Done deal: Centerra Gold buys Thompson Creek for $1.1 billion

Centerra has been using the cash generated by Kumtor to develop projects in Mongolia, Turkey and Canada, with the goal of becoming a 1 million ounce per year producer over the next few years.(Image courtesy of Centerra Gold)

Canada’s Centerra Gold (TSX:CG) said Thursday it has completed an agreement to buy US-based Thompson Creek Metals (TSX:TCM) in a US$1.1 billion deal that adds a new large asset to Centerra’s growing portfolio.

By acquiring Thompson Creek, a move first announced in July, the Toronto-based miner gets its hands on Mount Milligan, a mine in British Columbia with reserves estimated in 5.7 million ounces of gold rand 2.2 billion pounds of copper.

With the deal, Centerra gets its hands on Mount Milligan, a large mine in British Columbia and reduces its reliance on Kumtor mine, in Kyrgyzstan, for cash flow.

Through the deal, Centerra also reduces its reliance on Kumtor mine in Kyrgyzstan for cash flow, as the associated risks to such operation have proved a drag on the company’s market valuation.

Thompson Creek, meanwhile, gets a lifeline as the Denver-based miner had accumulated a debt of more than $800 million, coming due between 2017 and 2019 and it didn’t seem able to cover it up on its own.

“The acquisition establishes 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,” Scott Perry, CEO of Centerra, said in the statement.

Perry noted the deal also adds to the company’s existing project pipeline, which includes Öksüt in Turkey, Gatsuurt in Mongolia, and Greenstone in Canada.

The agreement includes a revision of a metal streaming agreement between Thompson Creek Metals and Royal Gold (TSX:RGL) which partly helped to finance Mount Milligan after Thompson Creek bought the property in 2010. Royal Gold’s streaming interest on the mine’s gold output will be reduced to 35% from 52.25%, in exchange for the rights to 18.75% of the mine’s copper production.

The company said Centerra Thompson Creek common will be delisted from the Toronto Stock Exchange, removed from the OTCQX and deregistered under the Securities Exchange Act of 1934.

Investors reacted positively to the news and Centerra stock climbed more than 5% in early trading in Toronto to Cdn$6.79.