Placer wins round in Eskay battle

Future ownership of the Eskay Creek gold play has become even more of a question mark, following Placer Dome’s (TSE) acquisition of a 45% stake in Stikine Resources (TSE). Under its offer of $67.50 (or alternatively 3.5 Placer shares) for each of Stikine’s 3.3 million shares, Placer has acquired 1.25 million shares of Stikine. Together with shares recently purchased on the open market, Placer now owns 45% of Stikine which, in turn, has a 50% interest in the Eskay Creek property.

In order “to acquire as many Stikine shares as possible,” Placer has extended the offer’s expiry from June 19 to July 4, said Hugh Leggatt, spokesman for Placer Dome. Placer President Tony Petrina was unavailable for comment.

Adding to the uncertainty over Eskay’s fate is Murray Pezim, chairman of Prime Resources (VSE). Pezim said Corona’s proposed purchase of a 25% stake in Prime failed to close as scheduled. He added that he is looking for a better deal for his shareholders than the straight share swap that Corona is offering. Corona already has a 20% interest in Prime, which owns the other half of the Eskay Creek property.

The new developments at Prime and Stikine could ruin Corona’s reorganization plans, which call for the merger of Prime and Stikine with a new company, Corona Gold. Corona Gold had planned to own 100% of Eskay Creek, Corona Chairman Ned Goodman said when the deal was announced at the beginning of the month. If the merger didn’t go through, he said, Corona Corp. would still end up with at least 45% of the Eskay claims.

Corona said even if Placer uses its interest in Stikine to block the merger, Stikine will be bound by its original agreement with Corona. Under the agreement, principal Stikine shareholders, including promotor John Toffman and geologist Ron Netolitzky, will sell their Stikine shares (representing 42% of the 3.3 million shares outstanding) to Corona in return for 4.5 shares of Corona Gold and 6.5 Class A shares of Corona.

If Prime and Stikine fail to uphold their end of the lockup agreements to give Corona a 45% stake in Eskay, the “lawyers are going to be busy,” said Richard Cohen, analyst for BBN James Capel. And if a lawsuit ensues, Corona will probably come out on top said Corona President Peter Steen during an interview with The Northern Miner. He said that if Corona could win the Hemlo lawsuit over a mere “handshake in the bush,” the signed agreements with Prime and Stikine would certainly hold up in a courtroom.

During the interview, which took place the day before Placer announced its new stake in Stikine, Steen implied that a partnership with Placer was not out of the question. If Placer continued to accumulate shares, he said, “at some stage we would have to talk to each other.”

Now that Placer owns 45% of Stikine, it has the leverage to negotiate with Corona over ownership of Eskay Creek. Leggatt, Placer’s spokesman, said although Placer had not initiated any discussions on the matter, a deal with Corona is a possibility.

Cohen agrees that, rather than continue the bidding war, Corona and Placer will try to work out some kind of deal. Alternatively, he said, Placer may go after the outstanding shares of Prime in attempt to gain more control over Eskay Creek. Leggatt declined to comment on this possibility.