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Thompson Creek Metals Co. B.C. mine project Mount Milligan.

Barring a wicked winter, the struggling Mount Milligan gold and copper project in British Columbia appears to have overcome its last major financing hurdle, and should come in on schedule and without further cost overruns.

The project owner, pure-play molybdenum miner Thompson Creek Metals Co., announced a $200-million deal this week to sell future gold output from the mine to partner Royal Gold, fending off banks and risks of defaulting on debt covenants.

The deal gives Thompson Creek more breathing room to access an existing revolving credit facility needed to finish construction on Mount Milligan, now about 80-per-cent complete, after falling molybdenum prices compounded a poor second quarter of production, revenue and earnings.

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"We think it's the most efficient form of financing for us and we hope that it puts the issue of financing at Mount Milligan behind us," said Thompson Creek chairman and chief executive Kevin Loughrey.

"There is one big imponderable, and that is, in British Columbia, you always face the possibility that winter could be a problem," he said. "We have accounted in our budget for winter progress, but if you get really hit, that can be a problem."

Mount Milligan is meant to drive Thompson Creek's growth once it goes into production around this time next year, but the project has proven troublesome since it was acquired under the $650-million takeover of Terrane Metals Corp. in 2010.

Costs of building the mine have skyrocketed from initial estimates of around $915-million in feasibility to between $1.4-billion and $1.5-billion these days. Cost inflation is becoming one of the biggest scourges on the resource industry of late, with major miners in Canada and abroad announcing multibillion cost over-runs this year.

"We believe we can get it done for that number," Mr. Loughrey said by telephone from Denver.

The latest rise in cash costs at Mount Milligan – about 20 per cent – saw Thompson Creek go to markets in May to raise $412-million in two debt and equity financings. The first was for $200-million via a senior notes offering due 2019. The second was for proceeds of $212-million through an offering tangible equity units to be repaid as a combination of debt and equity that could dilute current shares by as much as 28 per cent.

Before acquiring Terrane, Thompson Creek was a pure play "moly" producer with two mines and a metallurgical roasting facility in Pennsylvania. It decided to diversify into copper and gold as a hedge against commodity price cyclicality.

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Mount Milligan will have average annual production of 81 million pounds of copper and 194,500 ounces of gold per year over its mine life.

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