MY EVIL TWIN, TIME WILL TELL
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Here's one of today's comments from the Yahoo USSIF Board:
[I agree with giving them a chance to explain how it will help USSIF shareholders. I only scanned the RX 43-101, but it didn't impress me. Like USSIF, they are working played-out areas that will be marginally profitable without historically high pricing.
The $10M of concentrate will pay off the $10M in debt so I don't see much in the way of assets from the RX side. I think USSIF is overpaying for what I see from them. I don't see RX being accretive to earnings and this combination will need to raise more cash in 2013 in my opinion if metals prices stay at these levels or lower. 90% chance they go lower before things get better.
Interesting to follow the "negotiations". Look at the spikes and dips for the two companies over the past 6 months. Notice that RX (like USSIF) touts the past production from their areas? This means nothing except both areas are played-out and somebody made the decision they weren't worth continuing anymore. I also noticed the community doesn't seem to be on-board with the RX mining activities. That is in contrast with The Silver Valley which identifies with the mines and they are a welcome part of their heritage.
Combining "the best talent" from both companies should mean we know one CFO looking for a job. No wonder he wasn't too excited about getting the last earnings out on time... he knew he was on the way out.
I don't know... RX can say all the right things, but there are so many unknowns and they will take cash to move things forward. The thing I liked about USSIF is they shouldn't have had to raise more cash and could ride out the coming downturn in prices. This deal will most likely mean hitting the capital markets in a year for more dilution.
I don't know yet if it is worth it... giving up 30% of your company for iffy assets that will drain cash for at least a couple years. I'm sure they will say it will be accretive initially, but remember that is deceiving. That will include cashing out on stockpiled concentrate and this will only cover outstanding debt.]
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I encourage all USSIF holders to complete a DD as if one were adding a stock to one's PF. As part of that review the financials of RXE, the SEDAR filings, analyst discussions, the results of past CCs, and relevant Boards (iHub, Stockhouse, Yahoo, etc.). After you sort through this you should be able to come to an evaluation of the (new) company; then, match this to your risk profile & you will be able to determine if you should buy or sell.
It's hard work but necessary if one is not to end up with diminishing portfolio value.
Good Investing,
DrBill
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