Skeena plans to advance BC gold-silver mine to permitting North of 60 Mining News – September 9, 2022
A feasibility study for developing a mine at Skeena Resources Ltd.'s Eskay Creek has confirmed that developing an open pit mine at this historic gold-silver project in British Columbia's Golden Triangle remains profitable in today's inflationary environment, even if the price of gold dropped to US$1,400 per ounce and silver was selling for a mere US$14/oz.
At US$1,700/oz gold and US$19/oz silver, the open pit mined detailed in the Eskay Creek feasibility study prepared for Skeena is expected to generate an after-tax net present value (5% discount) of US$1.1 billion (C$1.41 billion) and a 50.2% after-tax internal rate of return.
"The feasibility study confirms the robust economics of the world-class Eskay Creek Project originally shown in the prefeasibility study but with improved definition," said Skeena Resources President Randy Reichert.
Financial and operational results from the prefeasibility study can be found at PFS details robust Eskay Creek gold mine in the July 23, 2021 edition of North of 60 Mining News.
Given the financial robustness of the Eskay Creek Mine detailed in the feasibility study, it is only expected to take one year to pay back the US$451 million (C$592 million) estimated capital costs to develop the open pit operation.
"Eskay Creek is a truly unique deposit that provides excellent profit margins due to its existing infrastructure and very high open pit grade," said Skeena Resources CEO Walter Coles Jr. "Even at US$1,400 gold and US$13 silver prices, the project still generates an average annual after-tax cash flow of C$209 million with an after-tax IRR of 36% and a 1.5-year payback on initial capital."
Over the nine years of operations considered in the feasibility study, the open pit mine proposed for Eskay Creek would produce 2.42 million oz of gold and 66.7 million oz of silver from 29.9 million metric tons of proven and probable reserves averaging 2.99 grams per metric ton gold and 79 g/t silver.
Roughly 3 million metric tons of ore would be fed through the mill annually over the first five years of operation before ramping up to 3.7 million metric tons annually during the final four years considered in the feasibility study.
The US$451 million (C$592 million) of initial capital needed to develop this mine is 21% higher than what was estimated in the July 2021 prefeasibility study due to the recent inflationary trends pushing up labor and materials costs.
The capital costs for the year-five expansion are expected to be around US$30 million (C$39.7 million).
Despite the increased costs, Skeena says the existing infrastructure at the past-producing Eskay Creek Mine and the availability of BC hydropower has helped mitigate much of the inflationary pressures.
"The open-pit mineable, high-grade ore combined with the existing infrastructure at the Eskay Creek site and nearby hydropower provides for an extraordinary project that can be developed by Skeena," said Reichert.
Even with the robust financial results of the feasibility study, and the prefeasibility study that came before it, opportunities still remain to further increase the value of a next-generation mine at Eskay Creek.
One such opportunity is to incorporate the success of the ongoing expansion drilling into an expanded resource that could be upgraded to reserves that would extend the life of the Eskay Creek Mine.
On Aug. 6, Skeena reported assays from the first 2022 holes drilled into the East Flank, 21A West, and 23 resource expansion zones adjacent to the proposed open pit at Eskay Creek.
Further details from the initial results of this resource expansion drilling can be read at Eskay Creek expansion holes show promise in the current edition of North of 60 Mining News.
Other areas of optimization include:
• Resource modeling and mine plan enhancements.
• Metallurgical testing to optimize the Eskay Creek process flow sheet.
• Optimize the mine plan through geometallurgical modeling based on enhanced knowledge of the orebody.
• Develop alternative execution approaches to further reduce capital expenditures and enhance project economics.
With an already robust feasibility study, however, Skeena now has a project to take into permitting.
"While the team continues to work on optimization of the project, my primary focus will now shift to advancement of the permitting process as we move Eskay Creek toward construction," said Reichert.
This permitting process is expected to be made easier by the strong relationship Skeena has built with the Tahltan Nation, whose traditional territory covers the Eskay Creek project.
Under a historic agreement reached in June, Eskay Creek will be the first proposed mine in BC to have permits authorized by an indigenous government.
For Skeena, this agreement provides greater certainty and a solid framework for permitting a modern operation at Eskay Creek.
Further details on this agreement and what it means for Eskay Creek and permitting mines in the Tahltan Territory can be read at Historic day for BC mining, First Nations in the June 6, 2022 edition of North of 60 Mining News.
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