In a research report published Wednesday, Heywood Securities insists "a decision form Goldcorp to exercise its option on the [Mt. Milligan copper-gold] project is key to timely development." Metals analysts Stefan Ioannou and Danny Ochoa noted Goldcorp has until January 8, 2010, to exercise its option to convert its 240-million share position in Terrane Metals into a participating joint-venture interest in the Mt. Milligan project in British Columbia. A recently updated feasibility study which expanded Mt. Milligan's reserve base to 2,1 billion pounds of copper and 6 million ounces of gold should make Goldcorp more comfortable with the project's economics, they suggested. "Prudent (and timely) capital-cost financing will be key to unlocking Mt. Milligan's potential value, and will likely require a combination of debt and equity," the analysts advised. "We note that a recent option agreement signed with Goldcorp partially backstops Mt. Milligan's financing risk." Should Goldcorp opt not to exercise its option, Haywood suggested, "The result would be an optically onerous capital structure, further complicated by a $1.0 billion attributable initial capital cost at Mt. Milligan (Haywood model). Furthermore, Goldcorp's election not to exercise its option on Mt. Milligan would arguable imply that 240 million shares of Terrane are ‘up for sale.'" The analysts also advised Terrane is "well positioned to make a formal production decision at the project by Q1/10." Nevertheless, the analysts warned, "Mt. Milligan is a very large low-grade deposit, which will require economies of scale. Hence, we believe Terrane best suits patient investors who are comfortable with a ‘stronger for longer' metal price outlook, enhanced by the project's limited political and technical risk."

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