Prime to go public via Delaware/Colossus merger

The first step of a 3-stage process to consolidate the assets of related companies, Prime Capital, Delaware Resources (VSE) and Colossus Resource Equities (VSE) into a single entity was recently completed here, paving the way for the public debut of an enhanced Prime Capital early next year.

After all the steps are completed, the surviving entity — which is likely to retain the Prime Capital name in some form — will be held 55% by shareholders, 30% by Murray Pezim and long-time associate Arthur Clemiss, and about 15% by Corona Corp. (TSE). Pezim, a Vancouver mine financier, and John Ivany, a lawyer and former president of Hemlo Gold Mines, are expected to remain at the helm of the resultant company, which both have publicly say will be involved exclusively in the resource sector.

The first stage of the consolidation process saw Prime Capital become a wholly-owned subsidiary of Delaware, a junior company best known for its 40% interest in the advanced Snip gold deposit being developed by Cominco Ltd. in northwestern British Columbia. That transaction was completed in early December, giving shareholders of Delaware exposure to Prime’s diversified portfolio of investments in 54 resource companies. (Delaware issued about 22 million shares to acquire all the issued and outstanding shares of Prime Capital.)

Prime Capital can also count among its assets a 3.8% interest in Delaware, a 58% interest in Colossus, 2.2% of the Class A shares of Corona and 14.7% of its Class B shares along with 827,000 Corona 1990 warrants. In turn, Colossus has about 43.6% of the issued shares of Delaware, 0.32% and 2.2% of the Class A and Class B shares respectively of Corona, and about 70,000 Corona 1990 warrants.

To simplify all this, shareholders of Delaware and Colossus will be asked at meetings planned for mid- January, 1989 to approve a transaction that would in effect merge the companies into one surviving entity with about 57,484,393 shares issued and outstanding. Because approximately 32% of the shares will be held by several remaining subsidiaries, the final stage calls for those shares to be cancelled after the transaction is completed, and the subsidiaries wound down. Prime’s evaluation of the pro forma assets of the surviving company (as of Aug 31, 1988) totalled about $165 million.

Reaction to the plan by the local investment community appears favorable.

“The philosophy behind what they are doing is positive because Delaware’s 40% interest in the Snip project is very likely to generate cash flow to allow for financing of other successful companies in this group,” said Tony Garson, a senior analyst with Vancouver’s Continental Securities. He added that the rationalization of operations and simplification of the corporate structure are also seen as beneficial moves.

“Another positive aspect is the teamwork and complementary working relationship that has developed between Murray Pezim and John Ivany and between their two separate functions,” he said.

Investors are also expected to be attracted by Prime’s corporate structure which allows maximum exposure with minimum risk to the numerous exploration and development opportunities found by, or presented to Pezim’s organization. Ivany said that as these projects advance, “and the risk is reduced”, Prime would likely increase its position in the companies involved in order to consolidate the successes and build the company.

About 18 of the 54 Prime Capital- managed companies, including Calpine Resources (VSE) which recently made an impressive gold discovery, hold significant ground in the Iskut River gold camp of British Columbia. These companies collectively will spend about $15.0 million on exploration in the area in the 1989 season — about half the total amount to be spent next year under the direction of Prime Capital’s exploration arm, Prime Explorations. Prime Capital companies are also active in many other key exploration areas in Canada and in the southwestern United States, particularly Nevada.

Ivany said Prime would also continue its “close working relationship” with Corona, and added that Corona may eventually increase its position back to the original 30% stake it held in the private stage. Ivany also said a Toronto Stock Exchange listing is planned for next year, which may be followed by a financing to raise about $40 million.