Lac appeal decision may drag

The market seems to be saying that Lac Minerals is going to win, to some degree, its appeal of an Ontario Supreme Court ruling awarding the Page-Williams gold mine at Hemlo, Ont., to International Corona Resources.

Lac’s stock price gained $3.12 during the second and final week of pleadings in the appeal, the very days when Corona was having its say in the appeal. Lac closed the week at $28.88.

Of course the price increase could reflect other aspects of Lac’s operations. Good drilling results at its 50%-owned Bousquet gold mine in Quebec, in particular, could have significant tonnage implications at that already impressive operation.

And even if the stock price does reflect opinion on the street about the Ontario Court of Appeal’s pending decision, the market has been wrong before. Just nine months ago Lac’s stock climbed to new highs as the original trial came to a close, but the March 7 decision was a clear loss for Lac. When the decision was handed down Lac’s stock immediately tumbled to $17, less than half of what it had reached just days earlier.

The March 7 decision ruled that Lac obtained the 11 patented Williams claims on which the mine is located by misusing confidential information it had gained from Corona and that Lac violated a legally binding trust to Corona.

Corona was ordered to pay Lac $154 million to offset some of the mine and mill’s $204-million cost before the property could be transferred.

The trial judge, Mr Justice R. E. Holland, was also requested by both companies to estimate the dollar value of damages in case a subsequent court should award a cash settlement rather than transfer of the property.

Judge Holland set the value of the property at $700 million but Corona argued that it should be up to double that. The Court of Appeal has asked both sides to submit analyses of what they believe is the value and show how they determine that value.

The trial judge said return of the property to Corona is equitable because it is difficult to determine the true value of the mine — “gold properties of significance are unique and rare.”

The five judges hearing the appeal are not expected to hand down a decision before the New Year and could take much longer (although Judge Holland took much less time than expected to reach his decision, just 15 days). The decision could be unanimous or there could be dissenting opinions from one or two of the judges.

Appeal to the Supreme Court of Canada is possible but not automatic. Either Lac or Corona may ask the highest court in the land to hear an appeal, but the Supreme Court of Canada may choose not to permit the appeal in which case the Ontario Court of Appeal’s decision would stand.

Since the March 7 decision, Lac has continued to operate the mine and mill under a management committee estabished by it and Corona. In the 9-month period ended Sept 30 the mine turned out 165,475 oz of gold. In the 3-month period ended Sept 30 it produced 66,296 oz, a rate that, if maintained, would rank it with Campbell Red Lake Mines’ Campbell mine as Canada’s largest producing gold mine. The Campbell mine produced 168,691 oz of gold in the first nine months of 1986.

Mining costs for the 9-month period at the Page-Williams mine came to $37.3 million or $225(Cdn) per oz. When non-cash items and corporate administration charges are added in, the cost per oz is $325 per oz.