Major General plans diamond spinoff

With 42.1 million shares currently issued, Major General Resources (MGJ-V) intends to spin off its diamond properties into a new company and undergo a 3-for-1 stock rollback.

Shareholders of Major General would receive shares in the yet-to-be-named new company on the basis of one share for every 3.5 restructured shares held. The proposed reorganization requires the approval of 75% of the votes cast at the annual general meeting, to be held in May.

Major General would retain a 9.9% equity position in the new company, along with a 2% royalty on future production.

The company’s diamond property holdings exceed 400,000 hectares on Victoria Island in Nunavut where more than a dozen targets are ready to drill, subject to funding. In addition, the junior holds a 24% interest in the Misty Lake joint venture, immediately south of the Gahcho Kue (Kennady Lake) in the Northwest Territories, a joint venture between De Beers and Mountain Province Diamonds.

The new company would be financed by way of a prospectus offering through Haywood Securities of 3 million units for proceeds of up to $1.5 million. Each unit will consist of one new diamond share and a half warrant.

The restructured Major General would retain all its base metal and gold properties, including its South Voisey’s Bay interests and Green Bay property in Newfoundland. Anglo American (AAUK-Q) affiliate Hudson Bay Exploration & Development is preparing to launch a 3,000-metre drilling program to test for base metal mineralization at the Green property in March.

Major General will complete a $1-million financing once the shares in the company have been rolled back. The private placement will be priced at 45 for a post-consolidated share and a warrant that entitles the holder to buy an additional share at 55 in the first year and 65 in the second. A 7.5% finder’s fee will be payable to Rick Rule’s Global Resource Investments.