Chalice Mining (ASX:CHN) share price falls on demerger announcement

While some companies are merging, others are going the other way.

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Shares in Chalice Mining Ltd (ASX: CHN) are sinking this morning after an initial lift at the open.

At the time of writing, the Chalice share price is down 2.38% trading at $6.15 apiece.

Below we take a look at the ASX resource producer’s demerger and initial public offering (IPO) announcement.

What spin-out did Chalice announce?

Chalice Mining’s share price is sliding after the company confirmed it was going forward with the demerger and IPO of its Australian gold assets. Namely its Pyramid Hill Gold Project in Victoria, along with its Viking Gold Project and Mt Jackson Gold Project, both located in Western Australia.

The proposed spinout, still subject to final board, regulatory and shareholder approvals, would see the rise of a new ASX-listed gold explorer, to be called Falcon Metals Limited with the proposed ticker ASX: FAL.

Chalice intends to launch Falcon Metals complete with an experienced board and management team. According to the release that includes “one of most decorated explorers in Australia”, Mark Bennett, who has been appointed non-executive chair.

Chalice advised it expected eligible shareholders would gain 1 Falcon share for every 3 Chalice shares held (1-for-3) via an in-specie distribution.

Atop the demerger, there will be a concurrent IPO. Falcon will raise between $15–30 million under a pro-rata priority offer to Chalice shareholders.

Company commentary

Chalice described the demerger of its gold assets as “the optimal structure to maximise value for our shareholders”. The company said it could then focus on its Julimar Ni-Cu-PGE Project and the new West Yilgarn Ni-Cu-PGE Project in Western Australia.

Commenting on the demerger, Chalice CEO Alex Dorsch said:

This will result in the establishment of a significant new, well-funded ASX-listed gold explorer with a high-quality portfolio spanning some of Australia’s most highly-endowed gold provinces.

Importantly, Chalice shareholders will retain exposure to these assets via an in-specie distribution of shares in Falcon Metals on a 1-for-3 basis. I think this is a great result for our shareholders…

If approved, the company expects the demerger to be completed in late 2021.

Chalice Mining share price snapshot

The Chalice Mining share price has been a stellar performer over the past 12 months, gaining 137%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 25% over that same time.

Chalice Mining’s shares have struggled recently, however, down 12% over the past month.

Should you invest $1,000 in Chalice Mining right now?

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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