Well this proposed merger between ECU and AUM has certainly produced some outstanding posts that have debated the merits vs. disadvantages of this union.When I first learned of the trading halt, my first thoughts were that ECU was about to release the long awaited initial drill assays for the MS zone. Then the surprising announcement came that ECU management had approved a merger with Golden Minerals.
After my initial shock wore off, and learning a little more about AUM, I slowly began to warm up to the prospects this proposed merger.Although this came as a surprise to most everyone here, ECU management has been stating their desire of some sort of joint venture and possible M&A for some time now.I am glad this was done with an equally sized company that will hopefully benefit both companies in the long term.
Although we all know that ECU has an outstanding resource down at Valerdena, we also know the debt issue has been an overhang on the share price for some time now and is what many potentialinstitutionaland fund investors have identified as a concern. With this merger, it cleans up our balance sheet and translates into a net cash position of approximately $90 million.No longer will we have to use cash to finance the long term debt.
As has been mentioned here by others, the NewCo will have a market cap of only $600 million with only 34 million shares fully diluted.At its peak in 2006, ECU had a market cap in excess of this amount and now we have added another outstanding silver prospect in El Quevar, Argentina.So in my opinion the leverage is still there, while we have reduced our risk with a better balance sheet and another property under the books. I’m sure there will be other synergies as well from this deal.As shareholders, we now benefit from the advancement of two properties.
I still have many questions and concerns that hopefully will be addressed in due time, but overall I believe this deal allows ECU and the NewCo to move forward and make decisions without having their hands tied and can now apply a more strategic plan to maximize the potential of both properties.
