New KSM mine plan comes to surface
New PFS leverages East Mitchell deposit to establish an open pit mine with improved economics in inflationary environment North of 60 Mining News – July 1, 2022
Last updated 7/7/2022 at 2:37pm
An updated prefeasibility study details plans for a financially robust mining operation at Seabridge Gold Inc.'s KSM project in British Columbia's Golden Triangle that will produce an average of more than 1 million ounces of gold, 3 million oz of silver, 178 million pounds of copper and 4.2 million lb of molybdenum annually for 33 years.
Unlike a PFS completed in 2016, this new study does not include block cave mining of the deeper resource found at the world-class deposit. Instead, the 2022 PFS involves open-pit mining of the Mitchell, East Mitchell and Sulphurets deposits only.
This change in the KSM mine plan is primarily the result of Seabridge's 2020 acquisition of Pretium Resources' Snowfield project, which added East Mitchell to the project. Essentially an extension of the near-surface Mitchell deposit that has long put the "M" in the Kerr-Sulphurets-Mitchell project, East Mitchell has significantly added to the global resources at KSM.
According to an updated calculation completed earlier this year, KSM now hosts 5.4 billion metric tons of measured and indicated resources averaging 0.51 grams per metric ton (88.3 million oz) gold, 0.16% 19.4 billion lb) copper, 2.4 g/t (414 million oz) silver, and 63 parts per million (742 million lb) molybdenum; plus 5.7 billion metric tons of inferred resource averaging 0.36 g/t (65.6 million oz) gold, 0.28% (35.1 billion lb) copper, 2.2 g/t (406 million oz) silver, and 33 ppm (415 million lb) molybdenum.
Based on this global resource and the mine plan detailed in the PFS, the Mitchell, East Mitchell, and Sulphurets deposits host 2.29 million metric tons of proven and probable reserves averaging 0.64 g/t (47.3 million oz) gold, 0.14% (7.32 billion lb) copper, 2.2 g/t (160 million oz) silver, and 76 ppm (385 million lb) molybdenum.
The new PFS envisions the reserves mined from these surface deposits providing feedstock for a 133,000 metric ton per day mill for the first three years of operations, which would be expanded to a 195,000 tpd mill for the remaining 30 years.
A flotation plant would produce a copper concentrate carrying gold and silver, plus a molybdenum concentrate. Gold-silver doré will also be produced at the KSM processing facility. The concentrates would be trucked to a port in the nearby town of Stewart, BC, where they would be shipped to Pacific Rim smelters.
The 2022 study also considers autonomous mine equipment, where applicable, and an integrated remote operations center to reduce on-site personnel. The new mine plan also includes the use of an electric haul truck fleet with trolley assist to reduce carbon emissions and energy costs through the replacement of diesel with low-cost and clean hydroelectricity.
"We have redesigned KSM for an inflationary environment. The themes for this PFS are capital and energy efficiency," said Seabridge Gold Chairman and CEO Rudi Fronk.
The initial capital cost of building the mine detailed in the 2022 PFS is estimated to be US$6.4 billion, which is roughly 28% higher than the US$5 billion that was estimated for the mine outlined in the 2016 study.
Initial capital estimates assume early works such as roads and power infrastructure are being completed ahead of a major project construction decision as a part of the ongoing KSM substantial start activities.
While startup costs have increased due to inflation, the sustaining capital over the 33-year mine life is estimated at US$3.2 billion, which is approximately US$2.3 billion lower than the sustaining costs in the 2016 PFS. The 2022 sustaining capital is dominated by mill throughput expansion and mine fleet ramp up during the first two years of operation, and tailings sustaining capital mid-way through the mine life.
In addition to sustaining capital, a further US$1.27 billion has been charged against the project including US$653 million set aside in a sinking fund during the production period to pay for estimated water treatment obligations that continue after closure and US$620 million for physical reclamation and post-closure maintenance after mining operations have ceased.
With the elimination of the expense of block cave mining more than offsetting inflationary pressures, the overall capital costs outlined in the 2022 PFS is US$9.6 billion, nearly US$1 billion lower than the $10.5 billion for the operation detailed in 2016.
"The mine plan is simplified to bring total capital down below 2016 estimates despite inflation by reducing sustaining capital. We have accomplished this by eliminating underground mine development which is deferred to future years," said Fronk. "Important steps have also been taken to make the project less dependent on oil, especially diesel fuel, which is an inflationary hot spot and likely to remain so. We have done this by maximizing the use of low cost, green hydroelectric energy."
As a result, the after-tax net present value (5% discount) of the KSM mine detailed in the 2022 PFS is US$7.9 billion, a substantial increase over the US$1.5 billion NPV for the mine considered in the 2016 study. Likewise, the after-tax internal rate of return for the 2022 plan is 16.1%, more than double the 8% IRR estimated in the 2016 PFS.
Despite the higher initial capital, the payback period for the operation outlined in the 2022 PFS is 3.7 years, roughly three years shorter than in the 2016 study.
With the 2022 PFS only considering open pit mines at Mitchell, East Mitchell, and Sulphurets, only about 25% of the KSM resource is considered in the mine plan. The copper-rich resources ay Kerr and Iron Cap will be considered in an analysis of a stand-alone development of these underground deposits and will be included as a preliminary economic assessment forming a separate section of the NI 43-101 technical report for the 2022 PFS, which be filed within the next 45 days.