Terrane needs $100M for Mt. Milligan

VANCOUVER — Terrane Metals (TRX-V) is raising $100 million to kick-start construction at its Mt. Milligan gold-copper project in British Columbia.

The company expects to bring in $70 million by selling 63.6 million units in a bought-deal financing. Units will be sold for $1.10 each through a syndicate of underwriters and will consist of one share and half of a warrant.

A full warrant is exercisable into a share for $1.50 within 12 months.

The other $30 million will come from Goldcorp (G-T, GG-N), which will buy a further 27.3 million units. Goldcorp already owns 240 million convertible preferred Terrane shares, which are non-voting, non-redeemable and non-retractable, but when converted will give Goldcorp a 60% stake in Terrane, on a fully diluted basis. Terrane currently has 129 million shares outstanding.

In the new deal, Terrane has granted an overallotment option of 9.5 million shares, which if sold will add $10.5 million to the overall financing.

The company will put the money towards the $172 million it plans to spend on construction this year at Mt. Milligan. Total capital costs for the project have been pegged at $915 million.

The Mt. Milligan project, located 155 km northwest of Prince George, is the most-advanced mining project in B.C. Terrane has secured native backing and environmental permits, which means the biggest challenge now is raising capital.

The company had a setback in January when Goldcorp decided not to convert its equity interest in Terrane into a participating stake in Mt. Milligan by the conversion deadline. Instead, Goldcorp extended until early May the term of the $40-million credit it opened for Terrane in mid-2008. Along with the latest financing, Terrane announced it has agreed with Goldcorp to work towards further extending the credit line another year.

The financing announcement comes soon after Terrane confirmed continued support from the McLeod Lake Indian Band (MLIB) for the project, which has treaty rights in the area.

Terrane quoted Chief Derek Orr of the MLIB as saying, “Terrane has provided the business community with a model for the conduct of business and good relations with aboriginal people, and we look forward to a long and prosperous relationship with them. We offer our full support to Terrane, and recommend the project to potential development partners and investors.”

The company secured federal environmental approval for the project in December and provincial approval last March.

Terrane has planned Mt. Milligan as a conventional, truck-shovel, open-pit mine with a 60,000-tonne-per- day copper flotation process plant.

The project has 482.4 million proven and probable tonnes grading 0.2% copper and 0.38 gram gold per tonne and a further 707 million measured and indicated tonnes grading 0.182% copper and 0.33 gram gold. The total gold reserve is now 6 million oz., making it the second largest gold reserve in Canada; the copper reserve is 2.1 billion lbs.

The company forecasts a mine life of 22 years, pumping out 81 million lbs. of copper and 194,500 oz. gold per year.

Terrane expects production to start in the first quarter of 2013.

Terrane’s share price closed at $1.22 on the day the financing news was released. The company has a 52-week trading range of 19¢- $1.80 and 128 million shares outstanding.