Colorado-headquartered miner Golden Minerals (AUM-T, AUNM-X) and Toronto-based ECU Silver Mining (ECU-T) agreed to merge to create a new silver mining company focused mainly in Mexico and Argentina.
Under the plan of arrangement, ECU shareholders would receive 0.05 of a Golden Mineral share and .0394¢ in cash for each share held.
The exchange ratio represents a 7% premium to ECU Silver’s 20-day volume weighted average price of 93¢, and is an “at market” transaction based on both companies’ 20-day volume weighted average trading prices.
Both boards have approved the proposed deal and are recommending shareholders to vote in favour of the transaction.
Sentient Group, Golden Minerals’ biggest shareholder with a 19% stake, gave a thumbs-up to the transaction. It added that it’s interested in keeping its current proportionate stake in the enlarged company. However, nothing has been finalized yet.
For the deal to close, two-thirds of ECU shareholders and half of Golden Minerals shareholders would need to approve.
Once the transaction closes, the combined company would have 31.2 million shares outstanding. It would be held 55% by ECU shareholders and the remainder by Golden Minerals. Although, ECU would have more control, it would be given the Golden Minerals name and headquartered in Golden, Colo.
Golden Mineral’s CEO Jeffrey Clevenger would take the helm of the new company, with ECU’s president Stephen Altmann assuming the role of president.
ECU Silver adds as part of the transaction it would offer Golden Minerals about $15 million in senior unsecured convertible notes in a private placement. The notes would have a conversion price of 97¢ and a maturity date of June 30, 2012.
Meanwhile, Golden Minerals is developing its key El Quevar silver project in Argentina’s Salta province, and exploration projects in Mexico and Peru. ECU is currently mining its Velardena silver project in Mexico’s Durango state.
Combined the company would host a measured and indicated resource of about 25 million oz. silver, 26 million lbs. lead and 37 million lbs. zinc. Inferred resources would stand at 187 million oz. silver, 2 million oz. gold, 1 billion lbs. lead and 1 billion lbs. zinc.
The deal has a break fee of $10 million. Both companies have agreed not to solicit offers, but could match superior offers.
On the merger news in Toronto, ECU shares dropped 5¢ or 4.8% to 99¢. Golden Minerals shares lost 6¢ or 0.3% to end at $19.32.
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