CEO's Message
On February 22nd I commented that the current major disconnect between precious metal prices and precious metal equities could be a historic opportunity to purchase junior gold and silver shares. I also cautioned that the precious metal prices had been on a roll and they appeared overdue for a pullback. Now that short-term metals correction has arrived and as soon as it is played, the stocks should start outperforming the metals.
One precious metal stock that recently bottomed and has great upside potential is Canarc Resource Corp. (who recently announced spin-out plans for Caza Gold Corp., CCM is currently $0.25).
In November Canarc announced the spinout of its Mexican exploration properties to a new company, Caza Gold Corp. The purpose of a spin-out is to help unfold the full value of under-appreciated properties in a company. In Canarc’s case the value of our Mexican gold projects are not receiving any value in the share price, nor does Canarc want to finance them at the current share price.
The result of a spin-out is to add shareholder value by distributing the shares of a subsidiary company, in this case Caza Gold Corp., to existing shareholders of Canarc as a “dividend in kind”. Simply stated, an allotment of Caza Gold shares will be given as a “freebie” to Canarc shareholders on a 1 to 6 basis.
On April 29th, the Canarc Annual General Meeting, and Special Shareholders Meeting will be held to approve the resolution. Following court and TSX approval, Canarc will own, as of the Dividend Record Date and the Effective Date approximately 17% or 2.4 million of the issued shares of Caza and the Canarc Shareholders of Record will own an estimated 83% or 12.0 million of the issued share capital of Caza. (see March 3, 2008 News Release)
On the completion of the Plan of Arrangement, all shareholders of Canarc will continue to hold their Canarc shares and will also hold their allotment of Caza Gold Corp. After the distribution of Caza Gold shares to Canarc shareholders Caza will raise financing on its own and then apply to list its shares for trading on a stock exchange.
Spin-outs
There are many examples of successful spin-outs. Rubicon Minerals spin-out of both Paragon Minerals and Africo Resources in February 2006 clearly indicates the potential value added.
Rubicon had a market capitalization of $41 million prior to its announcement. The combined market cap of Rubicon, Africo and Paragon today is $222 million.
Clearly, significant benefits to shareholders can be gained from these value-added spin-outs. I believe with the continuing rise in the price of gold coupled with the exploration, development and acquisition program management has planned for 2008 shareholders of Canarc could be well rewarded.
Previous CEO Message
Feb 22, 2008 - CEO Message
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