The Ottawa-based firm, which currently has interests in a total of four mining projects including Bottle Creek, said it intended to spin out its 60-per-cent interest in Bottle Creek Exploration LLC into a new B.C. incorporated subsidiary called Red Ore Gold Inc.
Bottle Creek Exploration is Galahad’s joint venture with Golden Gryphon USA Inc. The joint venture holds 1,772 claims in the Bottle Creek, Nev. gold mine and surrounding areas.
Galahad said Red Ore has plans to raise up to $1 million for working capital and to fund exploration activities, by selling up to two million units at 50 cents each in a private placement. The newly created company also intends to complete an initial public offering and list its shares on the TSX Venture Exchange, and to prepare a National Instrument 43-101 technical report detailing Bottle Creek’s scientific and technical information in line with listing requirements.
Galahad said the spinout transaction will give Galahad roughly 8.95 million common shares of Red Ore worth 50 cents each, for aggregate consideration of $4.48 million. The amount represents the total Galahad has spent to date on exploration, property staking and payment costs at the property.
“Management believes that Galahad is not receiving any recognition in the public markets for the property. The significant Bottle Creek holdings, which encompass over 900 claims, are a very exciting drill-ready project, with a 2011 budget of $1.6 million in drilling and sampling programs,” said Galahad CEO Robin Dow in a statement.
The company noted the Red Ore consideration shares would be held by Galahad instead of being distributed to shareholders, with Mr. Dow saying that the company’s stakeholders would “receive the benefit of indirect ownership in a newly listed public company,” along with retaining their interest in Galahad’s three other exploration projects in northern Ontario and Quebec.
Galahad added the move would create an “orderly and balance after-market” for the IPO shares, which will be subject to a voluntary three-year escrow agreement. The shares will not be freely tradable for at least the first six months, the company noted.
Mr. Dow will also be director, chair and CEO of Red Ore, and Galahad will share its chief financial officer Sabino Di Paola and three of its four directors with the subsidiary.
The spinout transaction and proposed IPO must still be approved by the TSX Venture Exchange and other required regulatory bodies.
P I Financial Corp. has been retained to provide advisory services on the transaction, Galahad added.
Shares of Galahad were steady at 13.5 cents each on the TSX Venture Exchange at 10:21 a.m.
.jpg)
