Centerra Buys Thompson Creek in US$1.1 Billion Deal

Toronto-based Centerra Gold will purchase Thompson Creek Metals Co. in a deal valued at US$1.1 billion, Bloomberg reports.

The transaction will include a US$135 million stock swap wherein each Thompson Creek share will be exchanged for 0.0988 Centerra shares. This ratio represents a 32 percent premium on Monday closing prices based on information from both companies.

In addition, Centerra will redeem Thompson Creek’s US$889 million in bonds with interest, and take on US$47 million in capital lease obligations.

For Centerra, the deal grants control of the Mount Milligan copper and gold mine in central British Columbia; thus, the firm expands beyond the Kumtor mine in the Kyrgyz Republic that serves as its primary revenue source. Centerra has had a tense relationship with the Kyrgyz government over developing and running Kumtor.

“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,” according to a joint statement by Centerra and Thompson Creek.

Thompson Creek has seen its debt rise due to the construction of Mount Milligan and plummeting prices of molybdenum, which is the metal used to harden oil drills. The company’s shares have nosedived by 95 percent over the past five years but they posted a 6.7 percent recovery on Tuesday shortly before the deal was announced.

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Aside from Centerra and Thompson Creek, the transaction could also benefit Royal Gold Inc., whose majority gold streaming interest on Mount Milligan will become 35 percent gold stream and 18.75 percent copper stream. Financial experts upgraded Royal and believe the company will be a more fiscally stronger owner-operator of the mine.

“Despite largely neutral amended terms, greater certainty with Mt. Milligan cash flow warrants greater investor confidence,” Raymond James analyst Phil Russo told clients, according to Canada’s Financial Post earlier today.

By Erwin Cifuentes for Oilprice.com

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