Vancouver-based copper/gold explorer and developer NGEx Resources has announced that it will spin out its Los Helados project, in Chile, into a wholly-owned subsidiary, Spinco, to allow it to focus on the more advanced Josemaría project, in Argentina, which is now advancing to the feasibility study stage.
The arrangement, NGEx said on Wednesday, was designed to deliver greater value to shareholders and would allow the company and Spinco increased flexibility to advance their respective assets without unnecessary dilution to the other.
The company proposed to change its name to Josemaria Resources and Spinco to change its name to NGEx Resources. It said it planned to list Spinco on the TSX-V.
"In 2016, NGEx created value for shareholders through the spin out of its Filo del Sol project. We hope to repeat that success. . . . The proposed spinout will allow NGEx to focus on advancing the development of Josemaría. The recently completed prefeasibility study (PFS) shows robust economics and confirms the potential of Josemaría. Long-term copper fundamentals appear strong, and it is our understanding that the global project pipeline is at multi-decade lows. We believe that this scarcity may lead to increased valuations for companies with construction-ready projects and we plan to work towards advancing Josemaría towards that status,” said president and CEO Wojtek Wodzicki.
The PFS evaluated a standalone development option, which contemplates an openpit mine with a shallow, high-grade starter pit. The PFS estimates that Josemaría has an after-tax net present value of $2-billion using an 8% discount rate and an internal rate of return of 18.7% at $3.00/lb copper.
With the PFS complete, the company intends to advance development of the Josemaría by completing a feasibility study, securing water rights, and advancing its environmental permitting plans. Field work in support of the feasibility study, including resource and geotechnical drilling, was completed during the first quarter of 2019. The company is targeting completion of the study in 2020.
Wodzicki added that the creation of Spinco would enhance shareholder value by bringing increased investor focus to the potential of Los Helados. The project hosts a large mineral resource, which the company believes has synergies with its exploration partner, Pan Pacific Copper and their adjacent operations in Chile.
Upon completion of the arrangement, Spinco would hold an about 63% interest in the Los Helados project, along with a portfolio of exploration interests. Over time, it was anticipated that Spinco would add new projects to its portfolio in addition to advancing Los Helados.
William Rand will become chairperson of Spinco and other directors will be named at a later stage.
The management team of Spinco would consist in Wodzicki as CEO, Joyce Ngo as interim CFO and Bob Carmichael as VP exploration.