Corona tightens grip on Eskay Creek

Murray Pezim and other insiders of Prime Resources Group (VSE) have accepted a sweetened offer from Corona (TSE) for their combined holding of 5.6 million Prime shares. As a result of the recent agreement, Corona will emerge with a voting interest in Prime of 44% (plus share options and warrants), which will give it a substantially tighter hold on the rich Eskay Creek deposit north of Stewart, B.C.

Corona offered Pezim and two associates one Corona Class A subordinate voting share plus $1 for each Prime share, which was accepted by Pezim and Lawrence Page. Arthur Clemiss, Pezim’s long-time partner, will receive additional Corona shares rather than the cash portion of the purchase price. All three individuals granted Corona a right of first refusal and voting trust on any additional shares they may own or acquire.

As part of the agreement, Pezim, Clemiss and Page will sever all connections with Prime and Corona, including any rights to representation on the boards of these companies.

Pezim and his associates will be bowing out of the Eskay Creek project (and the Snip gold project) but they will emerge with a strengthened role in Prime Equities, currently a wholly owned subsidiary of Prime.

Prime Equities will eventually become a public company holding under its umbrella about 50 junior companies, most of which are involved in exploration programs in northwestern British Columbia.

To get the process started, Prime will transfer to Prime Equities substantially all its existing portfolio of investments in return for 40 million shares of Prime Equities.

For its part, Corona intends to vote in favor of Prime’s plan to declare a dividend of units consisting of one share of Prime Equities for every five shares of Prime (held together with a warrant for one share of Prime Equities).

Prime will then sell to Pezim and his group four million of these units for $4 million. And Corona will deliver to Pezim’s group the shares of Prime Equities that it will receive from the dividend. It is believed that Corona will not have the right of first refusal with respect to senior financing of Prime Equities’ projects.

These complex transactions, still subject to regulatory and other approvals, will eventually bring about more clearly defined and separate roles for Pezim’s group and the Corona organization than has existed in the past.

“Corona has grown to the point where it needs to do what it needs to do, our way,” said Corona President Peter Steen. “Murray Pezim and his group are more promotional and will be free to do things their way.”

Corona’s revised agreement with Prime is important in that Prime is operator of the Eskay Creek project. The remaining shares of Prime, about 55%, are believed to be widely held.

While it appears unlikely Corona will make a formal bid for these shares, Steen did say “options are still open” for the company to increase its interest in Prime to at least over 50%.

Eskay Creek is owned equally by Prime and Stikine Resources (TSE). Corona already holds about 45% of Stikine (plus it has the inside track to an additional 3%) while Placer Dome (TSE) owns a 45.3% interest.

Euro-Nevada Mining (TSE) is reported to have assembled about a 6% interest in Stikine, a position which it elected not to tender to Placer Dome’s recent extended offer. And Prime Equities will hold 90,400 Stikine shares transferred to it (as a result of the aforementioned transactions) “in custody,” with voting rights and other rights granted to Prime.

Steen said Corona is still “looking to increase its position in Stikine,” something Placer Dome has signalled it also intends to do. At this stage, Corona has not initiated any discussions with Placer Dome.

It is almost certain, however, that at some point the two senior gold producers will meet to discuss ongoing development of the Eskay Creek project.

Although Corona has emerged with the stronger position to date, Placer Dome has considerable financial resources that it might offer for project development in return for a greater stake in the project. Conceivably, an operating company could be set up that would allow both majors to play a role in project management.

At this stage, Corona still has not decided if it will go ahead with plans to set up Corona Gold in Vancouver, a concept that was part of its initial discussions with Prime and Stikine before Placer Dome entered the picture.

“We haven’t made any decision in that regard, but it is still a possibility,” said Steen.

Corona is already involved directly and indirectly in a number of mineral projects in British Columbia. Through its holdings in Prime and Stikine, for example, it has an indirect interest in the Ski property held by Adrian Resources (VSE), adjacent to Eskay Creek.

Prime, Stikine and Adrian intend to enter into an amended agreement to their existing arrangement providing for an area of mutual interest in the Eskay Creek area. As it stands now, Prime and Stikine can earn a 50% interest in Adrian’s Ski project.

Several junior companies under the umbrella of Prime Equities will also be affected by the Prime- Stikine “area of mutual interest” agreement. These include the GNC claims, the Tradewinds property, held by Gigi Resources (VSE), all of the holdings of Eurus Resources (VSE), and a joint ventured property held by Tymar Resources (VSE) and Akiko-Lori Resources (VSE).