Skeena raises $8 million for Eskay Creek

Skeena Resources Ltd. [SKE-TSXV; SKREF-OTCQX] has signed a purchase and sale agreement to sell the company’s 100% interest in the GJ Copper-Gold property to Newcrest Red Chris Mining Ltd., an affiliate of Newcrest Mining Ltd. [NCM-ASX] for $7.5 million in cash.

The 43,500-hectare GJ property is situated approximately 30 km west of the Red Chris Mine in the Golden Triangle area of northwestern British Columbia. Imperial Metals Corp. [III-TSX] recently sold a 70% stake in Red Chris to Newcrest for US$806.5 million in cash.

Having announced a Preliminary Economic Assessment for the GJ Project in April 2017, Skeena said it has been seeking a partner to develop the asset to the pre-feasibility stage.

In addition, Skeena said it has sold its wholly-owned subsidiary Sona Resources Corp., including the Blackdome-Elizabeth property to Australia Stock Exchange-listed Tempus Resources Ltd. for $500,000 cash. Blackdome-Elizabeth is also located in B.C., approximately 200 km north of Vancouver and 35 km northeast of the past-producing Bralorne Gold Mine, which operated between 1928 and 1971, producing 4.2 million ounces of gold.

Skeena is bidding to revive two of Canada’s most successful high-grade precious metal mines – Snip and Eskay Creek. Both are located in northwest British Columbia in an area known as The Golden Triangle.

Skeena acquired a 100% interest in the former Snip Mine in July, 2017 from Barrick Gold Corp. [ABX-TSX GOLD-NYSE]. Six months later, it secured an option to acquire a 100% stake in Eskay Creek from Barrick.

“Advancing the Eskay Creek project is Skeena’s primary focus,” said Skeena CEO Walter Coles. “Therefore, we are divesting the GJ Property and Blackdome-Elizabeth property as a way to raise funds for Eskay while incurring the least amount of equity dilution possible to our shareholders,” he said.

On Wednesday February 5, Skeena shares east 0.92% or $0.01 to $1.08 on volume of 159,942. The shares trade in a 52-week range of 27 cents and $1.21.

Skeena recently released the results of an initial Preliminary Economic Assessment (PEA) for Eskay Creek.

“Eskay Creek was a remarkable discovery that became an extraordinary mine,” Coles said. “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.

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 decision to stop mining at Eskay Creek would have occurred in 2005-2006 when the price of gold was around US$500 an ounce, the company has said.

The property is endowed with excellent infrastructure, including all-weather road access and proximity to the new 287-kilovolt Northwest Transmission Line.

“The PEA demonstrates that Eskay Creek still has a bright future, revitalized as an open-pit gold and silver mine, with additional possibility for underground mining,” said Coles.

According to the PEA, the project has the potential to produce an average of 306,000 gold equivalent ounces annually with a diluted mill feed grade of 4.17 g/ gold equivalent.

The processing capacity of 6,850 tonnes-per-day will result in a production lifespan of 8.6 years. An additional 1.5 years of pre-stripping, stockpiling and mine access development is planned prior to the processing facility becoming fully operational in year one.

Other highlights of the PEA include pre-production capital expenditures of US$233 million and life of mine all-in-sustaining costs of US$757 per ounce of gold equivalent recovered.

It also envisages an after-tax Net Present Value of US$491 million and 51% IRR at US$1,325/oz gold and US$16/oz silver.  The after-tax payback period is forecast at 1.2 years.