NGEx Minerals (TSX: NGEX) is handing its Valle Ancho copper-gold project to shareholders, carving out a new Lundin Group exploration company and running back a playbook that has worked well as of late.
Under a statutory plan of arrangement announced Aug. 6, NGEx will transfer the project to a newly formed subsidiary, referred to for now only as Spinco, and distribute its shares directly to NGEx holders, who will receive one-fifth of a Spinco share for every NGEx share they own. NGEx will retain no direct stake in the new company.
Valle Ancho is large and barely tested. The 109,000 hectare land package covers the eastern side of Chile’s Maricunga Gold Belt and its extension into Argentina, plus several separate copper-gold porphyry targets on the Argentine side. A 2022 NGEx drill program demonstrated significant porphyry copper and gold mineralization, and the company says a number of drill ready targets have since been identified.
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President and CEO Wojtek Wodzicki called Valle Ancho “a district-scale copper-gold exploration opportunity that resembles the Vicuña District in its earliest days,” and said Spinco will be led by several of the people pivotal in making those discoveries.
“NGEx has a long track record of creating value through successful exploration and strategic spin-outs,” Wodzicki said. “At its core, Spinco will focus on the tremendous value that can be generated through successful exploration.”
That record is why the announcement carries weight. NGEx spun out royalty interests on its Lunahuasi and Los Helados projects into LUNR Royalties last year, distributing a quarter share per NGEx share. LUNR is now valued at roughly C$2.53 billion.
Valle Ancho is meant to be a foundation rather than the whole company. NGEx says Spinco intends to grow opportunistically by assembling a broader portfolio of exploration projects, positioning it as a South America focused vehicle rather than a single asset story.
NGEx will inject cash into Spinco to fund the acquisition of the project and provide at least 12 months of working capital, though it has not disclosed the amount. Existing NGEx options will be exchanged for replacement NGEx options plus fully vested Spinco options on the same one-for-five basis.
The arrangement requires approval from two-thirds of votes cast at a special meeting expected in the fourth quarter, along with court and Toronto Stock Exchange sign-off. Spinco intends to apply to list on the TSX Venture Exchange.
Wodzicki will serve as Spinco’s chairman, president and CEO, with Alex Tong as chief financial officer and directors including Bob Carmichael, Joyce Ngo and Nathan Monash.
NGEx meanwhile will retain full ownership of Lunahuasi and roughly 69.1% of Los Helados.
NGEx Minerals last traded at $26.92 on the TSX.
