TSE blocks Corona/Golden North property transaction

The Toronto Stock Exchange blocked an interim agreement between Golden North Resource Corp. (TSE) and Corona Corp. (TSE) which would have seen Golden North acquire, along with certain other assets, Corona’s interests in the Bralorne and Cariboo- Bell properties in British Columbia.

The transaction was to have increased Corona’s current 23% interest in Golden North to 45% and given Golden North a 57.54% interest in the Bralorne gold property and a 38.4% interest in the Cariboo-Bell copper-gold project.

While the agreement specified an acquisition price of $11.6 million based on $279,000 in cash and 1,964,000 Golden North shares, the TSE concluded that the maximum value which could be attributed to the interests was $9 million. As Corona did not renegotiate or amend the agreement to reduce the consideration to the amount specified by the TSE, the agreement was automatically terminated.

John Godfrey, chairman of Golden North, said the TSE evaluation came as a “complete surprise” to both companies.

“This agreement had been approved by both boards and by our own shareholders earlier this year and has since been viewed almost as a fait accompli,” he said. “We felt the numbers arrived at were fair, and because this is a non-arms- length situation they were substantiated by several independent engineering reports.”

Godfrey said the company did have some recent discussions with the TSE and its consultant on the matter. “But they are not prepared to budge, which makes us question the right they have to get into the board rooms and into what we consider to be a fair deal for both parties.”

The TSE’s executive director of listings, Ralph Shay, told The Northern Miner that in the 1950s the TSE established the practice of having a consulting geologist routinely review large property transactions in the interest of ordinary shareholders, particularly when the transactions are non-arms-length and/or involve companies subject to special reporting requirements, as was the case with Golden North.

“We are concerned about public confidence in our market and we review these transactions with greater scrutiny because of a possible conflict of interest,” he said. “But just because our consulting geologist has a concern doesn’t mean the TSE is going to turn it down. Normally we go back to the company and see if it can in some way address the concerns of our consulting geologist, which I assume was not done in this case.”

Although Godfrey wouldn’t say if Corona took exception to the evaluation by the TSE’s consulting geologist as a matter of principle (as was speculated), he did admit he was surprised by Corona’s decision not to re-work the agreement to comply with the TSE’s evaluation. “This agreement is dead, but that doesn’t mean there won’t ever be a new one negotiated.”

There was also some hint of a possible breakthrough by a spokesman from Corona who said the company is now “re-evaluating” the entire situation.

Meanwhile, Golden North is well under way with a 25,000-ft diamond drill program on its 100%-owned Nickel Plate gold properties near Hedley, B.C., a large landholding said to be of considerable interest to Corona which operates its producing Nickel Plate mine in the immediate area.

Drilling is focusing on the Canty gold skarn deposit which has drill- indicated open pit reserves of 656,800 tons grading 0.154 oz gold per ton, and which is located 1 km east of Corona’s mine.

According to Godfrey, the 1988 exploration and development budget for the Nickel Plate properties is $2.4 million. But he said plans are being made to increase this budget “in order to expand and accelerate programs through to February, 1989 to expedite a possible production decision on the Canty orebody.