FULL DISCLOSURE: The Deep Dive is long the equity of Power Nickel.
Power Nickel Inc. (TSXV: PNPN) has announced a strategic reorganization of its business, which involves the spin-out of the company’s interests in the Golden Ivan property and Chilean exploration assets to shareholders through a newly formed subsidiary. This development represents a major shift for the company, allowing it to focus on its flagship Nisk project while giving investors ownership stakes in two separate companies with distinct objectives.
Under the new arrangement, Power Nickel will spin out its interests in the Golden Ivan property, a mining asset located in British Columbia’s renowned Golden Triangle region, along with its Chilean assets into a subsidiary (Spinco) which will be focused on advancing those projects independently.
As part of the spin-out, Power Nickel shareholders will receive shares in both Power Nickel and Spinco, with the latter’s shares being privately held and not listed on any stock exchange.
According to Power Nickel CEO Terry Lynch, the reorganization is intended to unlock value for shareholders that isn’t currently being reflected in the company’s stock.
“We believe our shareholders are not receiving at the moment any benefit from the properties we are spinning out,” Lynch said in a statement. He emphasized that this move will allow Power Nickel to focus on its core asset, the Nisk nickel sulfide project, which is expected to benefit from growing demand in the electric vehicle (EV) sector.
The Golden Ivan property, which spans approximately 797 hectares, is located near Stewart, British Columbia, within the Golden Triangle. This area is famous for its abundant mineral resources, including gold, silver, and copper. The property itself hosts two known mineral showings and is part of a region with a rich mining history dating back to the early 20th century. Notably, the nearby Golden Triangle has produced over 67 million ounces of gold, 569 million ounces of silver, and 27 billion pounds of copper.
In recent years, Power Nickel has conducted exploratory work at Golden Ivan, including a successful 2021 prospecting and geologic mapping program that led to the discovery of two new high-grade gold zones. These findings include assays of up to 16.2 grams per tonne (g/t) of gold from the Lone Goat showing and 15.1 g/t from the Molly B. East showing. Such discoveries underscore the property’s potential for future development.
The spin-out of Golden Ivan allows Spinco to independently pursue further exploration and development of this property. Spinco will also manage other Chilean assets, including the Zulema and Tierra de Oro projects.
The decision to spin out these assets is rooted in Power Nickel’s belief that the market has not been fully valuing its exploration properties, especially given the company’s focus on its flagship Nisk project. The Nisk project, located in Quebec, is a high-grade nickel sulfide deposit that has become increasingly valuable as global demand for nickel rises, particularly for its use in electric vehicle batteries. With the spin-out, Power Nickel can streamline its operations and focus entirely on advancing Nisk, while Spinco takes the lead on exploration projects in British Columbia and Chile.
This move also addresses what Power Nickel sees as an issue with “naked short” positions—unreported short selling—on its stock. By spinning out its assets into a private entity, Power Nickel hopes to make it more difficult for these short positions to negatively impact its share price.
The spin-out process is expected to be completed by the end of 2024, pending approval from Power Nickel shareholders and the Supreme Court of British Columbia. Shareholders will vote on the arrangement at a special meeting scheduled for November 22, 2024. If approved, each shareholder will receive shares in Spinco proportional to their holdings in Power Nickel.
Upon completion, Spinco will operate as a reporting issuer in British Columbia and Alberta but will not be publicly listed on a stock exchange. This private structure, according to Power Nickel, will provide shareholders with continued exposure to the exploration potential of the Golden Ivan property and the Chilean assets while allowing Power Nickel to concentrate on its core nickel operations.
Power Nickel last traded at $0.76 on the TSX Venture.
FULL DISCLOSURE: Canacom Group, the parent company of The Deep Dive is long the equity of Power Nickel. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
