  Materials where localized magnetic moments are coupled to itinerant
electrons, the so-called Kondo lattice materials, provide a very rich backdrop
for strong electron correlations. They are known to realize many exotic
phenomena, including unconventional superconductivity, strange metals, and
correlated topological phases of matter. Here, we report what appears to be
electron fractionalization in insulating Kondo lattice material YbIr$_3$Si$_7$,
with emergent neutral excitations that carry heat but not electric current and
contribute to metal-like specific heat. We show that these neutral particles
change their properties as the material undergoes a transformation between two
antiferromagnetic phases in an applied magnetic field. In the low-field AF-I
phase, we find that the low temperature linear specific heat coefficient
$\gamma$ and the residual linear term in the thermal conductivity
$\kappa/T(T\rightarrow 0)$ are finite, demonstrating itinerant gapless
excitations. These results, along with a spectacular violation of the
Wiedemann-Franz law, directly indicate that YbIr$_3$Si$_7$ is a charge
insulator but a thermal metal. Nuclear magnetic resonance spectrum reveals a
spin-flop transition to a high field AF-II phase. Near the transition field,
$\gamma$ is significantly enhanced. Most surprisingly, inside the AF-II phase,
$\kappa/T$ exhibits a sharp drop below $\sim300$ mK, indicating either opening
of a tiny gap or a linearly vanishing density of states. This finding
demonstrates a transition from a thermal metal into an insulator/semimetal
driven by the spin-flop magnetic transition. These results suggest that spin
degrees of freedom directly couple to the neutral fermions, whose emergent
Fermi surface undergoes a field-driven instability at low temperatures.
