Calpine shareholders group finds Prime offer too low

That’s assuming of course that a proposed business arrangement to result in Prime acquiring all Calpine’s shares receives all necessary regulatory and shareholder approvals. Calpine’s key asset is a 50% interest in the Eskay Creek gold project located north of Stewart, B.C.

The proposal is structured so that each shareholder of Calpine would receive 2.25 shares of Prime for each Calpine share. Prime already owns about 33.6% of Calpine’s outstanding common shares and manages its operations, including ongoing work programs at Eskay Creek.

Those programs have resulted in the discovery of a mineral deposit that is widely considered to be one of Western Canada’s most significant gold projects. As a result, Calpine’s shares are trading at $6.12 in a 52-week range of 18 cents to $9.75.

But George Oughtred, a former president of Calpine, says he and a group of “concerned” shareholders are of the opinion that the fair value of Calpine shares is well in excess of the consideration that Prime proposes in its current offer.

Oughtred said the proposal “appears to be but one more in a series of three previously unsuccessful and aborted attempts by Prime this year to gain ownership of Calpine’s interest in the Eskay Creek project.”

Oughtred said his group has retained counsel for legal advice but will await receipt of the formal proposal, which is being mailed to Calpine shareholders, before making a specific response.

But he did say the group would be seeking to ensure that the package accompanying the proposal contains certain minimum requirements, including current independent evaluations of Prime and Calpine’s assets.

Prime has about 65.07 million shares outstanding and Calpine has 16.72 million shares outstanding. Upon completion of the arrangement, Prime would have about 90.06 million shares outstanding.

However, if all currently outstanding share purchase warrants and share purchase options of Calpine and Prime were exercised, an additional 13 million Prime shares would be issued. The transaction is not expected to reduce significantly Corona Corp.’s (TSE) 31.86% interest in Prime after Corona exercises all its options.

Prime’s other assets include a 40% interest in the Snip gold project in the Iskut River camp northwest of Stewart. Operator Cominco Ltd. has calculated diluted reserves of 1.58 million tons with a cut grade of 0.639 oz gold per ton in the Twin Zone of the Snip deposit. The project is now at the feasibility stage.

In addition, Prime has a 9.9% interest in the Premier Gold mine near Stewart along with interests in about 50 exploration companies which Prime also manages.

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