Navigator Resources advances plans for Cummins Range rare earth asset spin-off

Navigator Resources (ASX: NAV) has updated progress towards the de-merger of its Cummins Range rare earth asset into a separate company to be listed in early 2011.

Navigator recently received a revised independent valuation report  for its fully owned Cummins Range project that reflects higher commodity prices and estimates the projects value to be in the range of A$20 million to A$30 million.

Cummins Range is located 130km southwest of Halls Creek in the East Kimberley region of Western Australia and is one of very few Australian advanced REO deposits for which a mineral resource has been delineated.

The spin-off company’s name will be Kimberley Rare Earths Limited (KRE) and is in the process of indentifying suitable managing director and non-executive director candidates.

Navigator has appointed three interim directors to progress the company towards listing.

These are Ian Macpherson (Navigator’s deputy chairman) as KRE non-executive chairman and non-executive directors Gerry Kaczmarek (Navigator's chief financial officer) and Allan Trench (Navigator’s chairman).

Navigator proposes to transfer ownership of 25% of the Cummins Range rare earth project to KRE prior to listing in exchange for the issue of shares in KRE.

The majority of these shares will then be distributed to eligible Navigator shareholders via an in-specie distribution after the fundraising process has been completed.

Navigator will also grant KRE the right to earn an additional interest in Cummins Range under the terms of a Joint Venture Agreement (JV).

Under the terms of the JV, KRE can earn an additional 30% interest through the expenditure of $10 million on the project within a four year period. KRE will be manager and operator of the JV during the earn-in period.

Upon successful earn-in under the JV, KRE will have a majority 55% interest in the project.

An extraordinary general meeting (EGM) is anticipated to be held in early March 2011 where shareholders will be asked to approve the proposed in-specie distribution which will be effected by way of a return of capital.

KRE will prepare a prospectus to raise approximately $15 million. The raising will comprise a priority offer to eligible Navigator shareholders and a public offer to be managed by BGF Equities.

Eligible Navigator shareholders will get a priority offer to apply for additional shares in KRE on a 2 for 1 basis. That is, they will be entitled to apply for two additional new shares at 20 cents each for each KRE share they are entitled to under the in-specie distribution.

Depending on the final take-up of the priority offer, Navigator shareholders could hold between 60% and 72% of the new KRE capital.

The direct in-specie distribution of KRE shares to eligible NAV shareholders will comprise between 20% and a maximum of 30% of the new KRE capital structure (depending upon the quantum of NAV options exercised before the record date).

The in-specie distribution will take place on an approximate 1 for 20 basis within one month of KRE gaining admission to the ASX.

The company proposes that Navigator shareholders holding 10,000 NAV shares and above on the record date will be eligible for the in-specie distribution and priority offer in KRE.

Shareholders with less than 10,000 Navigator shares will not be eligible to participate in either the in-specie distribution or the priority offer.

The record date for the in-specie entitlement is expected to be in March 2011 after shareholder approval has been received at the EGM.