NEW YORK (TheStreet) -- Shares of AuRico Gold (AUQ) were gaining 5.7% to $3.16 Monday following the announcement that it will merge with fellow Canadian gold miner Alamos Gold (AGI) - Get Report.

The companies said the merger is structured as a merger of equals in a transaction that has an equity value of about $1.5 billion.

Each AuRico Gold shareholder will receive 0.5046 shares of the new company for each AuRico share they own. Alamos Gold shareholders will receive one share of the new company and 0.01 cents in cash for each Alamos Gold share they own.

Alamos Gold CEO John McCulskey will serve as CEO of the new combined company, and the 10 person board of directors of the new company will have five directors from each company.

The companies said the merger is expected to close sometime in the second quarter of 2015.

TheStreet Ratings team rates AURICO GOLD INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate AURICO GOLD INC (AUQ) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market, AURICO GOLD INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • AUQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 34.39%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Metals & Mining industry average. The net income has decreased by 1.7% when compared to the same quarter one year ago, dropping from -$106.41 million to -$108.26 million.
  • AURICO GOLD INC reported flat earnings per share in the most recent quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AURICO GOLD INC continued to lose money by earning -$0.68 versus -$0.77 in the prior year.
  • Net operating cash flow has significantly increased by 138.29% to $28.49 million when compared to the same quarter last year. In addition, AURICO GOLD INC has also vastly surpassed the industry average cash flow growth rate of -51.60%.
  • You can view the full analysis from the report here: AUQ Ratings Report

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