Calpine shareholders group appeals to regulators

Speaking for the Calpine minority shareholders, George Oughtred called upon British Columbia regulatory authorities to require Murray Pezim’s Prime Resources to provide Calpine shareholders with an independent valuation of the assets of both companies.

Shareholders of Prime and Calpine will be meeting in mid-December to consider a merger of the associated companies under the name Prime Resources Group. Calpine’s key asset is a 50% interest in the promising Eskay Creek gold-base metals project, 50 miles north of Stewart, B.C.

Corona Corp. is a substantial shareholder of Prime, which in turn is the largest and controlling shareholder of Calpine.

Oughtred, a former president of Calpine, said the circular is “entirely insufficient and represents a mockery of shareholder rights.” At issue, he said, is the value of Calpine’s 50% interest in Eskay Creek. The remaining 50% is held by Stikine Resources (VSE).

“The circular provides no information concerning the value of Eskay Creek,” he stated, adding this is despite the fact that Stikine Resources is soliciting offers for the sale of its interest. According to Oughtred, himself a director of Stikine, prospective buyers of Stikine are being provided with estimates of reserves “based on at least five million ounces of gold equivalent.”

Oughtred said Pezim’s office advised the group in late November that there are insufficient drill data to determine the size and grade of the reserves. Instead, he said shareholders were referred to the fairness opinion, prepared by Goepel Shields & Partners, as the best guide to the value of Eskay Creek.

“If that document is intended by Prime to comfort Calpine shareholders,” stated Oughtred, “the effect is the opposite.” He added that his group will be requesting an independent engineering valuation of Eskay Creek.

Murray Pezim was out of town, and John Ivany, a director of Prime and Cal pine, did not return calls from The Northern Miner.

Opinion appears to be divided among local mining analysts as to whether it is too early to make meaningful tonnage and grade calculations for the project. In any case, several have already published geological reserve estimates that are comparable to Stikine’s.

Officials of Vancouver-based Goepel Shields & Partners insisted they had “every confidence” in the quality and integrity of the fairness opinion. They confirmed that Jonathan Goodman, the son of Corona chairman Ned Goodman, did work on some of the study’s technical aspects. The financial aspects of the evaluation were prepared by the firm’s senior management in Vancouver.

Under the proposal, Prime stock would be consolidated on the basis of one consolidated share for 2.25 shares outstanding. Calpine shareholders would then receive one consolidated Prime share plus half of a warrant for each Calpine share exchanged.

The controversial merger aside, Prime Resources is facing criticism and regulatory investigation over its failure to report on a timely basis the withdrawal of $4.25 million in its September financing. The unsold units were later taken down by Canarim Investment.

More recently, attention has been focused on insider trading reports that revealed several insiders in the Prime group reaped substantial profits from selling at the height of the buying frenzy last August.

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