Silver Lake Resources will purchase for $426 million another Western Australia gold miner, Integra Mining, in the process creating one of the country's largest producer of the yellow metal.

Their merger comes at a time that institutional investors are urging for more mergers and acquisitions in the gold mining industry because of lower share prices.

The new entity will have a total of 6.6 million ounces of gold in resources, current production of 200,000 ounces annually and a market value of almost $1 billion. It is comparable to production of Australia's fifth largest gold producers, Kingsgate Consolidated, which reported a yearly gold production of 208,760 ounces as of the end of June 30.

"The strategic and financial logic of the combination is clear, driven by the complementary nature of the two companies' projects and the strong organic growth profile of the combined business," Silver Lake Managing Director Les Davis said in a statement on Monday.

Silver Lake owns three production and exploration assets in WA. Integra has the Randalls Gold project located 60 kilometres east of Kalgoorlie as its main assets. With the takeover, Integra stockholders will receive one Silver Lake share for every 6.28 Integra shares or a premium of about 44 per cent based on the last Integra trading price of 40 cents.

After the merger announcement, Silver Lake shares closed 8.5 per cent down by 24 cents to $2.60.

Integra Managing Director Chris Cairns said the buy-out was in the best interest of shareholders.

"Investors are increasingly attracted to gold mining companies which enjoy the lower risk and economies of scale associated with multiple operations. This deal will enable Integra shareholders to benefit from being part of a bigger and more diversified company," Mr Cairns said in a statement.

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