Centerra Gold Inc. [CG-TSX] and Thompson Creek Metals Company Inc. [TCM-TSX; TCPTF-OTCQX] announced, on July 5, 2016, that they have entered into a definitive arrangement whereby Centerra will acquire all of the issued and outstanding common shares of Thompson Creek.
Under the agreement each Thompson Creek share will be exchanged for 0.0988 of a Centerra share. Centerra stated that upon completion of the arrangement, existing Centerra and Thompson Creek shareholders are expected to own approximately 92% and 8%, respectively, of the pro forma company. The Exchange Ratio implies a premium of 33% to Thompson Creek common shares based on each company’s 20-day volume weighted average price on the TSX for the period ending July 4, 2016. Total transaction value is equal to ~US $1.1 billion.
Thompson Creek operates the Mount Milligan open-pit copper-gold mine in British Columbia, Canada, a low-cost asset with more than two additional decades of production expected from the current reserve base. Together with Centerra’s low-cost, long-lived Kumtor Mine in the Kyrgyz Republic, 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 combined company will possess a quality pipeline of development opportunities and is well positioned to sustain and grow its production base.
In connection with the proposed transactions, Royal Gold Inc’s [RGL-TSX; RGLD-Nasdaq] 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.
Scott Perry, CEO of Centerra, said, “The combination with Thompson Creek is a highly compelling transformative transaction that diversifies Centerra’s operating platform and adds low risk production and cash flow from a very high quality, long-lived asset in Mount Milligan. The acquisition will establish an operating base in Canada – one of the lowest risk mining jurisdictions in the world– which will complement our Canadian-based Greenstone project and provide for further flexibility to expand into the Americas.”
Jacques Perron, President and CEO of Thompson Creek, stated, “We believe the combination with Centerra represents a unique opportunity for our shareholders to gain exposure to additional high-quality assets with a strong development pipeline. “
Tony Jensen, President and CEO of Royal Gold, said, “Looking forward, we welcome Centerra as our new partner at Mount Milligan and we are pleased that a strong management and operating team will continue to lead the operations at the mine.”
It is anticipated that the Thompson Creek shareholder meeting and closing of the proposed transactions will take place in the fall of 2016.