Thompson Creek Metals Co. Inc. is diversifying beyond its traditional base of molybdenum with a $650-million deal to acquire a junior miner with copper and gold assets.
Thompson Cree, which has executive offices in Denver and trades on the TSX, said Thursday it will acquire Terrane Metals Corp. in a cash and share deal that values Terrane at $1.41 per share. That's a 35 per cent premium.
Terrane's key asset is the Mount Milligan copper-gold project in central British Columbia, near Thompson Creek's Endako mine. The project is expected to produce an average of 81 million pounds of copper and 194,000 ounces of gold annually for its 22-year life.
"The acquisition of Terrane fits well in our strategic growth plan, providing us with clear production and revenue growth while diversifying our commodity exposure, all in a project with mining and milling processes and a regulatory environment with which we have considerable experience," stated Kevin Loughrey, chairman and CEO of Thompson Creek.
"The upside from our existing asset base has been retained for our shareholders while structuring a transaction that we believe will be highly accretive on a cash flow basis once Mount Milligan is in production," he added.
Thompson Creek also announced that it has reached an agreement with Royal Gold Inc. to sell the company a quarter of the gold produced at Mount Milligan for the life of the mine, which is expected to begin producing in 2013.
Goldcorp Inc. , which controls 58 per cent of Terrane's outstanding shares, has already agreed to vote in favour of the transaction. Goldcorp said it will receive $240.5-million in cash and 13.9 million Thompson Creek shares - about eight per cent of the company - once the transaction is complete.
For the deal to be completed, it requires the approval of two-thirds of Terrane's shareholders.
Rob Pease, president and CEO of Terrane, said Thompson Creek will provide the financing needed to complete construction of Mount Milligan.
"Their financial depth, combined with the Royal Gold transaction, provides a clear path to complete funding of Mount Milligan. Combined with their proven development and operating capabilities, this transaction has the opportunity to unlock the value of Mount Milligan for all shareholders," Mr. Pease said.
Besides Mount Milligan, Terrane also owns a number of other early-stage mineral projects, including the Berg copper-molybdenum-silver deposit in B.C., an interest in the Howard's Pass joint-venture in the Yukon and an interest in the Maze Lake gold project in Nunavut.
Thompson Creek's producing assets include the Thompson Creek molybdenum mine in Idaho, 75 per cent of Endako in northern B.C. and a metallurgical plant in Pennsylvania.
Thompson Creek, with 700 employees, was formerly known as Blue Pearl Mining Ltd. and is one of the world's largest publicly traded producers of molybdenum, a specialty metal widely used in alloys of steel, iron and other metals.
Shares in both companies were halted pending the announcement. When trading resumed, Thompson Creek stock lost 25 cents or 2.5 per cent to $9.65, while shares in Terrane jumped 20 cents or 17 per cent to $1.37.