Developer eyes Mount Milligan startup

The Government of British Columbia's push in recent years for mine exploration and development in the northern region of the province is slowly bearing fruit. An early plum is Thompson Creek Metals Co. Inc.'s Mount Milligan copper-gold mine in north-central B.C., which is rolling toward startup in August and commercial production in the fourth quarter.

Terrane Metals Corp., a subsidiary of Thompson Creek, reports that construction of the 60,000-metric-tons-per-day open pit mine, which is located 155 kilometers (about 96 miles) northwest of Prince George, B.C. and mid-way between the communities of Fort St. James and Mackenzie, was 85-89 percent complete in early May.

On-schedule construction

Thompson Creek Chairman and CEO Kevin Loughrey told analysts on a conference call May 9 that the Mt. Milligan project is progressing satisfactorily.

"Our important Mt. Milligan project is very much on schedule," Loughrey said. "This week, in fact, we've started the primary crusher and it is crushing waste and creating a base with the waste for the stockpile we will build over the next several weeks, and we are on schedule to the guidance previously given. We believe now that we'll start the mill running in August of this year with commercial production still slated for the fourth quarter of 2013, which is very good news for us."

Mt. Milligan has been designed as a conventional truck-shovel open pit operation using a copper flotation concentrator for extraction of higher grade and rich reserves in the early years of a 22-year mine life with a strip ratio of 0.84:1. Plant recoveries are expected to average 84.1 percent for copper and 71.4 percent for gold in a clean and marketable copper concentrate grading 26.4 percent copper and 43.7 grams per metric ton gold, with a minor silver credit. Mine production is expected to average 89 million pounds per year of copper and about 262,100 ounces per year of gold during the first six years of operation.

Mt. Milligan had 6.0 million oz in gold reserves, which is currently the second-largest gold reserve in Canada and 2.1 billion lbs in copper reserves.

The current capital expenditure to construct and develop Mt. Milligan is estimated at C$1.5 billion, of which 95 percent has been spent or contractually committed.

Loughrey also praised the workers at Mt. Milligan, noting that they are approaching 5 million work hours without a lost-time incident

Other recent achievements include bringing the mine pit into full operation with all mobile equipment, including two electric shovels and a fleet of trucks, currently operational; preparing the SAG and ball mills for pre-commissioning; and hiring the operations senior management, he said.

In March, the company reported the appointment of Dennis Hoof as vice president and general manager at Mt. Milligan. Hoof has more than 20 years of management experience across the chemical, petrochemical and mining industries.

As of Dec. 31, 202 permanent workers had been hired for the mine. Of that number, 67 percent are residents of the local region.

Thompson Creek plans to begin copper and gold sales in the fourth quarter. Some 85 percent of the mine's production is already committed through 2013, with copper concentrate to be shipped to the Pacific Rim. In addition, 120,000 tons of concentrate is committed for 2015 and 2016.

Cash generator

At current commodity prices, Mt. Milligan could generate about US$520 million in annual cash revenue during the first six years of production at annual estimated cash costs of US$280 million, including refining and transportation cost, according to Loughrey.

Considered a significant source for gold, Mt. Milligan also will produce minor payable quantities of silver.

The progress at Mt. Milligan is also good news for Thompson Creek's partner, Royal Gold Inc., which invested US$781 million in the project in exchange for 52.25 percent of the mine project's gold stream, for a payment of $435 per ounce. Thompson Creek used the funds to help finance construction of the mine.

The project is expected to provide a huge boost to Royal Gold's cash flow, potentially generating US$131 million (or US$2.02 per share) at current gold prices. By comparison, the company generated a total of US$172 million during the past four quarters from its other investments.

Thompson Creek has plans to sell its nearly 48 percent of the mine's gold output at prevailing market prices, generating at current prices about $200 million annually, which is enough revenue to offset most of the mine's total operating costs.

This means the cost of producing copper at Mt. Milligan could be negative or at least very low, Loughrey told the analysts.

Mining indicator

Mt. Milligan also represents the second new mine to come on stream in British Columbia in recent years and is one of two new mines under construction north of Prince George. Imperial Metals Corp.'s Red Chris copper project is also under construction, and in 2012 New Gold Inc. re-opened its New Afton mine in the southern part of the province.

Further, there are 30 mining projects with potential to be developed in the near future in British Columbia, a province described as still largely unexplored by the Association of Mining Explorers British Columbia.

"The best indicator of success for mineral explorers is the construction and development of new mines," AME BC officials have said.

Provincial officials also laud the Mt. Milligan mine project as an important economic engine for north-central B.C. In 2012 alone, Terrane Metals did business at Mt. Milligan with about 200 companies within the region, generating a regional spend of some C$125 million. The region is defined as the area from Prince George to Fraser Lake in the south and Mackenzie and Fort St James in the north.

Total project procurement is 2012 was just over C$480 million, which means that more than a quarter of Mt. Milligan's purchasing was sourced locally.

Mt. Milligan is also a part of British Columbia's historic revenue-sharing agreements signed in 20120 with three First Nations - the McLeod Lake Indian Band and Stk'emlupsemc of the Secwepemc Nation (Skeetchestn and Tk'emlúps First Nations), regarding the mines at Mount Milligan and New Afton, respectively. British Columbia is the first province in Canada to share direct revenue generated from mining activities with First Nations.

In addition, Duz Cho Construction, a company owned by the McLeod Lake Indian Band has won the contract to build the tailings storage facility at Mt. Milligan.