Seabridge Gold Inc. [SEA-TSX, SA-NYSE] and Eskay Mining Corp. [ESK-TSXV, ESKYF-OTCQB, KN7-Frankfurt, AOYDPM] said Monday they have agreed to share part of the cost of building a $12 million mine access road in British Columbia.
The â€œCoulter Creek Access Roadâ€ (CCAR) is one of two main access roads planned and permitted for Seabridgeâ€™s 100% owed KSM gold project which is located in B.C.â€™s Golden Triangle region. The road is designed to connect the KSM project with the existing Eskay mine road to the northwest.
Approximately 2.92 kilometres of the first segment of the CCAR is situated on mineral tenures held by Eskay Mining.
On Monday, the companies said they have agreed to share the costs equally on construction of the first nine kilometres of the CCAR, which is estimated to cost $12 million. Construction is planned to commence in July, 2021,
â€œThis initial segment will provide Seabridge with a lower elevation staging site closer to the KSM camp, thereby reducing Seabridgeâ€™s helicopter costs and improving both safety and certainty of access to KSM, while at the same time providing cost-saving logistical benefits for Eskay Miningâ€™s planned exploration activities,â€™â€™ said Seabridge Gold Chairman and CEO Rudi Fronk.
Eskay shares eased 7.1% or 20 cents to $2.61 and trade in a 52-week range of $3.14 and 26 cents. Seabridge rose 0.50% or 11 cents to $21.90 to trade in a 52-week range of $29 and $19.45.
Seabridge Goldâ€™s KSM property is one of the worldâ€™s largest undeveloped gold projects as measured by reserves. It is estimated to contain 38.8 million ounces of gold and 10.2 billion pounds of copper in proven and probable reserves.
â€œMore important for Seabridge, constructing this segment now will shorten the time needed to establish early site access to the KSM deposits, enabling more rapid development of the project once we have consummated our anticipated joint venture,â€™â€™ Fronk said.
â€œCo-operation between neighbouring companies will help facilitate the emergence of B.C.â€™s Golden Triangle as one of Canadaâ€™s most important new mining camps.â€™â€™
Eskay Mining President and CEO Mac Balkam said the access road will provide his company with a tremendous benefit as it continues exploration on its 100%-owned Consolidated Eskay precious metal-rich volcanogenic massive suphide (VMS) project.
This summer, Eskay Mining plans to drill at least 30,000 metres of diamond core at multiple targets across its 526 square kilometre of land holdings, starting with focused drilling at its Jeff and TV targets to follow up on encouraging gold-silver mineralization, some high-grade, encountered by 18 of 20 drill holes completed in 2020.
To fund Eskay Miningâ€™s shares of costs under the agreement, Seabridge has agreed to purchase a $6.0 million convertible debenture and 1.35 million warrants from Eskay Mining.
At any time within a year from closing, Eskay Mining has the option to redeem any portion of the convertible debenture, plus any unpaid and accrued interest, for cash. At any time after the first anniversary of closing, Seabridge can convert all or any portion of the principal amount into common shares of Eskay Mining at $2.81 per share
The debenture will mature on the third anniversary of closing and will bear interest at 3% per annum. At any time after the first anniversary of closing, Eskay Mining has the right to force conversion of the debenture into Eskay Mining shares at $2.81 per share, provided that Eskayâ€™s common shares close at a price equal to greater than $4.22 for 20 consecutive trading days.
The warrants are exercisable into Eskay Mining common shares for three years at an average exercise price of $2.82 per share in the first year, $2.92 in the second, and $3.02 in year three.