Terrane set to go with Mount Milligan

The MT. MILLIGAN GOLD-COPPER PROJECT is a go, according to 100% owner Terrane Metals Corp. of Vancouver. A positive feasibility study for the mega porphyry project, 155 km northwest of Prince George in central British Columbia, envisions production beginning in 2012.

The $20-million, 22-month study, prepared by Wardrop Engineering Inc. and released the end of March, concluded a conventional truck-shovel open pit mine and 60,000-tonne (t) per day mill is economically and environmentally feasible. Now Terrane faces the prospect of finding the $917 million of capital needed to get the project into production by early 2012, plus an estimated $70 million to cover capital cost escalation.

Company president and CEO Rob Pease is certainly pleased with the result. Pease, a former Placer Dome executive, directed Terrane’s 2006 purchase of Mt. Milligan when Placer Dome’s assets were split up. Goldcorp owns a 58% equity interest in Terrane, on a fully diluted basis.

A Mt. Milligan mine would produce 88 million lb of copper and 217,000 oz gold annually over a 15.3-year mine life, using LME three-year rolling average metal prices of US$2.75/lb copper, US$600/oz gold, and a US$0.89 exchange rate for the Canadian dollar.

The production cost for copper, net of gold credits, averages out to US$0.64/lb or $7.12/t of ore milled. The project is expected to pay back the capital investment in 3.7 years through a pre-tax internal rate of return of 18.1%.

Mt. Milligan hosts proven and probable reserves of 333.7 million t grading 0.217% Cu and 0.428 g/t Au. The reserves form a near-surface tabular body, well-suited to low unit cost open pit mining. Indeed, the waste:ore strip ratio for the pit is expected to run at only 0.82:1. The mine production schedule foresees seven pushbacks and allows for early extraction of higher-grade reserves–over the first six years the production will average 97 million lb of copper and 265,100 oz gold per year. The copper head grade will be blended to optimize metallurgical performance in the plant.

Terrane’s design philosophy was to develop a simple and conventional single-line processing flowsheet. The plant will process 60,000 t/d using conventional crushing, grinding, and rougher and cleaner flotation circuits to produce a gold-rich copper concentrate. Coarse free gold will be recovered in a separate gravity concentrate and mixed with the final copper concentrate. The expected copper recovery is 84.6% and recovery of gold is 72.3%.The final concentrate will grade 27% copper.

For Terrane to attain its goal of production by 2012, the company will have to negotiate the remaining permitting hurdles just right. Terrane still needs environmental approvals from both the provincial and federal governments. Both are expected to produce interim documents in the next few months, after which Terrane can apply for the final permits. The company also needs to obtain the necessary construction permits, which it expects by mid-2009.

In early April Terrane announced that it was working towards a socio-economic agreement with the McLeod Lake Indian Band regarding the project. “So far, we have found Terrane to be an extremely responsible corporate citizen, sensitive to the concerns and needs of Aboriginal peoples,” said Alec Chingee, chief of the McLeod Lake Indian Band. “The project offers substantial economic benefits for a region hard hit by a failing forest industry. Our prime responsibility is to ensure that sound environmental regulations are in place and followed so the project area is protected for future generations.”

A Mt. Milligan mine would create 400 permanent jobs over a 15-year mine life in a location that is not particularly isolated. It is connected to existing roads and railheads at the nearby communities of Fort St. James and Mackenzie, from which mine employees can commute to the site daily. Concentrate will be trucked to the railhead at Fort St. James, and then sent by rail to the port of Vancouver.

Power supply is not as simple–to connect to B. C. Hydro’s power grid, Terrane will have to build a 92-km, 230-kV transmission line from the Kennedy substation. Permission to develop the power line would be included in an environmental assessment permit.

Gwen Preston is a staff writer with The Northern Miner and can be reached at gpreston@northernminer.com.

This article first appeared in The Northern Miner, April 1-7, 2008.