Major Emerging Gold Producer in Central B.C.
LOM average 217,000oz/yr Au , 88 million lbs/yr Cu for 15 years on Flagship property (CAPEX payback 2.9 yrs. at $900/oz Au,$2.50Cu)
Message: Marketwire: Expands Gold Reserve to Six Million Ounces.................
| October 13, 2009 | ||||||||
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Terrane Expands Gold Reserve to Six Million Ounces
Completes Feasibility Update Study at Mt. Milligan |
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 13, 2009) - Robert Pease, President and CEO of Terrane Metals Corp. ("Terrane" or the "Company") (TSX VENTURE:TRX) is pleased to announce results of the Feasibility Update Study (the "2009 Study") for the Company's 100%-owned Mt. Milligan Copper-Gold Project (the "Project"), British Columbia, Canada. The 2009 Study was prepared by Wardrop, a Tetra Tech Company ("Wardrop") to update a 2008 Feasibility Study (the "2008 Study") to construct a 60,000 tonnes per day copper flotation process plant and open pit mine at Mt. Milligan (see Press Release dated March 31, 2008). The 2009 Study is a key component of a 14 month - $21.5 million Modified Project Execution Plan to advance the Project through the completion of key pre-construction-related activities (see Press Release dated December 8, 2008). The 2009 Study is based on Proven and Probable reserves of 482 million tonnes averaging 0.20% Cu and 0.39 g/t Au. It incorporates additional mine planning, engineering, detailed design, updated cost estimation and purchase orders for long-lead equipment into the 2008 Study. Recommendations from the British Columbia Environmental Assessment Certificate, as issued on March 18, 2009, and a federal Environmental Assessment approval, which is expected in Q4 2009, are included in the cost estimates. Several critical path components of the Project including Tailing Storage Facility, access road and power line are now construction-ready. Subject to financing and receipt of certain permits and approvals, the Project is positioned for a Q1 2010 construction decision. HIGHLIGHTS - Gold in reserves +31% to 6.0 million oz - Copper in reserves +33% to 2.1 billion lb - Mine life +45% to 22 years - Life-of-Mine strip ratio steady at 0.84/1 - Capital cost steady at $915 million - Payback 4.1 years - Pre-Tax Internal Rate of Return 17.2% - Net Present Value (5%) $1.05 billion All figures in CDN$ unless otherwise noted. The NI 43-101 Technical Report for the 2009 Study will be filed on SEDAR by October 23, 2009. An Executive Summary of the 2009 Study is available at http://www.terranemetals.com/i/pdf/2009study.pdf. The first six years of the mine plan have been designed to accelerate the extraction of near-surface and higher-grade gold reserves (Table 1). Gold production will average 262,100 oz per year and account for 55% of the revenue. Net of a copper credit, gold production cash cost is negative US$ 8 per oz. Over the 22 year life-of-mine (LOM) gold production will average 194,500 oz per year and account for 51% of the revenue. Net of a copper credit, LOM gold production cash cost is US$ 51 per oz. Table 1 Metal Production, Revenue and Cash Cost ---------------------------------------------------------------- ---------------------------------------------------------------- BASE CASE Milling Rate 60,000 tonnes/day Years LOM (US$800/oz Au, US$2.00/lb Cu, FX 0.85) 1 - 6 1 - 22 ---------------------------------------------------------------- ---------------------------------------------------------------- AVERAGE ANNUAL ---------------------------------------------------------------- Metal Production ---------------------------------------------------------------- Gold (oz) 262,100 194,500 ---------------------------------------------------------------- Copper (lb, million) 89 81 ---------------------------------------------------------------- ---------------------------------------------------------------- Revenue (%) ---------------------------------------------------------------- Gold 55 51 ---------------------------------------------------------------- Copper 45 49 ---------------------------------------------------------------- ---------------------------------------------------------------- Cash Cost Net of Credit ---------------------------------------------------------------- Gold 1 oz (US$/oz) -8 51 ---------------------------------------------------------------- Copper 1 lb (US$/lb) -0.40 0.17 ---------------------------------------------------------------- ---------------------------------------------------------------- ---------------------------------------------------------------- Chuck Jeannes, President and CEO, Goldcorp Inc. stated: "We are very pleased with the Feasibility Update Study. Not only did it hold the line on costs but it also significantly boosted reserve ounces and mine life. Terrane has clearly grown Mt. Milligan into a major, construction-ready, copper-gold project with an opportunity for outstanding net operating margins. Goldcorp, as majority shareholder, remains committed to working closely with the Terrane Board of Directors to unlock value for all shareholders at Mt. Milligan." CONFERENCE CALL Terrane will host a conference call on Thursday October 15, 2009 at 8:00am PDT to discuss the 2009 Study. A recording of the call will be available on the Company's website. Toll Free Dial-in Numbers (within the US and Canada): 1 800 918 9482. International Dial-in Number: 1 212 231 2919. KEY 2009 STUDY UPDATES - Optimized open pit Reserves with updated net smelter return (NSR) cut-off, metal prices and foreign exchange rate (FXR) as shown below: ------------------------------------------------------------
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NSR cut-off Gold Copper FXR
BASE CASE (US$/t) (US$/oz) (US$/lb) (US$/C$)
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2009 Study 4.10 690 1.60 0.85
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2008 Study 4.20 550 1.60 0.89
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- Optimized design of the open pit, Tailing Storage Facility (TSF), process plant and site layouts. Completed basic engineering of the open pit and process plant - Completed Issue for Construction (IFC) documentation for access road, power line, plant site and initial phase of the TSF - Placed purchase orders on long-lead mills, crushers, mill motors and the main transformer, representing 15% of total initial Project capital cost - Updated cost estimates to Q3 2009, which confirmed capital cost and reduced operating cost - A recommendation to proceed with detailed engineering, procurement, construction and commissioning to target commercial production in Q1 2013. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES The Mt. Milligan copper-gold porphyry deposits contain a Measured and Indicated Mineral Resource of 706.7 Mt at 0.18% Cu and 0.33 g/t Au, containing 2.84 billion lb copper and 7.50 million oz gold (Table 2). The Mineral Resource was tabulated within a conceptual open pit at a US$4.10/t NSR cut-off value using US$2.00/lb Cu and US$800/oz Au. The Mineral Resource estimate is NI 43-101 compliant and is based upon a geologic block model that incorporated over 180,000 individual assays from 220,200 m of core drilling in 969 drill holes. Assay data density is sufficient for feasibility-level estimation with drill hole spacing of 25 m to 50 m within both the Main and SS Zones. The drill hole database is supported by some 35,000 quality assurance/quality control (QA/QC) check assays. Table 2 Mineral Resource Estimate(1) (Inclusive of Mineral Reserve)
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Cu Au In-Situ Cu lb In-Situ Au oz
Category Mt (%) (g/t) (Million) (Million)
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Measured 334.6 0.197 0.398 1,453 4.28
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Indicated 372.1 0.169 0.269 1,386 3.22
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Total Measured
+ Indicated 706.7 0.182 0.330 2,840 7.50
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Inferred 20.5 0.154 0.205 70 0.14
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Note: (1) Mineral Resources are not Mineral Reserves and do not have
economic viability
Table 3 Mineral Reserve Estimate
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Tonnes Cu Au In-Situ Cu lb In-Situ Au oz
Category (M) (%) (g/t) (Million) (Million)
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Proven 274.6 0.210 0.438 1,273 3.87
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Probable 207.8 0.187 0.322 851 2.16
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Total 482.4 0.200 0.388 2,124 6.02
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A comprehensive and systematic metallurgical test work program on composite samples representative of the mine development plan determined that, on average, 84.1% of the copper and 71.4% of the gold will be recovered into a clean and marketable copper concentrate grading 26.4% Cu and 43.7 g/t Au with a minor silver credit. Both the Mineral Resource and Mineral Reserve take into consideration metallurgical recoveries, concentrate grades, transportation costs and smelter treatment charges in determining NSR values. In addition, the Mineral Reserve incorporates allowances for grade dilution, mining dilution and ore losses. ENVIRONMENT & PERMITTING The Project is in the final stages of regulatory approval. It was reviewed under the British Columbia Environmental Assessment Act; provincial Environmental Assessment (EA) approval was received in March 2009. In addition, a provincial Mines Act Permit was received in September 2009. The Project is currently being reviewed under the Canadian Environmental Assessment Act; federal EA approval is expected in Q4 2009. Certain permits required to proceed to construction are anticipated by Q1 2010. All regulatory applications and approvals have been based on the 2008 Study with a 15 year mine life. Terrane will seek appropriate regulatory amendments if required for additional mine life, but this is not expected to impact commencement of construction. Approximately 400 permanent jobs will be created at the Project. The construction workforce will average 400 workers and peak at 700 workers. Terrane is committed to maximizing local employment and contracting opportunities and will work with community partners on training programs to prepare local residents for employment. INITIAL CAPITAL COST The initial capital cost as described within this 2009 Study is $915 million, as shown in Table 4. The 2009 Study incorporates additional mine planning, engineering, detailed design, updated cost estimation and purchase orders of $137 million for long-lead equipment. The initial capital cost includes requirements of regulatory approvals. Final designs of several critical path components including access road, plant site, power line and initial phase of the TSF are now construction-ready. Table 4 Initial Capital Cost ------------------------------------------------------------ ------------------------------------------------------------ Description $ Million ------------------------------------------------------------ ------------------------------------------------------------ Direct Costs ------------------------------------------------------------ Plant Site Infrastructure 26 ------------------------------------------------------------ Mining and Pre-Production Development 169 ------------------------------------------------------------ Process Plant 276 ------------------------------------------------------------ Ancillaries 22 ------------------------------------------------------------ Power Supply and Distribution 70 ------------------------------------------------------------ Tailing and Water Reclaim 77 ------------------------------------------------------------ Total Direct Costs 640 ------------------------------------------------------------ ------------------------------------------------------------ Indirect Costs ------------------------------------------------------------ Owner's Costs 26 ------------------------------------------------------------ EPCM 52 ------------------------------------------------------------ Other Indirect Costs 101 ------------------------------------------------------------ Total Indirect Costs 179 ------------------------------------------------------------ ------------------------------------------------------------ Subtotal 819 ------------------------------------------------------------ Contingency (11.8%) 96 ------------------------------------------------------------ ------------------------------------------------------------ Total Project 915 ------------------------------------------------------------ ------------------------------------------------------------ On site operating costs were estimated at $6.96/t of ore milled as shown in Table 5. The 2009 Study incorporates additional mine planning, engineering, detailed design, and updated cost estimation. The operating cost includes requirements of regulatory approvals. Table 5 Operating Cost
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Unit Cost
Area ($/t milled)
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Mining 2.35
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Processing 3.89
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General and Administrative 0.57
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Plant Services 0.15
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Total Operating Cost 6.96
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FINANCIAL EVALUATION An economic evaluation was prepared for the Project based on a pre-tax financial model. For the 22.1 year mine life and 482 Mt Mineral Reserve, the following Base Case financial parameters were calculated: - 17.2% IRR - 4.1 year payback on $915 million initial capital cost - $1.05 billion NPV at 5.0% discount. Three metal price scenarios and a constant FXR of 0.85 (US$/C$) were used in the pre-tax model to evaluate sensitivity of NPV, IRR and payback. Base Case, Base Case minus 10% and Current Case metal prices are shown in Table 6. Project NPV, IRR and payback for all three metal price scenarios are presented in Table 7. Table 6 Metal Price Scenarios
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Copper Gold Silver
Case (US$/lb) (US$/oz) (US$/oz)
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Base 2.00 800 11.00
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Base -10% 1.80 720 9.90
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Current 2.80 1000 16.50
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Note: Current prices are as of September 15, 2009
Table 7 Pre-Tax NPV, IRR and Payback by Metal Price Scenario
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NPV at Selected
Discount Rates (Million $)
-------------------------- Payback
Case 8% 5% 0% IRR (%) (Years)
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Base 619 1,047 2,392 17.2 4.1
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Base -10% 313 632 1,644 13.0 5.1
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Current 1,630 2,415 4,877 28.6 2.4
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A matrix illustrating the sensitivity of the Project economics over a range of metal prices is shown in Table 8. All other parameters including exchange rate, capital cost and operating costs were fixed. Table 8 Pre-Tax Matrix
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Copper Price (US$/lb)
1.50 2.00 2.50 3.00
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700 1,025 1,911 2,798 3,783
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295 773 1,250 1,781
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9.1% 14.4% 18.8% 23.3%
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6.3 4.7 3.7 3.0 Legend
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800 1,505 2,392 3,279 4,264 NPV 0% (million C$)
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570 1,047 1,525 2,055 NPV 5% (million C$)
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12.5% 17.2% 21.4% 25.6% IRR (%)
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Gold Price 5.2 4.1 3.3 2.7 Payback (Years)
(US$/oz) ---------------------------------------- ------------------
900 1,986 2,873 3,760 4,745
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844 1,322 1,799 2,329
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15.5% 19.8% 23.8% 27.8%
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4.4 3.6 2.9 2.4
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1000 2,467 3,354 4,241 5,226
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1,119 1,596 2,073 2,604
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18.2% 22.3% 26.1% 30.0%
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3.9 3.2 2.7 2.2
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Ms. Karla Mills, P. Eng., of Wardrop is an independent Qualified Person as defined by NI 43-101. Ms. Mills has reviewed and approved the contents of this news release. Mr. Jianhui Huang, Ph.D., P. Eng., of Wardrop is an independent Qualified Person as defined by NI 43-101. Mr. Huang has reviewed and approved the contents of this news release. Mr. Scott Cowie, B. Eng, MAusIMM., of Wardrop is an independent Qualified Person as defined by NI 43-101. Mr. Cowie has reviewed and approved the contents of this news release. Mr. Grant Bosworth, P. Eng., of Wardrop is an independent Qualified Person as defined by NI 43-101. Mr. Bosworth has reviewed and approved the contents of this news release. Mr. Herb Welhener, MMSA-QPM, of Independent Mining Consultants, Inc. is an independent Qualified Person as defined by NI 43-101. Mr. Welhener has reviewed and approved the contents of this news release. Mr. Darin Labrenz, P. Geo., of Terrane Metals Corp. is a Qualified Person as defined by NI 43-101. Mr. Labrenz has reviewed and approved the contents of this news release. Mr. Jay Collins, P. Eng., of Merit Consultants International Inc. is an independent Qualified Person as defined by NI 43-101. Mr. Collins has reviewed and approved the contents of this news release. Mr. Bruno Borntraeger, P. Eng., of Knight Piesold Ltd. is an independent Qualified Person as defined by NI 43-101. Mr. Borntraeger has reviewed and approved the contents of this news release. Mr. Tim Bekhuys, RPBio., of AMEC Earth and Environmental Inc. is an independent Qualified Person as defined by NI 43-101. Mr. Bekhuys has reviewed and approved the contents of this news release. ABOUT THE COMPANY Terrane Metals Corp. is an exploration and mine development company focused on the Mt. Milligan copper-gold and Berg copper-molybdenum-silver projects in British Columbia, Canada. Goldcorp Inc. (GG: NYSE; G: TSX) owns a 60% equity interest in Terrane on a fully diluted basis. TERRANE METALS CORP. Robert Pease, P.Geo, FGAC, President and CEO |
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