U.S. Silver and RX Gold and Silver to merge

VANCOUVER — United States-focused junior precious metal producers U.S. Silver (USA-T) and RX Gold and Silver (RXE-V) have agreed to merge in an all-share deal to create a new company called U.S. Gold and Silver.

In the deal U.S. Silver shareholders will get 0.67 shares in the new company per U.S. Silver share and RX shareholders will get 0.109 shares of the new company for each RX share, giving U.S. Silver roughly 70% and RX 30% of what will be U.S. Gold and Silver.

Both companies bring producing precious metal mines to the new company, with U.S. Silver holding the Galena silver mine Idaho, and RX holding the Drumlummon gold-silver mine one state east in Montana. U.S. Silver reopened the historic Galena mine several years ago and produced roughly 559,000 oz. silver from the mine in the first quarter. RX is still ramping up production since restarting the historic Drumlummon mine last year, producing roughly 6,600 oz. gold and 118,000 oz. silver in the first quarter, and expects to achieve commercial production next quarter.

Management on both sides emphasized that the compatibility and proximity of the assets make for a smooth transition to a larger single producer with an increased profile.

Sprott Asset Management, which holds 14% of U.S. Silver shares and 8% of RX shares, has embraced the deal. In a prepared statement Eric Sprott said of the deal that “we believe it will unlock significant value for shareholders as the newly formed company will have the production base, management team, balance sheet and capital markets profile to pursue its growth strategy.”

The proposed management team for U.S. Gold and Silver is composed of Darren Blasutti as president and CEO, Robert Taylor as COO, and Jim Atkinson as VP exploration, all of whom currently serve the same roles at RX, while Steve Long will represent U.S. Silver on the management side as senior VP operations. In the boardroom the split is more balanced, with four directors from each company represented and Gordon Pridham, interim CEO of U.S. Silver taking the role as chairman of the board.

And while RX is providing the bulk of management, U.S. Silver is fronting the cash and long-term assets. At the end of the first quarter the company had almost $27-million in cash with no debt while RX had a working capital deficiency of $300,000. Given operating expenses and a small shutdown at U.S. Silver’s mine the combined company will start off with about US$25 million in cash.

U.S. Silver shareholders welcomed the deal more than RX shareholders, at least according to their stock prices. U.S. Silver climbed 11¢ or 8% on the news to $1.49, while RX dropped 8¢ or 24% to 26¢ after hitting a 52-week low of 24¢ on the news.  


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