Skeena Resources Ltd. [SKE-TSXV] CEO Walter Coles says he welcomes the opportunity to investigate and potentially revitalize one of Canada’s richest past-producing silver and gold mines.
He made the comment after Skeena signed an option deal with Barrick Gold Corp. [ABX-TSX, NYSE] allowing Skeena to earn a 100% interest in the former Eskay Creek Mine in northwestern British Columbia.
“Eskay Creek was a remarkable discovery that became an extraordinary mine,’’ said Coles. “It produced 3.3 million ounces of gold and 160 million ounces of silver from 2.2 million tonnes of ore from 1994 until closure in 2008,’’ he said. “We are honoured that Barrick has given us an opportunity to investigate and potentially revitalize one of Canada’s highest-grade past-producing mines.’’
To earn the interest, Skeena must spend $3.5 million on exploration prior to December 18, 2020, pay Barrick $10 million, and reimburse Barrick for reclamation expenses incurred during the option period up to a maximum of $7.7 million.
Under the agreement, Barrick will retain a 1.0% net smelter royalty on all parts of the property that are not already subject to royalties. The gold mining giant will also retain a back-in right to purchase a 51% interest on the property.
The back-in right can only be exercised by Barrick for a 12-month period following notification by Skeena of a NI 43-101 compliant resource of at least 1.5 million ounces of contained gold equivalent. To exercise the back-in right, Barrick must pay Skeena up to three times its cumulative expenses on the property and reimburse Skeena for purchase costs.
In addition, Barrick has agreed to make a $1 million strategic investment in Skeena. Under the terms of the investment, Skeena will issue 1,250,000 flow-through common shares at $0.80 per share.
Skeena shares rose 4.5% or $0.03 to 70 cents in the trading session Tuesday December 19 as investors continued to respond to news of the option agreement, which was announced on December 18, 2017.
Skeena said its technical team is currently compiling and reviewing more than 20 years of exploration and production information in Barrick’s Eskay database. The aim is to build an upgraded geological model and determine the exploration potential of remnant zones, the company said.
In an effort to expedite a first phase of confirmation drilling, the company is now working to gain the necessary permits for surface drilling.