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Thompson Creek Acquires Terrane Metals
Thompson Creek Metals has completed its previously announced plan to acquire Terrane Metals (E&MJ, July-August 2010, p. 8). The total value of consideration paid to Terrane shareholders was approximately C$700 million—approximately C$420 million in cash and the remainder from issuance of about 24.3 million Thompson Creek shares. Goldcorp, which held 58% of the voting equity of Terrane, received C$240 million in cash and Thompson Creek shares representing about an 8% interest in Thompson Creek.
Terrane’s primary asset was its Mt. Milligan project in British Columbia, which has proven and probable reserves of 2.1 billion lb of copper and 6 million oz of gold. Concurrent with the closing of its Terrane acquisition, Thompson Creek completed a gold stream transaction with Royal Gold, whereby Royal Gold has acquired the right to 25% of the payable gold from the Mt. Milligan project. Total consideration for this transaction was $311.5 million, of which $226.5 million was paid by Royal Gold upon closing of the transaction, while the remaining $85 million will be paid during construction of the Mt. Milligan project. In addition, Royal Gold will pay Thompson Creek the lesser of $400 or the prevailing market gold price for each payable ounce of gold until 550,000 oz have been delivered to Royal Gold and the lesser of $450 or the prevailing market price for each additional ounce thereafter.
The Mt. Milligan project is in the early stages of construction, and Thompson Creek estimates production will begin in 2013. Production from a conventional open-pit mine and 60,000-mt/d concentrator is expected to average 81 million lb/y of copper and 194,000 oz/y of gold in concentrates over a 22-year mine life. Thompson Creek intends to fund the remaining Mt. Milligan construction costs from cash balances, the $311.5 million of proceeds from the gold stream transaction with Royal Gold, up to $450 million of debt finance in the form of equipment financing and a potential bank credit facility, internal cash generation, and potential warrant proceeds.
The project has received an Environmental Assessment Certificate and a Mines Act Permit from the province and the Environmental Assessment approval from the government of Canada. Terrane has also secured long lead-time equipment and has an engineering, procurement, and construction management contract with an AMEC-Fluor joint venture.