Merger of US Gold, Minera Andes goes ahead

When Rob McEwen first proposed the combination of US Gold (UXG-T, UXG-N) and Minera Andes (MAI-T, MNEAF-O) in June 2011, the chairman, chief executive and largest shareholder of both companies thought the deal easily could be completed by early November at the latest. But it wasn’t until Jan. 19, 2012, that the shareholders of both companies finally voted in favour of the merger that will create a new company to be named McEwen Mining.

“We were a little longer than we wanted to be,” McEwen says in a telephone interview. “To me it was a simple yes or no . . . I always like to get it done faster because you’re at risk in the marketplace.”

McEwen adds that while the intention of the corporate governance process “is very good,” its application can be “difficult” and “it can be expensive for shareholders in dollars and time.”

Despite the length of time it took for the business combination to go ahead, however, the market now has a new mid-tier silver producer, diversified throughout the Americas, that will not only be low-cost with a significant pipeline of production growth, but will own a portfolio of exploration properties.

US Gold explores for gold and silver in the Americas and is advancing its El Gallo complex in Mexico and its Gold Bar project in Nevada towards production.

Minera Andes explores for gold, silver and copper in Argentina and has three significant assets: 49% ownership of the San Jose mine near Goldcorp‘s (G-T, GG-N) Cerro Negro project; 100% of the Los Azules copper deposit; and 100% of a large portfolio of exploration properties in Santa Cruz province. Minera Andes also has about US$45 million in cash and no bank debt.

“You put together and build on the strength of both companies and therefore you offset some of your financing requirements in the future and you have a larger presence in the market that should over time attract increased research coverage,” McEwen says.

“We have great trading liquidity in US Gold – not so great in Minera,” he adds. “US Gold is trading three million shares on average each day, which is quite good.”

The combined company “is a much stronger company to build and goes towards achieving our goal for qualifying for the S&P 500 Index by 2015.”

McEwen Mining will have a market capitalization of about US$1.3 billion and McEwen will own 25%, worth about US$325 million.

As for future acquisition possibilities for the new company, McEwen says he’s always looking but “they have to come at the right price.”

“They’ll appear when they appear,” he says. “I don’t take a salary so I’m going to make money the same way my shareholders do, which is through the share price.”

Minera Andes shareholders voted 89% in favour of the merger and US Gold shareholders voted 94% in favour.

McEwen Mining is expected to start trading on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “MUX” on Jan. 27.