Corona Restructuring arrangement

The complicated restructuring under way at Corona (TSE) will involve several share exchanges among the shareholders of Corona, Prime Resources (VSE) and Stikine Resources (TSE). In a series of transactions, Corona has already acquired about 10.2 million shares of Prime and the right to purchase 1.5 million shares of Stikine. These acquisitions and rights, if exercised, give Corona a 45% interest in each of the junior companies.

Prime and Stikine will then merge with a new company, Corona Gold, which will be exclusively a gold mining company controlling all of Corona’s gold assets, including its interests in two gold mines at Hemlo, Ont., and 100% of the Eskay Creek prospect in northwestern British Columbia. Corona Gold will list on the Toronto, Montreal, and Vancouver stock exchanges and be based in Vancouver.

Initially, Corona Gold will have 202 million shares outstanding and $284 million in long-term debt. Corona proposes to consolidate the shares on a 1-for-2 basis so that Corona Gold will have 101 million shares (but no multiple voting shares) outstanding.

Holders of Corona common and subordinate voting shares will receive 0.38 shares of Corona Gold for each share of the parent company. As a result, Corona will own 50.2% of Corona Gold, while shareholders of Corona will hold 40%. Shareholders of Prime and Stikine will share the remaining 9.8% interest.

Under the amended agreement with Stikine, each Stikine share will be replaced by two shares of Corona Gold and 6.5 existing Class “A” Corona shares (Corona’s single-voting shares). The Corona shares, in turn, will be exchanged for 0.38 shares of Corona Gold.

As a safety net, Corona has agreed to acquire the shares owned by principal Stikine shareholders, even if, for any reason, the restructuring of Corona or agreement with Stikine does not go ahead. Corona also has the right to require the principal Stikine shareholders to sell their shares under certain terms.

Prime shareholders will receive one share of Corona Gold for every share of Prime. A new company, Prime Equities, will be formed to control Prime’s existing portfolio of junior exploration companies. Prime shareholders will also receive one share of Prime Equities for each share of Prime.

The transactions have been approved by the boards of directors of Stikine, Prime and Corona, but still require a receipt of fairness opinions, approval by the shareholders of each company, and regulatory and court approvals. Shareholders will have a chance to approve the merger at company meetings scheduled for August.