Corona revises plans for merger to bypass Pezim

Murray Pezim, chairman of Prime Resources (VSE), has forced Corona (TSE) to revise its plans for control of the Eskay Creek gold play. As a result of Pezim’s rejection of Corona’s bid for a larger stake in Prime, Corona has shelved its strategy to merge Eskay’s co-owners, Prime and Stikine Resources (TSE) with a new gold company, Corona Gold.

Although businessman James Pattison has upset his alliance with Pezim by tendering his 11% interest in Prime through a private deal with Corona, Pezim is still blocking Corona’s bid for the 25% interest anticipated in the original deal between the two companies.

“Corona came to the view that pursuing its legal rights to force Mr. Pezim to honor his contractual agreement would have been costly and time-consuming and would have put at risk the ownership of the Eskay Creek orebody,” Corona said in a press release. Corona now owns 31% of Prime, or about 15% of the Eskay Creek property.

Instead of the direct share exchange originally offered to Prime shareholders, Corona will issue Pattison one subordinate share of Corona for every share of Prime plus enough cash to make the offer worth $9 per share. Recently, Prime shares traded at $8, compared with Corona shares at $7.60.

Corona also said it will go ahead with the formation of Corona Gold as a precious metals subsidiary, but Corona will hold 100% of the gold company, not 50.2% as originally planned. Corona is continuing with arrangements to establish the new company in Vancouver under the management of Corona President Peter Steen.

In light of competition from Placer Dome (TSE), Corona has also had to revise its lockup agreement with the four insiders that control 40% of Stikine. Under the new deal, the Stikine insiders will be issued one Corona preferred share for every Stikine share. At any time after Sept. 30, the preferred shareholders may cash in their shares at $70 per share, which represents a $2.50 edge over Placer’s $67.50 offer.

Alternatively, the shareholders have until June 30, 1992, to exchange the preferred shares for 8.5 Corona subordinate shares. The preferred shares carry cumulative cash dividends of $4.20 per share, per annum.

Should a publicly-traded gold company be created in future, Corona added, preferred shareholders will be able to exchange their shares for 4.5 shares of the new gold company and 6.5 subordinate shares of Corona.

“We are offering everything that Placer Dome didn’t,” said Brian Hay, Corona’s vice-president of corporate communications. “More money, more time, and, most importantly, participation in the upside.” Placer’s cash offer expired July 4.

If Corona is successful in its new bid, it will own 43% of Stikine. This would put Corona in direct competition with Placer Dome, which at midday July 4 held 45% of Stikine. Rumor has it that Euro- Nevada Mining (TSE), of which Peter Steen is a director, holds another 6% interest. If Placer is able to acquire this strategic 6%, it will win a controlling interest in Stikine. Prime, however, is operator of the Eskay Creek project.

Corona said it intends to discuss the possibility of a Prime-Stikine merger with Placer Dome.