Kootenay Silver Inc said its board of directors has unanimously approved a spin-out of 80% of the company's Canadian exploration assets to its shareholders in a move that it expects to unlock value.
The unbundling will be conducted by way of a share capital reorganization effected through a statutory plan of arrangement.
The Canadian assets are held through Kootenay's wholly-owned subsidiary, Kootenay Resources Inc (Spinco). Under the arrangement, Kootenay will distribute 80% of the common shares of Spinco to shareholders. Once it becomes effective, shareholders will ultimately own shares in two public companies: Spinco, which will focus on the development of the Canadian assets; and Kootenay, which will continue with the exploration and development of its Mexican assets.
Kootenay said it expects that the arrangement will increase shareholder value by allowing capital markets to ascribe value to the Canadian assets independently of the other properties held by Kootenay. It said the spin-out will provide new and existing shareholders more flexibility as to their specific investment strategy and risk profile. Kootenay also believes that having a separately funded early exploration business will accelerate the development of the Canadian assets.
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“We believe the spin-out of the Canadian assets will be very beneficial to shareholders,” Kootenay president and CEO James McDonald said in a statement. “Among other benefits, it will unlock the value of the Canadian assets by allowing it to be developed separately, by a skilled and experienced management team, and it will allow our shareholders to own shares in two companies."
Under the arrangement, Kootenay's current shareholders will receive one new common Kootenay share and 0.04 of a Spinco share for each existing common share of Kootenay. Outstanding options and warrants to purchase common shares of the company will be adjusted or replaced so that upon exercise, holders receive stock in the same ratio.
The reorganization needs the approval of the Supreme Court of British Columbia and at least two-thirds of Kootenay's shareholders, who will vote at a shareholders' meeting to be held on September 15, 2021.
Upon receipt of the required approvals, Kootenay's board will determine a trigger date for Spinco to complete a financing by way of a private placement, rights offer or other means, and apply for a listing on the TSX Venture Exchange or other Canadian stock exchange. The trigger date is anticipated before the end of 2021.
Contact the author at stephen.gunnion@proactiveinvestors.com