The TSX Venture Exchange gained 14.87 points to close at 353.67 Thursday. James Hutton's first capital pool shell, Owl Capital Corp. (OCC: halted), has completed its qualifying transaction, which is a U.S. gold mining deal. The shell expects its resulting issuer to begin trading as Southern Empire Resources Corp. (SMP) on Tuesday, pending final exchange approval.
For its QT, the shell has acquired the following: a 75-per-cent interest in the Oro Cruz property in California, an 85-per-cent interest in the Eastgate property in Nevada and a 4.93-per-cent equity interest in Bullfrog Gold Corp. (BFG: $0.10). Owl Capital, which had 6,237,063 shares issued, acquired these three target assets by issuing shares to two vendors: 14,302,940 shares to Ron Netolitzky's Eros Resources Corp. (ERC: $0.055) and 11,124,000 shares to Dale Wallster's Demerara Gold Corp.
The main property, Oro Cruz, covers 2,783 hectares in Southern California. It includes a past-producing gold mine, which yielded 150,000 ounces between 1890 and 1941. Then from 1995 to 1996, MK Gold Co. produced 61,000 ounces before ceasing operations because of low gold prices (under $400 (U.S.) an ounce at the time). Now, Owl Capital owns 75 per cent of Oro Cruz. The other owner is Paul Saxton's Lincoln Gold Mining Inc. (LMG: $0.07) with 24 per cent. Lincoln is focusing its efforts not on Oro Cruz but on its Pine Grove property in Nevada.
Owl Capital's secondary property, Eastgate, covers 817 hectares in Nevada. Between 1987 and 1999 (again, during a period of low gold prices), four companies including Freeport-McMoRan Corp. and Echo Bay Mines Ltd. conducted exploration at Eastgate, but based on their test results, they all decided to abandon it. Now, it is 85 per cent owned by Owl Capital. The other 15 per cent is owned by Kermode Resources Ltd. (KLM: $0.005), a dormant mining junior under Don Moore and Neil Briggs. Kermode's largest shareholder is Mr. Wallster's Demerara Gold with 13.4 per cent of Kermode's 65.4 million shares.
The third asset that Owl Capital acquired in the QT is a non-core investment comprising 8.75 million shares of David Beling's Bullfrog Gold. This company plans to conduct exploration (including surveying and drilling) this year at its Bullfrog property in Nevada. In January, it raised $2-million at 13 cents, so it has money to spend.
For its part, Owl Capital has sold a $3.27-million private placement at 30 cents to raise money for its resulting issuer. Southern Empire will use the proceeds for exploration (including drilling and metallurgical testing) at Oro Cruz and for general working capital.
Southern Empire will have six directors: Mr. Netolitzky, Mr. Wallster, James Currie, Bryan Slusarchuk, Latika Prasad and the shell's Mr. Hutton. Mr. Netolitzky, 76, will be the chairman. A familiar name to most on Howe Street, he is the president and CEO of Eros Resources, which is now the largest shareholder of Owl Capital with 35.8 per cent of its shares. Under Mr. Netolitzky's watch, Eros's stock has declined to 5.5 cents today from its modest peak of 22.5 cents in 2016. Mr. Netolitzky has two other junior gold promotions, Aben Resources Ltd. (ABN: $0.05) and MAS Gold Corp. (MAS: $0.03), which both have properties in Western Canada.
Long-time promoter Mr. Netolitzky is probably better remembered for helping develop the Snip and Eskay Creek gold mines in Northern British Columbia in the 1980s. These mines each produced more than one million ounces before they were mothballed for high costs and depletion. They have yet to restart commercial production, but they are being explored by Skeena Resources Ltd. (SKE: $0.77). Mr. Netolitzky was the chairman of Skeena from April, 2003, to February, 2019. Skeena rolled back 1 for 10 in 2017, around the time that it acquired the two former mines.
The next director nominee, Mr. Wallster, 63, is a prospector. He will be the president and chief executive officer of Southern Empire. He was previously the founder and president of a private Saskatchewan uranium explorer that was acquired in 2006 by Hathor Exploration Ltd., because Hathor had a uranium project in the same area. These days, Mr. Wallster sits on the board of Valore Metals Corp. (VO: $0.15), a Brazilian PGM (platinum group metals) explorer. He now holds 3.55 million shares or 8.9 per cent of Owl Capital.
The third director nominee, Mr. Currie, 65, is a mining engineer. He is the chief operating officer of Equinox Gold Corp. (EQX: $8.50), which has two producing gold mines, including one near Oro Cruz. He holds no shares of Owl Capital.
The fourth nominee, Mr. Slusarchuk, 44, is a broker turned mining promoter. He is a new addition to the list of nominees for Southern Empire; his name was not in the filing statement that the shell submitted in December. Mr. Slusarchuk was the founding president of K92 Mining Inc. (KNT: $2.37), a gold explorer in Papua New Guinea. While he was there, from 2016 to 2018, the stock quickly climbed to $2.10 from $1, after which it descended to 50 cents. These days, Mr. Slusarchuk is the president of Turmalina Metals Corp. (TBX: $0.385), an Argentine gold-copper-silver explorer. He took this company public in December, 2019, without an initial public offering, only a listing of its already-issued shares. Turmalina did sell a $7-million private placement at 50 cents in connection with its going public. Last month, it raised another $9.77-million by public offering at 70 cents. Fortunately for Turmalina, the financing closed before markets reacted negatively to COVID-19.
The fifth director nominee for Southern Empire, Ms. Prasad, is also a new addition. She was a director and the corporate secretary of Turmalina from April, 2017, to July, 2019, when the company was still private. She has been a director and officer of two public companies, one that now trades as Getchell Gold Corp. (GTCH: $0.13) and one that now trades as Azincourt Energy Corp. (AAZ: $0.015). Ms. Prasad is slated to become the chief financial officer, the secretary and a director of Dev Randhawa's Rockwealth Resources Corp. (RWR: halted), as soon as Rockwealth closes its gold exploration deal in the Kyrgyz Republic.
Rounding out the board of Southern Empire will be Mr. Hutton, 59, a first-time shell-maker. Since the 1990s, he has been the president of several resource investment funds, including the Canada Dominion Resources funds and the CMP Resources funds. He has also been directly involved with public companies, for instance as the chairman of Terra Ventures Inc., a Saskatchewan uranium explorer that peaked at $1.03 in 2008. Terra was acquired in 2011 by its joint venture partner, Hathor Exploration, for $24-million worth of shares. It worked out to a value of 57 cents per Terra share.
Mr. Hutton listed Owl Capital in June, 2018, with a $200,000 IPO at 10 cents. Because there was no rollback in connection with the QT (there often is), the break-even price for the shell's IPO investors remains at 10 cents.
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