Goldcorp finds buyer for Placer properties

Vancouver — A newly inked deal with Goldcorp (G-T, GG-N) sets the stage for Atlas Cromwell (ACR.H-V, ACRWF-O) to revive the Mount Milligan copper-gold deposit in central British Columbia, one of the largest undeveloped copper-gold deposits in North America.

The junior company agreed to buy Mount Milligan and interests in four other projects previously held by Placer Dome from Goldcorp in exchange for preferred shares valued at $120 million.

Goldcorp is in the process of acquiring the properties from Barrick Gold (ABX-T, ABX-N), which took control of Placer Dome through a successful US$10.4-billion takeover bid announced late last year. As part of that deal, Goldcorp agreed to pay US$1.5 billion in cash for Placer Dome’s Canadian assets, including the Campbell gold mine, adjacent to its Red Lake gold mine in the Red Lake camp of Ontario.

Along with Mount Milligan, Atlas will acquire 51% of the Berg copper-molybdenum-silver deposit near Houston, B.C., and an option to earn at least 51% of three gold properties in the province’s Toodoggone district from Stealth Minerals (SML-V, SMLZF-O). The other assets are the Maze Lake gold project in Nunavut, and a residual interest in Howard’s Pass, a large zinc-lead-silver project controlled by Pacifica Resources (PAX-V, PCFRF-O) in the Yukon. Atlas will also have a “right of first offer” on three gold properties in Ontario and Quebec, should Goldcorp decide to sell, option or joint venture them.

Atlas plans to change its name to Terrane Metals once the proposed transaction is completed. Robert Pease, Placer Dome’s former head of Canadian exploration and global major projects, will take the helm as president. Jeffrey Franzen, Edward Farrauto, Douglas Leishman and John Reynolds, a former member of Parliament and member of legislative assembly for British Columbia, have also agreed to join the board.

The cornerstone asset will be the Mount Milligan copper-gold deposit, which Placer Dome acquired in 1990 for $266 million from two previous owners. The company wrote-down its entire investment two years later when studies showed that the low-grade project would provide an “an insufficient return” to justify the $500 to $600-million capital investment required to develop the property. It didn’t help that copper prices were below US$1.50 per lb., while gold sold for about US$340 per oz.

Fresh start

In light of dramatically improved metal prices, Placer Dome commissioned an updated prefeasibility study last year that was nearing completion before Barrick announced its takeover bid. Much of the work focused on optimizing the processing flow sheet in light of recent metallurgical advances. Pease says the results were encouraging enough for the major to rebuff a series of offers from third parties hoping to acquire and revive Mount Milligan.

“Placer hadn’t done much work for a number of years, but decided to give the project a fresh look after a number of groups expressed interest in the property,” Pease adds. “There’s still more work to be done, but we’re optimistic that we have an economic project at Mount Milligan, along with a nice mix of properties for a company coming out of the block.”

Mount Milligan hosts a measured and indicated resource totalling 205.9 million tonnes grading 0.6 gram gold per tonne and 0.247% copper, containing 3.7 million oz. gold and 1.12 billion lbs. copper. The resource estimate is based on 194,467 metres of drilling in 911 holes.

While the project was fully permitted in the mid-1990s, Pease expects a new project description would have to be filed in light of changes to mining legislation.

“Even so, we believe most of the (environmental) baseline data is still valid, along with much engineering and prefeasibility data,” Pease says.

Market reaction to the proposed transaction pushed shares of Atlas to $1.55 in active trading. The agreement between Atlas and Goldcorp is still subject to various conditions, including regulatory approvals and third-party consents, and the completion of a proposed non-brokered financing of 13.5 million units priced at 38 per unit, for gross proceeds of $5.13 million.

Goldcorp will have the right to convert the preferred shares into 240 million shares of Atlas at a price of 50 per share at any time. Assuming 100% conversion of the preferred shares, Goldcorp would hold an 82% equity interest in Atlas on an issued and outstanding basis, and a 76% equity interest on a fully diluted basis.