Construction To Start On Mt. Milligan

VANCOUVER — Terrane Metals (TRX-V) is set to bring a major new copper-gold mine to British Columbia.

With support from major shareholder Goldcorp (G-T, GG-N), Terrane is going ahead with the construction of a large, open-pit mine at Mt. Milligan, a sizeable copper-gold deposit 150 km northwest of Prince George.

News of the construction decision came the day after Goldcorp’s deadline passed to convert its 60% fully diluted stake in Terrane into a participating interest in the Mt. Milligan project.

Instead of taking an interest in the project, Goldcorp extended the $40-million credit facility it opened for Terrane in 2008 until early May. The extension should give the junior enough time to source the funds it needs to meet its $172-million construction budget for 2010.

In December, Terrane’s mine-building plans took a major step forward when the federal government approved the Mt. Milligan environmental assessment. Provincial authorities had already given the project a green light in March.

Plans call for an open pit mine and flotation facility churning through 60,000 tonnes of ore daily. In the mine’s first six years of operation it will produce over 250,000 oz. gold and just shy of 90 million lbs. of copper annually. Over its 22- year mine life annual production will average 194,500 oz. gold and 81 million lbs. copper.

Mt. Milligan’s proven and probable reserve base totals 482 million tonnes averaging 0.2% copper and 0.39 gram gold per tonne. The deposit is near surface, enabling a strip ratio of just 0.84 to 1.

The mine should generate a 17.4% pretax internal rate of return and it carries a net present value of just over $1 billion, using a 5% discount. Payback would come after only four years, with the cash cost to produce an ounce of gold averaging just US$51, net of copper credits. The feasibility study assumed a copper price of US$2 per lb. and a gold price of US$800 per oz.

Terrane’s big challenge now is to come up with $915 million, the expected cost to develop Mt. Milligan. In previous discussions, Terrane’s president and CEO, Robert Pease, has indicated the company would consider all options, including taking on a partner.

In September, Terrane’s share price started an upward climb, rising to the $1.50 range from just 25¢. In the ensuing lead-up to Goldcorp’s decision, Terrane shares settled slightly and on news Goldcorp would not be stepping in as a partner at Mt. Milligan, Terrane lost 8¢ to close at $1.09.

The junior has 113 million shares outstanding.