Terrane, Goldcorp sign loan, JV option agreement
Terrane Metals Corp (C:TRX)
Shares Issued 113,198,500
Last Close 5/23/2008 $0.485
Monday May 26 2008 - News Release
Also Goldcorp Inc (2) (C:G) News Release
Mr. Robert Pease of Terrane reports
GOLDCORP TO SUPPORT DEVELOPMENT OF MT. MILLIGAN PROJECT
Terrane Metals Corp. has entered into a letter agreement in respect of a loan guarantee and a joint venture option agreement with majority shareholder Goldcorp Inc. for the commercial development of its 100-per-cent-owned Mt. Milligan copper-gold project in British Columbia.
Under the terms of the agreement, Goldcorp will guarantee a non-revolving term credit facility of up to $40-million, or U.S. dollars equivalent, to further advance the company's long-lead-time capital equipment procurement program in support of the construction of a 60,000-tonne-per-day open-pit mine and process plant at Mt. Milligan. The loan will have an 18-month term and be underwritten by the Bank of Montreal with BMO Capital Markets as the lead arranger and sole book runner.
The agreement also provides Goldcorp with a one-time option to convert its fully diluted in-the-money equity interest in the company into a participating joint venture interest in the project. The option can only be exercised during the term of the credit facility and then, only if Goldcorp's resulting joint venture interest will be greater than 30 per cent and less than 60 per cent. Upon exercise of the option, among other terms and conditions, Goldcorp's 240 million convertible preferred shares in the capital of the company would be cancelled and the parties would develop and operate the project under a joint venture operating agreement. The party holding the majority participating interest would be operator of the joint venture.
A special independent committee of the board, assisted by Paradigm Capital Inc. and Stikeman Elliot LLP, has determined that the agreement is fair and in the best interests of the company. In addition, the agreement has the unanimous support of the company's board of directors. Goldcorp shall be entitled to nominate two individuals for approval as members of the board of directors of Terrane from the time Terrane has obtained all required regulatory and shareholder approvals until the time the option is exercised. Upon the exercise of the option, the two Goldcorp nominees shall resign from the board of Terrane and the joint venture shall be governed by a management committee comprising representatives from each of Terrane and Goldcorp. Terrane currently expects to hold a meeting of shareholders in July, 2008, as the transaction is subject to minority shareholder approval.
Robert Pease, president and chief executive officer of Terrane, stated: "Substantial capital investment, time and expertise are required to build a mine at Mt. Milligan. As a result this deal makes a lot of sense for both Goldcorp and Terrane. We welcome the immediate financial support of our majority shareholder and look forward to a strong working partnership over the months ahead as we advance the project through permitting and into construction."
"We are pleased with the progress on Mt. Milligan," said Kevin McArthur, president and chief executive officer of Goldcorp. "These first steps not only allow us to financially support the development of Mt. Milligan but also provide Goldcorp with the option to participate in its future commercial operation. We are very pleased with our investment in Terrane."