Centerra /Thompson Creek -- summary under Share-for-Share

Overview

Centerra Gold is proposing to acquire all of the shares of Thompson Creek under a B.C. Plan of Arrangement in consideration solely for Centerra shares, with the acquired shares contributed immediately to a new holding subsidiary of Centerra. As there is no nominal cash or other non-share consideration, the Thompson Creek shareholders are not required to file an election form in order to receive (s. 85.1) rollover treatment, so that Centerra will have lower basis in the acquired shares. The U.S. tax disclosure indicates that the exchange is expected to be a “B” reorg, which requires that the sole consideration be shares. The exchange ratio (resulting in the Thompson Creek shareholders holding only 8% of Centerra) reflects that Thompson Creek has a U.S.$673 million deferred revenue obligation under a gold stream arrangement for its B.C. mine, as well as U.S.$823 million of long-term debt. Centerra has renegotiated the gold stream arrangement to reduce the gold delivery obligation and create a copper delivery obligation.

Centerra

A TSX-listed Canadian-based gold mining company engaged in operating, developing, acquiring and exploring gold properties in Asia, North America and elsewhere. A Kyrgyz government-owned entity holds 32% of its common shares.

Thompson Creek

A BCBCA corporation whose shares trade on the TSX and OTCQX and whose principal operating property is the Mount Milligan open-pit copper and gold mine in B.C. It has U.S.$823 million of long-term debt, and U.S.$673 million of deferred revenue obligations under the gold stream arrangement described below.

Gold stream arrangement

Pursuant to a sale agreement dated December 14, 2011, Thompson Creek agreed to sell to Royal Gold 52.5% of the refined gold production from the Mount Milligan mine for an upfront payment of $781.5 million plus $435 an ounce (or the prevailing market price, if lower), when the gold was delivered. Pursuant to a letter of intent, the designated percentage of produced gold to be delivered is to be reduced to 35%, and the percentage of copper to be delivered is to be increased to 15% (with a price paid on delivery equal to 15% of the prevailing market price).

Centerra Holdco

A newly-incorporated wholly-owned B.C. subsidiary of Centerra.

Plan of Arrangement

1. Each Thompson Creek option will be exchanged for a Centerra replacement option. It is intended that s. 7(1.4) apply to such exchange of Company Options..
2. The vesting of each Thompson Creek performance share unit and restricted share unit will be accelerated, with each such PSU and RSU surrendered for one Thompson Creek common share.
3. Each Thompson Creek common share held by a dissenting Thompson Creek shareholder shall be deemed to be transferred to Thompson Creek and Thompson Creek will be obliged to pay the amount determined under the Arrangement.
4. Each issued Thompson Creek common share (other than of dissenting shareholders or Centerra) shall be transferred to Centerra in exchange for 0.0988 of a Centerra common share (with the number of Centerra common shares to be issued rounded down to the next whole number of Centerra common shares). Former Thompson Creek shareholders will hold around 8% of the Centerra shares).
5. The Thompson Creek common shares (now held by Centerra) will be contributed by Centerra to Centerra Holdco in consideration for a corresponding number of common shares in the capital of Centerra Holdco.

In connection with the completion of the Arrangement, Centerra has agreed to contribute to Thompson Creek the amount of cash necessary to redeem all of Thompson Creek's outstanding 9.75% senior secured notes due 2017, 7.375% senior unsecured notes due 2018 and 12.5% senior unsecured notes due 2019. Centerra is effecting a $170 million bought deal offering of subscription receipts and is entering into a $325 million secured revolving and term loan facility.

Canadian tax consequences

S. 85.1 rollover applies to the exchange (unless the holder has, in the holder's income tax return for the year in which the exchange occurs, included in computing income any portion of the capital gain (or capital loss) arising on the exchange otherwise determined.)

U.S. tax consequences

Exchange

The exchange of Thompson Creek common shares for Centerra common shares pursuant to the Arrangement is intended to qualify, for U.S. federal income tax purposes, as a tax-free ''reorganization'' within the meaning of Code s. 368(a)(1)(B).

PFIC rules

Thompson Creek believes that it should not be classified as a PFIC. Centerra believes that it should not be classified as a PFIC for its most recent taxable year, and does not anticipate becoming a PFIC in its current taxable year or in the foreseeable future based on its current and anticipated assets and operations.