Prophecy Resource unloads Canadian nickel-PGM projects to Pacific Coast, but retains majority control
by Deborah Sterescu
proactiveinvestors.com
Prophecy Resource Corp (TSX-V:PCY, OTC: PRPCF, FSX: 1P2) rallied on Wednesday after the company announced a day earlier that it plans to sell two Canadian nickel and platinum group metal projects to Pacific Coast Nickel (TSX-V: NKL) in an all-share deal valued at $107.3 million.
Under the terms of the transaction, Pacific Coast will acquire the Wellgreen platinum group metal Ni-Cu property and the Lynn Lake nickel project, located in the Yukon and Manitoba, respectively.
In exchange, Prophecy will receive 550 million common shares of Pacific Coast, which equates to roughly a 90% stake in the company. Based on the closing price of Pacific Coast on January 17, the day before the deal was announced, the gross value of the deal is $107.25 million.
Following the transaction, Pacific Coast will consolidate its share capital on a "10 old for 1 new" basis, and Prophecy will change its name to Prophecy Coal Corp., while Pacific Coast will be renamed as Prophecy Platinum Corp.
Indeed, the deal will allow Prophecy to focus on its Mongolian coal operations, while its shareholders will still realize the value of its Canadian projects. Prophecy said it plans to distribute half of its Pacific Coast interest to stakeholders on a pro rata basis.
Meanwhile, Pacific Coast will become a mid-tier resource company with the addition of Wellgreen and Lynn Lake, as it already owns the Las Aguilas nickel platinium group metal project in Argentina. The company's property portfolio also includes the Burwash property, located adjacent to the Wellgreen Mine.
Wellgreen is part of the Kluane Ultramafic Nickel belt, which is the second largest behind the Thompson Belt in Canada and remains vastly unexplored. An NI 43-101 report last July indicated that the potential of the property ranges between 77 to 254 million tonnes at 0.26 to 0.38% Nickel, 0.26% to 0.36% Copper and 0.55 to 0.85 g/t Platinum and Palladium.
According to an NI compliant estimate completed in May last year, Lynn Lake contains measured and indicated mineral resources of 22.9 million tons grading 0.57% nickel and 0.30% copper, as well as 8.1 million tonnes of inferred resources at 0.51% Nickel and 0.28% Copper. Approximately 50% of the host rock remains unexplored.
"This transaction unlocks the intrinsic value of Prophecy's assets. Investors will have a choice to own Prophecy Coal for 1.4-billion-tonne coal exposure, or own Prophecy Platinum for unique and significant Nickel PGM exposure," said chairman and CEO of Prophecy John Lee.
Lee will be appointed interim CEO of Pacific Coast, effective immediately, replacing James Walchuk.
Prophecy also said it has agreed to fund up to $2.0 million of flow-through expenses on the Canadian properties until the end of the year.
The deal, which remains subject to shareholder and regulatory approvals, is expected to close by the end of May 2011. Following the news, Prophecy has risen more than 3.8% on Wednesday morning to trade at $1.09 as of 11:25am EST. |
