Emgold Mining Corporation announced this week that it is forming a new subsidiary, "Newco", to raise capital on the alternative investment market for its wholly-owned subsidiary, Golden Bear Ceramics (GBC), currently a private company.
In mid-November Emgold had announced it was cutting back operations and funding for GBC while it proceeded with reorganizing and separating the financing for its proposed Idaho-Maryland underground gold mine and GBC (see article below).
The reason for the restructuring, Bill Witte, president and CEO of both Emgold and GBC told YubaNet in November, is because "the old time gold funds want their investment to go to gold only. Investors interested purely in gold are not too keen in paying for the development of a ceramics company. Analysts like to work with specific bonds for specific commodities."
The Canadian junior mining company, currently trading at 30 cents CAN on the Toronto Venture Exchange, is hoping to attract more investors once gold-only investors can purchase penny stocks in the proposed mine, without having to invest in GBC. According to Monday's news release, Emgold has already invested $6.56 million U.S. in GBC.
Emgold is hoping to win approval by the City of Grass Valley, Calif. to reopen the old Idaho-Maryland mine just 2 miles from downtown. The mine closed in 1956. An extensive environmental review process is underway and estimated to wrap up in about 11 months. Emgold will also have to get permits from state and federal agencies.
A crucial part of Emgold's proposal to Grass Valley is GBC's claim to be able to transform all of the proposed mine's tailings and waste rock into ceramic tiles and other building products through an invention it calls Ceramext ("ceramic extrusion"). Emgold has promised Grass Valley 200 jobs in the mine and 200 jobs in the ceramics factory for about 20 years, after which the land would be reclaimed and developed for another industrial use.
There is no place on the proposed mine property to store or reclaim tailings and waste rock. Trucking any gold-bearing ore to Nevada for processing and waste disposal would add considerable expense and potentially eliminate 200 of the promised jobs.
Emgold says it will use its Ceramext technology to process Idaho-Maryland mine waste under a contractual agreement with GBC, and will "also retain an initial 20% shareholding in GBC, which will be subject to dilution as additional financing is obtained by GBC."
The remaining 80% of Emgold's shares in GBC will be transferred to "Newco", its newly incorporated subsidiary, "in consideration for Newco's commitment to reimburse Emgold in respect of the funding provided to date to Golden Bear. Emgold's shares in Golden Bear will be secured by a promissory note of Newco and a pledge of Newco's Golden Bear shares. The note will be structured in a manner that will allow Newco to obtain required working capital and additional debt or equity financing prior to any repayment of the principal," according to the news release.
The announcement also states, "Initially management of Newco will be provided by the present management team of Golden Bear. It is anticipated that additional financing may be accompanied by changes in the management and Board of Directors of Newco."
Currently, Carl Frahme and Ross Guenther manage GBC.
Witte told YubaNet in November that the new spin off (now called "Newco"), will likely trade on the Toronto Venture Exchange or the London AIM Exchange.
