Terrane Metals is sitting with an advanced project, Mt Milligan, British Colombia, holding resources of open pittable 2.5bn pounds of copper and 6.7m ounces of gold, yet investors value the company at just USD 20m. Based on the gold content at the project alone, this ranks Terrane as one of the most undervalued big gold stock targets in the world. It ranks down there with Gold Reserve, whose big Brisas project in Venezuela remains bogged down in a sea of political turmoil. Ignoring Terrane's copper at Mt Mulligan and also Terrane's other projects, investors value the gold at Mt Mulligan at just USD 3.04/oz, compared to USD 2.99 at Brisas, and USD 4.28/oz at the monster Las Cristinas held by Crystallex, also in Venezuela. Compare these numbers to the USD 125.34/oz valuation accorded by investors to the gold held by Osisko at the Canadian Malarctic deposit in Quebec. Intentions to mine in Canada and Venezuela are two very different propositions. If that were not enough to explain the apparent Terrane anomaly, consider that just last month Terrane announced receipt from the province of British Columbia an environmental assessment certificate for its Mt. Milligan copper-gold project. Terrane now looks forward to successfully completing the federal EA process and building British Columbia's next major metal mine.If this was not enough, however, consider that in May 2008, Terrane signed a multi-faceted financing arrangement with Goldcorp, one of the biggest Tier I global gold diggers, with a monumental market value of USD 21.9bn (second only to the USD 25.1bn value attached to Barrick, the world's biggest gold name by output and value).Goldcorp, already Terrane's biggest shareholder, agreed to guarantee a non-revolving term credit facility for Terrane of up to CAD 40m, to further advance Terrane's long lead-time capital equipment procurement program. Goldcorp also has a one-time option during the credit facility to convert its preferred stock in Terrane (to end up with between 30% and 60% of Terrane, depending on certain issues), and to embark on a joint venture with Terrane at Mt Milligan. The Mt Milligan feasibility study points to a conventional truck-shovel open pit mine with a 60,000 tonnes per day copper flotation process plant. Average annual production of 265,100 ounces of gold and 97m pounds of copper is forecast for the first six years of an initial 15-year mine life. Pending receipt of the balance of project approvals and subject to financing, construction could commence in second-quarter 2010 with commercial production in fourth-quarter 2012. Capital costs in full are estimated at around CAD 917m. With a market value of just USD 20m, an equity issue by Terrane would be a futile exercise; meaningful debt of the magnitude required to finance Mt Milligan alone would simply not be possible. As mentioned, Terrane also has a pipeline of other projects beyond Mt Milligan, not least the copper-molybdenum-silver Berg deposit, also in British Colombia, not far from the Imperial Metals Huckleberry copper-molybdenum mine. Investors value Goldcorp's group gold resources of 68.3m ounces at USD 320.35, about a hundred times higher than the number currently applicable to Terrane's Mt Mulligan. One of the other key anomalies in valuations of potential gold stock targets is, of course, Western Copper; gold ounces at its copper-gold-molybdenum Casino project in the Yukon are valued at just USD 4.22/oz - by the market, that is.SELECTED TOP ACQUISITION GOLD TARGETS

Stock

Value

Gold

USD/

price

USD m

ounces m*

ounce

Gold Reserve

CAD 0.75

0.035

11.8

2.99

Terrane

CAD 0.22

0.020

6.7

3.04

Western Copper

CAD 0.57

0.034

8.0

4.22

Crystallex

CAD 0.30

0.072

16.9

4.28

Andina Minerals

CAD 1.40

0.092

13.8

6.64

San Anton Resource

CAD 0.24

0.021

3.0

6.96

Crew Gold

CAD 0.68

0.059

6.4

9.30

Greystar

CAD 3.51

0.151

15.0

10.07

Banro

CAD 2.50

0.128

11.2

11.38

Northern Dynasty

CAD 8.30

0.629

47.1

13.36

Perseus Mining

AUD 0.70

0.100

5.3

18.95

Taseko

CAD 2.02

0.253

13.3

19.04

Exeter Resources

CAD 3.57

0.182

8.7

20.87

Seabridge

CAD 26.39

0.807

34.5

23.40

Moto Goldmines

CAD 2.72

0.195

7.9

24.65

Guyana Goldfields

CAD 3.00

0.145

5.4

26.75

Detour Gold

CAD 10.63

0.391

13.2

29.66

Great Basin

CAD 1.55

0.403

13.3

30.45

Novagold

CAD 3.44

0.512

14.7

34.81

Gabriel

CAD 2.33

0.487

12.6

38.53

Northgate

CAD 1.56

0.327

6.9

47.32

Minefinders

CAD 8.91

0.430

6.7

63.87

Centamin Egypt

CAD 1.00

0.808

12.3

65.71

Osisko

CAD 5.36

1.119

8.9

125.34

Ivanhoe Mines

CAD 7.65

2.367

15.8

149.80

Totals/average

9.770

319.6

30.57

* Main project only; attributable ounces.

Source: market & company data, compiled by Barry Sergeant