Kirkland Lake Gold (TSX: KL) this morning announced that it is looking to dispose of the vast majority of its ownership in Novo Resources Corp (TSXV: NVO). The company intends to do so via what essentially amounts to a private placement that is being facilitated through Stifel GMP and Clarus Securities. The transaction is expected to generate cash of approximately $45.3 million for the issuer on a gross basis.
The transaction will see 18,500,000 units of Novo held by Kirkland sold at a price of $2.45 per unit. Each unit is to consist of one common share and one half purchase warrant, with each warrant valid for a period of twelve months from the date of issue. Warrants can be exercised at a price of $2.80 per common share. Warrants issued will be subject to a four month hold period as well.
In total, the financing will see Kirkland dispose of an initial 18,500,000 common shares of the issuer immediately, and if all warrants are fully exercised, an additional 9,250,000 shares of the issuer will be disposed of. Given that the company currently holds 27,885,168 Novo shares, if completed in full, only 135,168 shares will remain in its possession, dropping its stake in the issuer from 12.1% to 0.05%.
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Proceeds from the asset sale are to be used for general corporate purposes. The company expects the sale to be completed by December 3, 2020.
Notably, at least a portion of the transaction will represent a loss to the issuer, whom acquired 14.0 million units of Novo at a price of $4.00 per share in 2017. A further 4.0 million shares were acquired in May 2018 at a price of $5.00 per share, representing an even larger loss for the operator.
Novo Resources last traded at $2.77 on the TSX Venture.
Information for this briefing was found via Sedar and Kirkland Lake Gold Ltd. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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What is the real reason for Kirkland Lake to sell Novo shares at a loss?