Corona narrows focus with flurry of selloffs

VANCOUVER The share price of Corona (TSE) has strengthened modestly in recent weeks as the company continues efforts to divest itself of non-core assets in order to reduce debt and move ahead with its core gold mining business through development of the Eskay Creek project north of Stewart, B.C.

Rumors that the company may be close to working out a deal with Placer Dome (TSE) to determine who will operate the high-grade gold project also helped, although neither company has any new developments to report. Both Corona and Placer Dome hold substantial interests in Eskay Creek, but Corona holds the larger position and is operator through its equity holding in Prime Resources Group (VSE).

As one of the key components of its debt reduction plan, Corona is continuing to pursue the sale of its oil and gas affiliate Calgay-based Poco Petroleums. To make the sale of the controlling block of Poco “even more attractive” to a potential purchaser, Poco recently aquired a 32% interest in Voyageur Energy from CanCapital Corp.

Poco is now involved in discussions aimed at merging the two oil and gas companies, which Poco President Don Barkwell said would result in “enhanced value” for shareholders of both companies.

The merger and sale of the resulting company may take some time to complete in view of uncertainties created by the Gulf war, but in the meantime Corona has already sold off interests in sevarel mineral ventures.

Brian Hay, a spokesman for Corona, said the decision to sell the assets was made in view of the company’s commitment to Eskay Creek, and/or as part of its normal annual review of projects.

“We felt our shareholders would be better served if we focused out attention on the known, high-value, low-cost Eskay Creek development over the next few years, rather than to pursue projects that are either less well known, or higher-cost potentially, or further out in time before we would see a return on investment,” he said.

Early this year, for example, two Corona subsidiaries sold 1.32 million shares of Wharf Resources (TSE) for proceeds estimated at about $7 million. Corona bought the Wharf shares in 1989 as part of a takeover bid for former Wharf affiliate Kam-Kotia Mines and for Wharf’s largest shareholder, Dickenson Mines (TSE). That takeover was eventually won by Goldcorp Investments.

In late 1990, Corona backed out of a direct 51% interest in a gold-platinum exploration project in Greenland by swapping the interest for two million shares of Platinova Resources (TSE), its joint venture partner at the time. Along with the Platinova shares, Corona holds the right to participate at the post-feasibility stage of the Skaergaard project.

A modest gain of $550,000 payable over four years will be realized by Corona now that it has agreed to sell its 70% interest in the Leckie gold project near Temagami, Ont., to Stroud Resources (TSE). Corona will retain a 0.5% net smelter return royalty on any production from this property which has preliminary reserves estimated at 330,000 tons grading 0.22 oz. gold per ton.

In British Columbia, Corona recently sold its 38.41% interest in the Mount Polley copper-gold project to Imperial Metals (TSE) and sevarel of its affiliates. The transaction will give the Imperial group 100% control of the advanced project in exchange for cash and Imperial shares worth an estimated $6 million. (The Imperial group can elect to pay Corona either in cash, or in a mix of cash and shares.)

And Prime Resources Group (held 46% by Corona) recently closed the sale of a 1% net smelter return royalty to Euro-Nevada Mining (TSE) for $9.5 million. Prime owns 50% of Eskay Creek, with the remainder held by Stikine Resources (VSE).

But Corona’s investment in Breakwater Resources (TSE) is not proving to be as fortuitous, at least in the view of most mining analysts. Late last year Breakwater suspended operations at its Caribou zinc-lead-silver mine in New Brunswick just months after it took on a substantial debt load to aquire the project.

Like a number of other major companies, Corona recently cut its exploration budget to an estimated $7 million, a sizable drop from the high of $20 million spent in prior years. But the company still has plenty of exposure to exploration, particularily in northwestern British Columbia through Prime Resources Group. Prime has interests in numerous properties near Eskay Creek and elsewhere, and is also a sizable shareholder of Murray Pezim’s Prime Equities (VSE).

Corona’s key asset is still its 50% interest in two gold mines at Hemlo, Ont. The David Bell and Williams mines produced a total of 912,000 oz. gold in 1990, a 13% increase over 1989 production of 806,000 oz.