Skeena raises $34.5 million for Barrick royalty purchase

Skeena Resources Ltd. [SKE-TSXV, SKE-NYSE, RXFB-FRA] said Friday it has raised $34.5 million from a bought deal offering. The company said net proceeds will be used to exercise an option to buy down a 0.5% NSR royalty held by Barrick Gold Corp. [ABX-TSX, GOLD-NYSE] on the Eskay Creek gold-silver project in northwest British Columbia. Skeena can buy down the royalty for $17.5 million.

The bought deal offering consisted of 5.7 million common shares priced at $6.05 per share as well as the exercise in full by the underwriters of their overallotment option to purchase an additional 743,801 common shares at the offering price.

Skeena shares eased lower on the news, falling 3.8% or 24 cents to $6.12 in light trading volume. The shares are currently trading in a 52-week range of $17.11 and $5.80.

Skeena is a Canadian mining exploration and development company. It is focused on revitalizing the past-producing Eskay Creek mine in the Golden Triangle region of northwestern B.C.

Skeena recently tabled results of a feasibility study for Eskay Creek, which 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.

Eskay Creek ranked as highest-grade gold mine in the world at the time that it was in production. It was also the world’s fifth highest grade silver producer.

The feasibility study highlights an open pit average grade of 4.00 g/t gold equivalent (AuEq), an after-tax net present value of $1.4 billion, a 50% IRR, and a one-year payback at US$1,700 per ounce gold and US$19 per ounce silver.

The feasibility study pegs the after-tax net present value at $1.41 billion at a base case gold price of US$1,700 an ounce and US$19 an ounce for silver.

In years one to five, the study envisages average annual production of 431,000  AuEq ounces, placing Eskay Creek as a tier one operation. Life of mine production is expected to be 3.2 million AuEq ounces from 2.4 million ounces of gold and 66.7 million ounces of silver.

The all-in-sustaining cost is forecast at US$652 an ounce AuEq recovered in concentrate, with estimated pre-production capital expenditures pegged at US$592 million.

The study is based on proven and probable open-pit mineral reserves of 29.9 million tonnes, containing 2.87 million ounces of gold and 75.5 million ounces of silver (combined 3.85 million AuEq ounces).

The Eskay Creek Project is planned to be an open-pit operation using conventional mining equipment. The potential for an underground mining component to the project is still being evaluated.  It is anticipated that Skeena will have a stockpile developed ahead of mill start up of approximately 600,000 tonnes of ore.

The proposed gold-silver concentrate from Eskay Creek will be transported to a nearby port via highway.