Goldcorp facing legal battles in Dickenson/Kam-Kotia takeover

Goldcorp, a gold fund managed by CSA Management Ltd., borrowed about $100 million from the Canadian Imperial Bank of Commerce to pay for its share acquisitions of Dickenson and Kam- Kotia. Goldcorp President Robert McEwen told shareholders at the recent annual meeting some $90 million of the loan remains to be repaid.

McEwen also said Goldcorp was struggling to find the cash flow to make the interest payments on the outstanding balance, and he suggested the closed-end investment company may have to sell some of its assets.

One of the lawsuits was initiated by Corona Corp. (TSE), which also sought to take over Dickenson and Kam-Kotia. The Corona offer for the two mining companies preceded the Goldcorp offer.

The other lawsuit belongs to Massachusetts investment adviser Reginald Howe, a Goldcorp shareholder who has launched a class action suit in the United States on behalf of holders of Goldcorp’s A shares. Howe argues the takeover changed the fundamental nature and business of Goldcorp and alleges misrepresentation by Goldcorp officers.

Of the lawsuits, McEwen said “both are without foundation.”

Since winning the takeover fight, Goldcorp has moved to make Kam- Kotia a private company and has had it de-listed from the TSE. Kam- Kotia’s main mineral asset is a sodium sulphate operation in Saskatchewan.

Through the takeover, Goldcorp gained a 65% equity interest (and 82% voting interest) in Dickenson. The gold-producer reported total production in 1988 of 70,200 oz from its A.W. White mine near Red Lake, Ont. An output of 82,000 oz is projected from the mine in 1989.

Dickenson also has a 38.9% interest in Wharf Resources (TSE), which operates a heap-leach gold mine in South Dakota. The Wharf mine will turn out an estimated 71,000 oz this year.

Management of Dickenson continues to operate Kam-Kotia.

For 1988, Goldcorp reports net income of $766,932 (4 cents per share) on revenue of $2.75 million, compared with $1.1 million (6 cents per share) on revenue of $3.91 million for the previous year.

Goldcorp’s portfolio is currently invested 33% in gold bullion, 30% in gold equities and debentures, and 37% in the Dickenson group of companies.

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