Yesterday Teuton Resources (TOU-X) announced they would spin off the Tennyson project into a Newco partially owned by Hunter Dickinson Inc., and funded $7.5 million by Hunter Dickinson. The market was reserved on the news, and for good reason. It wasn’t a great deal for the shareholders, and I’m not sure why Teuton did it.
You see, we shareholders like to believe in a property. We love to be passionate about how we’re going to be early investors in the next big find. In Tennyson’s case, it was just south of, and on trend with, Seabridge’s KSM deposit, a huge 30 million ounce discovery in the Golden Triangle of British Columbia, Canada. Clearly in Teuton’s case many investors are investing in Tennyson.
The deal is structured so that Teuton gets a partial interest in the Newco, and it’s not even clear how much of an interest. The deal effectively removes Tennyson from Teuton’s portfolio. If investors now want to invest in the Tennyson property, they would buy have to buy shares of the Newco, not Teuton Resources, which justifies the decline in the share price. Why didn’t they just joint venture the property the traditional way and let shareholders keep the direct interest in the property?