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On July 15, 2010, Terrane Metals Corp. ("Terrane") announced an agreement whereby Thompson Creek Metals Company Inc. ("Thompson Creek") will acquire Terrane and its assets through a Plan of Arrangement. The announcement has raised some questions and concerns, and we at Terrane want to ensure that we do our best to provide some clarity for our valued shareholders and stakeholders.
Below you'll find a detailed summary of the acquisition agreement, along with links to our press release and other information about the deal.
Details of the Arrangement:- Thompson Creek to acquire Terrane for C$0.90 in cash and 0.052 Thompson Creek common shares per Terrane share (offer value $1.41per Terrane share)(1)
- Terrane's existing two series of warrants will remain outstanding and continue to trade on the exchange until their respective expiry dates. Upon exercising, warrant holders will be entitled to the same consideration (C$0.90 + 0.052 TCM share per Terrane share) as Terrane's common shares
Gold Stream Transaction:- Thompson Creek concurrently enters into 25% Mt. Milligan gold stream sale with Royal Gold for US$311.5 million plus per ounce payment thereafter
Other Terms:
- Goldcorp Inc. agrees to vote in favour of the transaction and currently holds 58% of Terrane's outstanding voting equity
- Requires 66 ⅔% vote of Terrane shareholders
Benefits to Terrane Shareholders:
- Participation in a well-funded, diversified base metals producer, including ongoing exposure to Mt. Milligan through the share component of the offer;
- Access to significantly greater financial resources to build and operate Mt. Milligan
- Access to Thompson Creek's proven development and construction expertise
- Delivery of an attractive premium with a meaningful cash component
Next Steps:
- Information circular mailed to shareholders in August
- Terrane shareholder vote in September
- Press release --
- Thompson Creek website -
FAQ
Why has Terrane agreed to this deal?
In order to secure the long-term success of the Mt. Milligan project, we felt that partnering with a company like Thompson Creek would provide the necessary financial depth to realize the full potential of the project.
How will Thompson Creek fund Mt. Milligan?
Thompson Creek has significantly greater financial resources, and the transaction provides a clear path towards funding of the project. Thompson Creek intends to fund the balance of construction costs through:
- Pro-forma cash balances of approximately US$178 million
- US$311.5 million proceeds from the Gold Stream Transaction
- Up to US$250 from equipment financing and bank credit facility
- Internal cash generation
- Potential warrant proceeds, including Thompson Creek 2011 warrants (C$220 million)
What's next for Mt. Milligan?
With funding secured, Mt. Milligan has taken a major step forwards towards production. It is anticipated that construction will continue to follow the implementation plan as developed by Terrane management, with commercial production targeted for 2013.
What will happen to my warrants?
The warrants will remain outstanding, with the same strike price and expiry dates. All holders will be entitled to the same consideration (C$0.90 + 0.052 TCM share per Terrane share) upon exercise.
The warrants are trading at XX. Does this mean my shares are only worth that much?
No. The future value of your warrants is not affected by the current trading price. What you need to consider is the strike price (TRX.WT.A = $1.50, TRX.WT = $0.85), and the value of Thompson Creek shares at the time of exercise.
For example, if you have 1000 TRX.WT warrants, you now have the option to purchase 1000 Terrane shares, any time before the expiry date (June 23, 2012), at a price of $0.85 each. If you exercise the option, the total cost to you would be $850 ($0.85 x 1000 shares).
Based on the acquisition agreement with Thompson Creek, these 1000 Terrane shares would immediately receive consideration of $900 cash ($0.90 per share) and 52 Thompson Creek shares (1000 x 0.052).
In the example above, the warrant transaction would leave you with a final cash position of $50 ($900 cash consideration - $850 cost of exercise). The final value of your investment would depend on the price of your 52 Thompson Creek shares which would be issued at the time of exercise.
Will there be any additional compensation for shareholders, aside from the deal outlined in the agreement?
No.
Will there be a shareholder vote? If so, when will it take place?
The agreement is subject to shareholder approval. A circular will be distributed to shareholders in August, at which point shareholders will have an opportunity to review the terms of the deal. A shareholder vote is planned for September.
For additional information contact:
Investor Relations, Terrane Metals Corp.
604-681-9930
info@terranemetals.com- Based on spot price of Terrane and Thompson Creek shares on the TSX as of market close on July 14, 2010
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