Centerra Gold Acquiring Thompson Creek Metals

Centerra Gold and Thompson Creek Metals announced in early July an agreement whereby Centerra will acquire all of the common shares of Thompson Creek in exchange for Centerra shares and assumption of Thompson Creek’s debt, totaling more than $800 million. Total value of the transaction is about $1.1 billion.

Mount Milligan is a low-cost producer with more than two decades of profitable production expected from the current reserve. Production during 2016 is forecast at 55 million lb to 65 million lb of copper and 240,000 oz to 270,000 oz of gold.

Thompson Creek’s Thompson Creek molybdenum mine, in Idaho, and its Endako molybdenum mine, in British Columbia, are currently on care and maintenance due to low molybdenum prices.

Centerra’s key producing asset is its Kumtor mine in the Kyrgyz Republic, where its relationship with the government in recent years has been contentious.

The pro forma annual production for 2016 of the combined company is estimated in the range of 675,000 oz to 725,000 oz of gold at all-in sustaining costs net of byproduct credits of $850/oz to $925/oz.

In connection with the proposed transactions, Centerra has entered into a binding commitment letter with Royal Gold whereby, upon the closing of the Centerra/Thompson Creek transaction, Royal Gold’s 52.25% gold streaming interest at Thompson’s Creek’s Mount Milligan mine in central British Columbia will be amended to a 35% gold stream and 18.75% copper stream.

“The combined company is expected to be firmly established as a low-cost gold producer with a geographically diversified footprint and industry-leading margins,” the Centerra announcement said. “In addition, the combined company will possess a high-quality pipeline of development opportunities and is well positioned to sustain and grow its production base. With a strong balance sheet and liquidity profile, sector leading operating margins, and moderate capital requirements, the combined company is expected to continue to generate robust free cash flows for many years to come.”

As featured in Womp 2016 Vol 08 -