Canadian Mining Journal

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MERGER: Centerra, Thompson Creek to unite in $1.1B deal



TORONTO and DENVER – Centerra Gold and Thompson Creek Metals Company have struck a friendly deal for Centerra to acquire all of the shares of Thompson Creek in an arrangement worth US$1.1 billion. Thompson Creek shares will be exchanged on the basis of 0.0988 of a Centerra share. The exchange ratio implies a Thompson Creek share price of C$0.79, representing a 32% premium to the July 4 closing price on the TSX.

Thompson Creek owns the Mount Milligan copper-gold mine 145 km northwest of Prince George, BC. Expansion at the mine is planned with the addition of secondary crushing, more flotation capacity, and added regrinding that will raise throughput to 65,000 t/d.

Centerra owns and operates the Kumtor gold mine in Kyrgyzstan and is developing two others in Mongolia and Turkey. Acquiring a mine in Canada broadens the company’s production base in a country with far less geopolitical risk than Kyrgyzstan.

Thompson Creek also owns the Endako and Thompson Creek molybdenum mine located, respectively, in British Columbia and Idaho. Mining at both is suspended. The Thompson Creek mill continues to operate as a concentrate upgrading facility, and the Langeloth mill will be run on a toll basis. These facilities have considerable upside potential should the price of moly rebound.

Centerra is proposing to redeem Thompson Creek’s 9.75% secured notes due in 2017, the 7.375% unsecured notes due in 2018, and the 12.5% unsecured notes due in 2019 using a new US$325 million senior secured revolver and term loan facility provided by Scotiabank, a C$170 million bought deal subscription receipt offering which has been announced today by way of a separate press release and cash on hand at Centerra and Thompson Creek.

When the Thompson Creek transaction closes, Centerra plans to exercise a binding commitment letter with Royal Gold whereby Royal Gold’s 52.25% gold streaming interest at Mount Milligan will be amended to a 35.00% gold stream and 18.75% copper stream. The transfer payment on the gold stream will remain at US$435/oz while the new copper stream will have a transfer payment equal to 15% of the prevailing market price of copper. Based on the midpoint of Thompson Creek’s 2016 production guidance, Mount Milligan’s revenue split to Centerra under the amended stream agreement is expected to be approximately 70% gold, and 30% copper at current spot prices of US$1,351/oz of gold and US$2.21/lb of copper.

Additional information is posted at www.CenterraGold.com.