Meanwhile, Arizona Metals Corp. [AMC-TSX, AZMCF-OTCQX] is proposing to create two new companies that will give investors new windows on the company’s two major assets in Arizona. The first spinout company, named Sugarloaf Gold Corp. will contain the Sugarloaf Peak Gold Project, which is estimated to contain an historic estimate of 1.5 million ounces of gold.
The second spinout company, Arizona Royalties Corp., will hold a 2.0% royalty on the company’s flagship Kay Mine Deposit as well as a 2.0% NSR royalty on all future mineral production from any new discoveries from ongoing exploration at the Kay Mine Project.
The company believes that positive outlook for both gold and copper means this is a good time to separate the flagship copper-gold-zinc-silver VMS Kay Mine from its gold-only Sugarloaf asset. Company officials take the view that based on the value of Kay alone Arizona Metals shares a significantly undervalued. On April 3, 2024, the shares were priced at $2.34 and traded in a 52-week range of $4.55 and $1.63, leaving the company with a market cap of $265 million based on 118.8 million shares outstanding.
It is expected that Arizona Metals will retain a 19.9% ownership in the shares of both Sugarloaf Gold and Arizona Royalties, while the remaining shares are distributed to the shareholders of Arizona Metals on a pro rata basis. Initially, both new companies will be reporting issuers. These are vehicles which provide continuous public disclosure but are not yet listed on an Exchange. Arizona Metals will look to list Sugarloaf Gold and Arizona Royalties on a public exchange as soon as market conditions allow.
The company’s primary asset is the Kay Mine, a high-grade copper-gold-zinc deposit located about one hour north of Pheonix that is also situated in a 100-kilometre trend that hosts 60 past-producing VMS deposits, most of which were last in operation during the 1970s. The majority of the company’s budget has been allocated to the Kay mine in the last few years.
In 1982, Exxon Minerals produced an internal proven and probable reserve of 6.4 million tons at a grade of 2.2% copper, 2.8 g/t gold, 3.0% zinc and 55 g/t silver. Arizona Metals has already completed 85,000 metres of drilling at the Kay Deposit and another 13,000 metres at the Central and West Targets. The Kay Mine Deposit is the company’s primary asset.
Arizona Metals is currently drilling another 30,000 metres of drilling in a bid to define a preliminary resource at the Kay Deposit by the end of 2024. The company said recent drill results offer reason for optimism, including 98.3 metres g/t gold equivalent (AuEq) in hole KM-22-60 and 125 metres at 3.2% copper equivalent (CuEq). With more than $30 million in cash, the company is fully funded for this effort and expects to continue releasing drill results as soon as they are available.
Arizona’s Sugarloaf Peak Gold project is a near-surface open pit target located on 4,400 acres of BLM claims in La Paz County, Arizona, about 8.0 kilometres from the town of Quartzsite. It contains a historic estimate of 1.5 million ounces grading 0.5 g/t gold to a depth of 70 metres.
The deposit is open for expansion in all directions and recent metallurgical testing has demonstrated the potential for excellent recoveries in both oxide and sulphide mineralization.
Meanwhile, the company said it intends to make modest cash injections, roughly $100,000 each, into both Sugarloaf Gold Corp. and Arizona Royalties in order to provide 12 to 18 months of working capital for both spinouts. These funds will be used to pay ongoing regulatory, legal and accounting fees that are needed to maintain operations and reporting obligations as reporting issuers. None of that money will be used for salaries or consulting fees.
It is anticipated that an information circular will be mailed out to Arizona Metals shareholders in May 2024. The meeting to allow shareholders to vote on the planned spinouts is expected to be held at the AGM in June 2024.