UPDATE 2-Lake Shore Gold to buy West Timmins for C$319 mln

* All-stock deal values West Timmins at C$2.26/share

* Will consolidate Timmins, Ontario, holdings (Updated throughout)

By Cameron French

TORONTO, Aug 27 (Reuters) - Lake Shore Gold has agreed to buy fellow Canadian gold developer West Timmins Mining for about C$319 million ($290 million) to consolidate its presence in the Timmins, Ontario, gold region, the two companies said on Thursday.

The friendly all-stock transaction, which has been approved by both boards, will consolidate the companies' jointly owned Thunder Creek property, which Lake Shore plans to develop in concert with its Timmins Gold mine.

The combined company will also own a sizable land package in the area, which has been producing gold for more than a century, as well as a clutch of properties in Mexico.

"It creates efficiencies and allows us to realize significant cost synergies and will expedite Thunder Creek's development," Tony Makuch, chief executive of Lake Shore Gold, said on a conference call.

Makuch said the company plans to be Canada's next mid-tier gold miner.

The deal comes as strong gold prices, combined with moderating costs for consumables such as oil, have boosted cash flows for miners, while loosening credit markets have emboldened resource companies to make deals.

For instance, Canadian miner Eldorado Gold said on Wednesday it would buy Australia's Sino Gold Mining for C$2 billion to make it the largest foreign gold miner in China.

The precious metal was at $948 an ounce on Thursday.

ALL-STOCK DEAL

West Timmins shareholders will receive 0.73 of a Lake Shore share for each West Timmins share, valuing West Timmins shares at C$2.26 each, based on Thursday's closing price.

Shares of both Toronto-listed companies showed little reaction to the transaction. Lake shore slipped 2 Canadian cents to C$3.10, while West Timmins edged up 2 Canadian cents to C$2.22.

West Timmins' shares have tripled since early June, while Lake Shore has risen 44 percent over that time.

"I think it's a good deal. It consolidates (their holdings) and there's going to be more ounces found there," said Kerry Smith, analyst at Haywood Securities in Toronto.

Following the transaction, Lake Shore will be 67 percent owned by its current shareholders.

The company is currently 41 percent owned by London-based Hochschild Mining , which has operations in Latin America. Hochschild said in a statement it supports the deal. Its holding in the combined company will be about 26 percent.

Three of the thirteen seats on Lake Shore's board will go to West Timmins directors.

The deal requires the approval of shareholders holding two-thirds of West Timmins shares.

($1=$1.09 Canadian) (Reporting by Cameron French; editing by Rob Wilson)