Pezim calls Prime board meeting to seek alternative Corona offer

A Prime Resources (VSE) board meeting was scheduled for June 28 to try to resolve some of the differences that have cropped up between Prime and Corona (TSE) since Corona announced its reorganization plans. Prime Chairman Murray Pezim was planning to meet with his 15 directors, eight of whom also sit on the Corona board, to come up with a new proposal for the reorganization of companies involved in the Eskay Creek gold play. Included in the discussion was to be Corona Chairman Ned Goodman, who devised the original restructuring scheme.

Pezim’s proposal would give him shares of Corona’s proposed new gold company, Corona Gold, which Corona hopes will control the Eskay Creek property. As Corona’s offer currently stands, Prime shareholders, including Pezim, would receive shares of Corona Corp., the holding company left over from the gold assets spinoff. Under this scenario, the shareholders would forfeit a direct interest in Eskay Creek.

Pezim is also recommending that, instead of a share exchange with Corona, Stikine’s (TSE) controlling shareholders should swap each of their shares in return for eight Prime shares.

Now that Placer Dome (TSE) and Corona are in head-to-head competition to win control of Eskay Creek through the property’s joint owners Stikine and Prime, Pezim has more power to negotiate with Corona. Recently, Pezim rejected Corona’s offer for a direct share swap, which, based on the value of the two companies’ shares, represented a $26.7 millon shortfall for Prime.

Originally, Corona had planned to merge Prime and Stikine to create Corona Gold, which would control 100% of Eskay Creek. As part of the reorganization, Corona, which already owns 20% of Prime, planned to acquire another 25% of Prime. Corona also has an agreement to purchase 42% of Stikine through the company’s three controlling shareholders. It hoped the remaining Stikine shareholders would also accept its offer.

But Corona’s plans were thwarted by Placer Dome, which made a competitive offer of $67.50 (or, alternatively, 3.5 Placer shares) for each Stikine share. Placer was able to pick up 42% of Stikine, or about 20% of Eskay Creek.

Pezim is also recommending that Corona spin off a larger portion of Corona Gold to the public. Corona had planned to control 50.2% of the new gold company, but Pezim suggests this figure should be reduced to 35-40%.