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Yamana intends to distribute, among shareholders, purchase rights in Brio as a dividend in kind. The exercise price will depend on market demand, the company said in a release.
"Completion of the spin-off will also enable Yamana to better focus on its portfolio of six, soon to be seven, producing mines in top mining jurisdictions and on its organic growth pipeline," Yamana said. "In particular, Yamana will be better positioned to focus on recent exploration success, optimization initiatives, and on advancing Canadian exploration and near-term development opportunities."
Proceeds from the exercise of the purchase rights and any direct sales of Brio Shares will be used to reduce debt, but Brio Gold will not receive any proceeds from the offering, the company said.
In a note to clients, Credit Suisse said that Toronto-based Yamana has potential to unlock value through Brio's spin-off.
Credit Suisse sees the stand-alone entities well positioned strategically.
"Yamana expects Brio to produce 225,000-245,000oz in 2017 from three assets in Brazil, growing to 400,000oz+ from four assets by 2018. Yamana (ex. Brio) has a relatively stable 1Moz+ production platform from which to grow with an improved balance sheet," it said.
Brio Gold holds gold mines Fazenda Brasileiro, Pilar and C1 Santa Luz, as well as some related exploration concessions.