Goldcorp agrees to loan for Mt. Milligan project

Majority shareholder Goldcorp (G-T, GG-N) has agreed to guarantee Terrane Metals (TRX-V) a credit facility of up to C$40 million to meet capital equipment procurement for its 100%-owned Mt. Milligan copper-gold project in central British Columbia.

News of the loan sent Terrane’s stock up 23.7% or 11.5 cents a share to close at 60 cents on a trading volume of 1.2 million.

The non-revolving credit facility will have an 18-month term and will enable Terrane to purchase the equipment it needs to build a 60,000 tonne per day open-pit mine and process plant at Mt. Milligan.

The agreement gives Goldcorp the option to convert its fully diluted in-the-money equity interest in Terrane into a participating joint-venture interest during the 18-month term and then, only if Goldcorp’s interest in the joint venture is less than 60% but greater than 30%.

According to a feasibility study released at the end of March, Mt. Milligan is forecast to have an average annual production of 265,100 oz. gold and 97 million lbs copper for the first six years of its estimated 15.3 year mine life.

In early May, Terrane’s board approved the feasibility study report and authorized management to proceed with securing long lead-time process plant equipment.

According to the feasibility study, the deposit hosts a measured and indicated mineral resource of 590.8 million tonnes averaging 0.193% copper and 0.352 gram gold per tonne, containing 2.52 billion lbs copper and 6.70 million oz. gold.

The project’s proven and probable mineral reserve totals 333.7 million tonnes averaging 0.217% copper and 0.428 gram gold per tonne, containing 1.60 billion lbs copper and 4.59 million oz. gold.

The project will consist of a conventional truck-shovel open pit mine and a 60,000 tonne-per-day copper flotation process plant. Mt. Milligan is close to existing infrastructure and low-cost power and would be built at a capital cost of C$917 million.

Commercial production is scheduled for the first quarter of 2012.