Mt. Milligan near construction-ready for Terrane

Vancouver – December brought Terrane Metals‘ (TRX-V, TRXOF-O) mine-building plans to the cusp of reality with the Canadian federal governments approval of the environmental assessment of Mt. Milligan’s copper-gold project.

Though Terrane still faces uncertainty from Goldcorp (G-T, GG-N), which has until early January, 2010, to say whether it is going to exercise its option to convert a 60% Terrane equity stake into a joint-venture interest, getting the federal approval pushes aside any lingering doubts environmental concerns might stymie development of Mt. Milligan.

As Terrane received provincial environmental approval from the B.C. government in early 2009, the path to construction is more or less obstruction free. By and large all that Terrane requires to have in place to go ahead at Mt. Milligan, 150 km northwest of Prince George, B.C., are final construction permits which were contingent on the environmental assessment process. Terrane says it expects to have those in hand sometime during the first quarter of 2010.

Terrane also says it is looking to start construction in the second quarter of 2010, with production beginning in 2012.

While how and when Mt. Milligan is developed clearly depends in part on Goldcorp’s intentions, once Mt. Milligan is up and running Terrane forecasts a mine that will annually produce over 250,000 oz. gold and just shy of 90 million lbs. of copper during the first six years of its 22-year mine life.

An updated feasibility study of Mt. Milligan announced in late 2009 sees the mine generating a 17.4% internal rate of return and a $1 billion net present value at a copper price of US$2 per lb. and a gold price of US$800 per oz.

Payback, as predicted in the feasibility study, would come after only four years, with gold cash costs net of copper production at US$51 per oz.

With those kinds of numbers on his side, Terrane president and CEO Robert Pease says with some confidence in a prepared statement: “We look forward to having the opportunity to build B.C.’s next major metal mine.”

The one major question that still remains is: How will construction of the mine, with a price tag of $915 million, be financed? Presumably, with Goldcorp’s deadline pending, that question may soon be answered.

Terrane’s updated feasibility study pegs Mt. Milligan’s proven and probable reserves at 482 million tonnes grading 0.2% copper and 0.39 gram gold per tonne.

Since the beginning of September, 2009, Terrane’s shareprice has skyrocketed from the 25¢-range to the $1.50 range, where it has been hovering for the past month and a half. Terrane has about 114 million shares outstanding.