Corona subject of speculation as takeover rumors continue

The proposed merger between gold mining giants American Barrick and Newmont Mining has some industry analysts predicting further rationalization of the North American gold mining industry.

Peter Miller, a London-based analyst for Yorkton Securities, wrote in his June 10 research report that the proposed creation of a world leader in gold mining may be the start of another round of “merger mania.” He also predicted that some top and middle tier gold companies are not likely to survive the impending industry rationalization.

“In times of buoyant gold prices, a host of small companies come into existence as entrepreneurs seek to take advantage of the new found boom,” Miller explained. “However, as prices weaken and industries mature, these companies tend to either coalesce or die, largely due to the restrictive pressure of the availability of capital.”

International Corona (TSE) was cited as a likely takeover candidate in the research report, noting that the company is “reputedly up for sale — market thinks the obvious candidate is Placer Dome (TSE).”

The company isn’t formally on the block, but rumors have been circulating in recent weeks that some of Corona’s insiders might be looking to divest themselves of their equity position (and associated voting rights) if the price was right.

It’s also known in Vancouver that Corona has been attracting the attention of several well-heeled mining groups. The company may be still carrying a heavy debt load, but it also has some attractive assets including 50% interests in two rich gold mines at Hemlo, Ont., and a controlling interest in the Eskay Creek project north of Stewart, B.C.

Placer Dome has been cited frequently as a logical suitor for Corona because it already has an indirect interest in the rich Eskay Creek gold deposit. But the two companies haven’t been on the best of terms since they failed to work out a joint venture agreement for development of a proposed mine.

Corona is faced with the task of raising several hundred million dollars to develop Eskay Creek, and it is reported to have had discussions in this regard with parties other than Placer Dome.

Teck (TSE) has been mentioned as a possible interested party as it is already Corona’s partner at the two Hemlo gold mines. And it’s no secret Teck is looking for new opportunities: the company just announced it is expecting to receive proceeds of $93 million from a recently arranged financing to fund undisclosed “business activities.”

As for Corona, it recently announced details of a proposed reorganization aimed at separating its gold and non-gold assets into two separate public companies later this year.

Corona would retain the gold assets, while the non-gold assets would be transferred into a separate new company that would in turn hold an approximate 25-30% interest in Corona.