal between Alamos and Richmont highlights one feature that is worth keeping in mind: location. The two companies’ main assets are in stable countries where it is highly unlikely that the government will try to change mining laws either on a whim or a dash for more cash.

The combined Alamos-Richmont firm, with a long-term production outlook of half a million ounces a year, could be a natural addition to a senior miner’s portfolio for a relatively reasonable price.

Another advantage of striking a deal for a smaller producing company is that the mining companies are not betting their entire futures on a merger between two giants. The industry went down that path not so many years ago. Falling gold prices hammered stock prices and cost many top executives their jobs. That was not a model for the future — or at least not one that anyone wants to resurrect.

Investors are not crazy about the Alamos-Richmont deal Monday. Alamos stock traded down about 16% in the early afternoon, at $7.10 in a 52-week range of $5.95 to $9.00.

Richmont stock traded up about 2.1% to $9.75, in a 52-week range of $5.45 to $11.66.

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