UPDATE 2-Stillwater to buy Marathon PGM for $118 mln

* $118 mln deal values Marathon at C$3.55 per shr

* Marathon jumps C$3.71 on TSX in morning trade

* Deal to boost Stillwater platinum, palladium production

(In U.S. dollars unless noted)

(Adds share price, details)

TORONTO, Sept 7 (Reuters) - Shares of Marathon PGM MAR.TO nearly doubled on Tuesday after Stillwater Mining Co (SWC.N: Quote) said it would buy the Canadian exploration company in a cash-and-stock deal worth $118 million (C$123 million).

The deal is expected to increase Stillwater's platinum and palladium production by 40 percent within three years, the companies said.

U.S.-based Stillwater will pay C$1.78 cash plus 0.112 Stillwater common share for each outstanding Marathon share, the companies said on Tuesday.

The deal values Marathon at C$3.55 per share, an 89 percent premium over its closing price of C$1.88 Friday on the Toronto Stock Exchange.