Trading in Ontario chromite explorer KWG Resources Inc. (TSX: V.KWG, Stock Forum) was halted Wednesday after the company released two independent valuations of its assets and common shares
When the stock was halted on Wednesday morning, the shares were trading at 12 cents.
However, the company said an independent valuation by Cormark Securities Inc. values KWG common shares within a range of between 22 cents and 30 cents.
The company also said a second valuation by Broad Oak Associates values the potential cash flow from KWG’s interest in a northern Ontario chromite discovery at 27 cents per common share.
KWG’s key asset is an interest in the Big Daddy chromite deposit, which is located in the Ring of Fire region of northern Ontario and has made its partner Spider Resources Inc. (TSX: V.SPQ, Stock Forum) a takeover target for Cleveland, Ohio-based Cliffs Natural Resources Inc. (NYSE: CLF, Stock Forum).
Spider and KWG each own 26.5% of Big Daddy and have the option to raise their interest to 30%. The other 47% interest is help by Cliffs, which has said previously that it wants control of the find.
Last Friday, Cliffs said it is willing to pay 19 cents a share in cash for Spider, marking an increase from the previous offer of 13 cents.
The sweetened offer comes after KWG – at the request of Cliffs --retained Cormark to provide an independent valuation in connection with a potential takeover bid by Cliffs, which needed the valuation before being permitted to launch takeover bid for KWG.
Cliffs later indicated that the no longer required the valuation. But KWG decided to go ahead and have the valuation completed. In addition, KWG retained Broad Oak to prepare a discounted cash flow valuation of KWG’s Big Daddy interests alone.
Investment Industry Regulatory Organization of Canada (IIROC) officials were unavailable to comment on speculation that the stock was halted because they are looking for a valuation that complies with National Instrument 43-101 levels of disclosure.
NI 43-101 makes it a requirement that when any scientific and technical information is being released about a mineral project to the public in Canada, it is based on information prepared by, or under the supervision of a qualified person.
The Broad Oak valuation has determined that KWG’s 30% stake in the indicated and inferred resource identified so far at Big Daddy could generate between US$140.7 million and US$300 million. That estimated is based on a discount rate of 8% and a coal price of US$300 to US$350 per tonne.