It was Dangerous Dan McGrew all over again. But instead of a gang of Robert Service characters in the Yukon it was a courtroom brawl in Toronto. One of the richest gold mines in Canada was won not in a poker game but in a lawsuit. An Ontario judge ordered that LAC Minerals -- Canada's second largest gold producer -- give its Hemlo property in northern Ontario to International Corona. It is estimated that the mine will produce at least 260,000 ounces of gold for the next 30 years.
LAC had already sunk a shaft and had been mining ore since December. It has stopped building a mill on the site, but it is still mining ore while it appeals the ruling.
The court ruled that geologists from LAC and Corona shared information on claims -- including drill results and future value of the mine -- in 1981 while the property was still being explored.
Corona claimed -- and the judge agreed -- that the two companies intended to develop the property jointly. The judge said LAC had breached its agreement with Corona and went ahead and bought the claim to develop on its own.
In mining country, prospectors are expected to keep their word. That was true during the Yukon gold rush, and it is still true today.
Corona gets the mine but it has to pay LAC $154 million (Canadian) for the work already done on the shaft and the mill. Net gain: about $700 million.
The big loser is Peter Allen, whose family runs LAC and are its largest shareholders. The big winner:Murray the Pez and other shareholders in Corona.
Murray Pezim, is a flamboyant Vancouver mining promoter who founded Corona. He's had a few reversals lately, and his friends say he can use the cash. He doesn't own as much of Corona as he did, but owning any on Friday, March 7, the day of the ruling, was enough.
On Monday morning after the ruling, International Corona skyrocked to $24.25. But just half an hour before the court ruling, it closed at $13.67.
LAC Minerals, one of the hottest Canadian mining stocks until the judgment came down, was trading at $22, down from $41.62 on Friday. LAC shares dropped $18 in the first 5 minutes of trading the next trading day.
Other losers include a number of American institutions that had purchased LAC Minerals as they got out of South African Mines.
``Not many of them took this lawsuit seriously, so they got burnt,'' said Derek Russell, a broker with Dominion Securities in Toronto.
The lawsuit now goes to the Ontario Court of Appeals and will eventually end up in the Supreme Court of Canada. It could take several years to resolve.