via NEWMEDIAWIRE – Gold Resource Corporation (NYSE American: GORO),
a gold and silver producer, developer, and explorer with operations
in Oaxaca, Mexico and Nevada, USA, today announced its intent to
spin-off its Nevada Mining Unit to shareholders as a separate,
publicly-traded company (“Spinco”).
The transaction is expected to be structured as a pro-rata
distribution of 100% of the Spinco shares to Gold Resource
shareholders. Approximately 20 million shares of Spinco are
expected to be distributed to the Company’s shareholders.
Shareholder approval is not required for the spin-off, which is
expected to be tax-free to Gold Resource shareholders for U.S. tax
purposes.
The Spinco transaction is subject to certain customary
conditions, including the approval of a Spinco registration
statement to be filed with the Securities and Exchange Commission
and final approval by the Company’s Board of Directors. The
transaction is targeted to be completed by year-end 2020 or the
first quarter of 2021.
Expected Benefits of the Transaction
- Permit each company to focus
on its own unique strategic business plan
- Allow each company flexibility
to allocate resources and deploy capital in a manner consistent
with its own business strategy
- Unlock a value premium for the
Nevada Mining Unit due to its location in one of the world’s
premier mining jurisdictions
- Allow each company to focus on
streamlining each distinct operation – underground, hard rock
operations in Mexico, and open-pit heap leach operations in Nevada,
USA
- Two separate companies have
the potential to provide investors with greater value than a single
combined company
CEO Comment
“We are at an exciting juncture in the evolution of our
Company,” stated Gold Resource Corporation’s CEO and President, Mr.
Jason Reid. “Significant management effort places us at a
point where both of our mining units are poised to experience
meaningful increases in future free cash flow: our Oaxaca Mining
Unit looks to benefit from the confluence of several recently
completed capital projects that are expected to positively impact
our future operations, cost structure and exploration potential;
and our Nevada Mining Unit continues ramping up its gold production
rate as it begins to benefit from the high-grade Pearl zone of the
Isabella Pearl Mine and exploring our highly prospective
properties. Both individual mining units include large
exploration land packages that are expected to benefit from strong
demand and metal prices for our products. We believe that this the
right time to separate the businesses.”
Mr. Reid continued, “By separating the mining units into two
independent companies, each focused on its own unique business
strategy, we believe we can provide our shareholders optionality of
increased growth in Mexico and potential for a dividend yield-play
in Nevada. Independent companies allow for far more
effectiveness of these distinct business strategies. We
believe far greater value can be created with two independent
companies compared to the value that could be achieved by keeping
the mining units together.”
Benefits of Stand-Alone Oaxaca Mining Unit
The Oaxaca Mining Unit celebrated a milestone earlier this year,
completing ten years of commercial production with over $1 billion
in revenue and $114 million in dividend distributions. Going
forward, the Company’s business strategy for Mexico targets
allocating more of its cash flow and capital back into operations
to better facilitate growth. A stand-alone Oaxaca-focused
company would be able to aggressively pursue expanding and
discovering new vein systems. The Company is currently
developing two dedicated exploration drifts at its Arista Mine to
access and target extensions of known vein systems and discoveries
of new veins in areas of the mine previously unexplored.
Exploration goals following the separation would include increased
exploration budgets for the Arista Mine expansion, and to identify
and define additional resource potential in the highly-prospective
but under-explored 55-kilometer fault corridor. To date, the
Company has drilled approximately 2% of its 560 square kilometer
land package in Oaxaca. The strategy going forward is to
allocate more capital to exploration for growth potential,
accelerating increased shareholder value.
The Company has recently completed a power grid project and a
paste fill plant and is currently constructing a dry-stack tailings
facility. A stand-alone Oaxaca Mining Unit would be in a
strong position to further optimize the Arista underground mine’s
infrastructure, including an underground ore pass and surface
processing facilities including regrind circuits for increased gold
recoveries. The Oaxaca Mining Unit could also target to
utilize its free cash flow for new accretive regional
acquisitions.
Benefits of Stand-Alone Nevada Mining Unit
Focusing on organic growth, Spinco would expect increased
margins from its Isabella Pearl project and to use the expected
cash flow to potentially return dividends to shareholders. Spinco
would seek to replicate GORO’s legacy success in its early years as
a yield-play with a tight capital structure.
Strong, expected near-term cash flow from Isabella Pearl
operations could not only facilitate dividends but also target
exploration and development of the mining unit’s highly prospective
property portfolio in the Walker Lane Mineral Belt. The
Company currently controls over 25,000 acres in five high-grade
gold properties in Nevada in various stages of production,
delineation, and exploration. In addition to the organic
growth and targeted dividend strategy, the separation would also
seek to unlock a value premium for the Nevada Mining Unit due to
its location in one of the world’s premier mining
jurisdictions.
Post Spin-off Companies and Operations
Gold Resource’s management team will develop detailed separation
plans for consideration by the Board of Directors. Completion of
the spin-off is subject to certain conditions, including the filing
and approval of a registration statement with the SEC and receipt
of final Board approval. The Company expects that the registration
statement will be filed in the near future. There is no assurance
regarding the ultimate timing of the transaction or that it will in
fact be completed.
Following the separation, it is expected that Gold Resource will
continue to operate and focus on its Oaxaca Mining Unit and its
shares will continue to trade on the NYSE American under the symbol
“GORO”. Current operations include the Arista underground
mine, as well as a large prospective land position of a
consolidated 55-kilometer mineralized fault corridor.
Nevada Spinco would focus on Nevada Mining Unit operations and
growth. Current operations include the Isabella Pearl
open-pit mine, as well as four additional high-grade gold
exploration properties. To provide operating capital, the
Company expects to make a capital contribution of $10 million to
Spinco at the time of the transaction. Given its expected
capitalization and other financial metrics, the Company expects
Spinco to initially trade in the over-the-counter (OTC) public
markets. Spinco would consider up-listing to an exchange such
as the New York Stock Exchange or Nasdaq at a future date, based on
consistently meeting listing standards, market conditions, and
strategic timing.
Management and Governance
Upon completion of the transaction, it is expected that Jason
Reid, current CEO, President and director of Gold Resource
Corporation, would step down from all executive and director
positions with the Company and be appointed CEO, President and
director of Spinco. The Company has already undertaken efforts to
identify a new chief executive officer for Gold Resource.
While a formal announcement of a new Company CEO and Board
appointments will be made at a later date, the following Board
modifications are anticipated:
Bill Conrad, current Chairman of Gold Resource Corporation, is
expected to remain on the Board of Directors of the Company but
will step down as Chairman. Mr. Conrad is expected to be
appointed as a director of Spinco and named Chairman of the
Board.
Mr. Alex Morrison, current member of the Company’s Board of
Directors and Audit Committee chair, is expected to be named
Chairman of Gold Resource’s Board.
To assist in a smooth transition, an arms-length management
services agreement between the Company and Spinco will be
developed. A small number of current executives, managers and
employees of the Company will continue to provide management and
technical support for Spinco’s operations to assist in the
transition.
Post spin-off, both companies are expected to remain
headquartered in Colorado.
Advisors
Polsinelli PC, SEC legal counsel for the Company.
Hart & Hart, SEC legal counsel for Spinco.
Capstone Headwaters, financial advisor to the Company.
Cautionary Statements:
This press release contains forward-looking statements that
involve risks and uncertainties. The statements contained in this
press release that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. When used in this press
release, the words “plan”, “target”, "anticipate," "believe,"
"estimate," "intend" and "expect" and similar expressions are
intended to identify such forward-looking statements. Such
forward-looking statements include, without limitation, the
statements regarding Gold Resource Corporation’s strategy, future
plans for production, future expenses and costs, future liquidity
and capital resources, and estimates of mineralized material. All
forward-looking statements in this press release are based upon
information available to Gold Resource Corporation on the date of
this press release, and the company assumes no obligation to update
any such forward-looking statements. Forward-looking statements
involve a number of risks and uncertainties, and there can be no
assurance that such statements will prove to be accurate. The
Company's actual results could differ materially from those
discussed in this press release. In particular, the scope,
duration, and impact of the COVID-19 pandemic on mining operations,
Company employees, and supply chains as well as the scope, duration
and impact of government action aimed at mitigating the pandemic
may cause the actual results and future events to differ materially
from those expressed or implied by such forward-looking
information. Also, there can be no assurance that production will
continue at any specific rate. Factors that could cause or
contribute to such differences include, but are not limited to,
those discussed in the Company’s Annual Report on Form 10-K and
other filings with the SEC.
Additional risks and uncertainties include the possibility that
the proposed spin-off will not be consummated within the
anticipated time period or at all, including as the result of
regulatory, market or other factors, including the possibility that
various closing conditions for the spin-off may not be satisfied;
the potential disruption to our business in connection with the
proposed spin-off; the potential that Gold Resource Corporation and
Spinco do not realize all of the expected benefits of the spin-off;
that the spin-off may be more difficult, time consuming or costly
than expected; the failure of the spin-off to qualify for the
expected tax treatment; and other uncertainties or risks reported
from time to time in our reports to the SEC. In light of these
risks, uncertainties, assumptions and factors, the forward-looking
events discussed in this communication may not occur. We caution
that undue reliance should not be placed on forward-looking
statements, which speak only as of the date made. Gold Resource
Corporation does not undertake, and expressly disclaims, any duty
to update any forward-looking statement whether as a result of new
information, future events or changes in expectations, except as
required by law.
Contacts:Corporate DevelopmentGreg
Patterson303-320-7708www.goldresourcecorp.com
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