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Cobalt-focused investors got a surprise Tuesday when Global Cobalt said its board of directors has approved a strategic reorganization of its business components.
Cobalt-focused investors got a surprise Tuesday when Global Cobalt (TSXV:GCO) announced that its board of directors has approved a strategic reorganization of its business components.
Specifically, the company’s North American Werner Lake and Iron Creek projects will be spun out into a new company, while Global Cobalt will continue to hold the Russia-based Karakul and Altai Sister properties.
While the move might seem strange given how recently Global Cobalt acquired those North American assets in an effort to diversify, Erin Chutter, the company’s president and CEO, explained to Resource Investing News that there are a number of simple reasons behind the move.
“What this transaction is meant to do is continue to allow our shareholders to have exposure and investment in the Russia-based cobalt projects, but also help us to unlock the value of the Canadian and US projects,” she said, adding that the split will also give the company “the flexibility to do additional acquisitions without the challenges of Russia.”
Elaborating, she noted, “we’re helping shareholders get the value from both parts of the asset set, and [gaining] the flexibility to do additional transactions.”
In terms of how the spin out will break down for shareholders, Tuesday’s release notes that they will receive shares in the new company “in proportion to their shares in Global Cobalt.” Ultimately, the two companies will be listed on the TSX Venture, with Global Cobalt eventually changing its name and trading symbol. The new company will be managed by the current team at Global Cobalt.
Chutter wasn’t able to give too many further details on the arrangement, but did say that the company is “in the process of preparing an information circular … that will delineate the asset and liability split between the two companies.”
In terms of a timeline for all that activity, a meeting for those who held common shares of Global Cobalt as of 12:01 a.m. on May 7, 2015 is set for June 15, 2015. Closure of the spin out is of course contingent on a variety of factors, including approval from shareholders and the TSX Venture.
Details on specific plans for the North American and Russian assets are also yet to come, but Chutter was able to sketch an outline of what’s in store. “With respect to Karakul, the view will be to continue to advance that project as market conditions allow; as we can raise capital for that project, we’ll continue to advance it. In addition we’ll continue to work with our Chinese partners on the feasibility study,” she said.
For the new company, “the focus is going to be on acquisitions of other projects as well as smart capital decisions with respect to the Canadian and US projects.”
All in all, it looks like exciting times may be ahead for Global Cobalt and its shareholders. And indeed, Chutter said in closing, “I think at the end of the day this is a really exciting opportunity for our shareholders who’ve been very, very patient during very difficult market conditions.”
Global Cobalt’s share price didn’t react to the news, staying flat Tuesday at $0.035.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Global Cobalt is a client of the Investing News Network. This article is not paid-for content.