Economically robust Eskay Creek Mine
North of 60 Mining News - November 17, 2023
Last updated 11/24/2023 at 1:40pm
Feasibility study details on open-pit mine slated to produce 2.8M oz of gold over first 12 years of mine.
A definitive feasibility study for Eskay Creek details the economic and engineering parameters for a longer-life mine at this exciting gold-silver project in British Columbia's Golden Triangle that will generate strong financial returns for Skeena Resources Ltd., even at the higher costs of building the mine in today's inflationary environment.
Under the base case scenario prices of US$1,800/oz gold and US$23/oz silver, the open-pit mine detailed in the 2023 Eskay Creek feasibility study is expected to generate an after-tax net present value (5% discount) of C$2 billion (US$1.46 billion) and a 42.9% after-tax internal rate of return.
Given the financial robustness of the Eskay Creek mine detailed in the feasibility study, it is only expected to take 1.2 years to pay back the C$713 million (US$521 million) estimated capital costs to develop the open-pit operation.
"With our base case after-tax NPV surpassing C$2.0 billion, Eskay Creek stands out as a rare potential Tier 1 gold mining project, located in a politically stable jurisdiction," said Skeena Resources Executive Chairman Walter Coles.
Critical de-risking step
Over the 12 years of operations considered in the feasibility study, the open-pit mine proposed for Eskay Creek would produce 2.8 million oz of gold and 81.1 million oz of silver from 39.8 million metric tons of proven and probable reserves averaging 2.6 grams per metric ton (3.3 million oz) gold and 68.7 g/t (88 million oz) silver.
This comes to an annual average of 324,000 oz gold-equivalent, which accounts for the value of both the gold and silver, over the 12 years of mining outlined in the study. Eskay Creek's precious metals output, however, is expected to be heavily weighted toward the early years of mining.
The average annual production over the first five years is expected to be around 455,000 gold-equivalent oz and the operation is expected to generate approximately C$2.37 billion (US$1.72 billion) of free cashflow over this span.
The increased NPV, longer mine life, and higher precious metals output are the result of increased metals reserves and other optimizations realized since the 2022 feasibility study.
"This definitive feasibility study was a critical de-risking step for the company in the development of Eskay Creek. In this study, we had multiple breakthroughs in metallurgy, increased mineral reserves by approximately 20% and continued to increase the project value for our shareholders," said Skeena Resources President and CEO Randy Reichert. "This study is robust and engineered to construct Eskay Creek."
While the definitive feasibility study is engineered to develop a mine at Eskay Creek, and the economics for this mine are robust, there remains opportunities to squeeze more value out of the gold-silver project.
"Excitingly, we see additional opportunities to increase reserves and mine life, while continuing to advance the project through permitting, project financing, construction and production in 2026," said Coles.
Optimization opportunities identified in the definitive feasibility study include:
• Reevaluating deeper gold and silver mineralization in the 2023 resource model, to potentially contribute additional ore to future mine plans.
• Steepening slopes within various lithological units, which could reduce stripping costs for current reserves and enhance the economics of mining deeper gold and silver mineralization
• Maximizing the value of concentrates produced through revenue from the recovery of lead, zinc, and antimony.
• Completing the evaluation of potential economic benefit of supplementing Eskay Creek mill feed with high-grade mineralization from Snip.
Even with the strong economics outlined in the Eskay Creek study and an exemplary relationship with local Tahltan First Nation, Skeena still has the large hurdle of financing its first mine.
"We're frustrated by the massive valuation gap between non-revenue generating mine developers and junior gold producers," said Coles. "However, we recognize that rapidly advancing Eskay Creek toward production and generating cash flow is the obvious path to delivering tremendous shareholder value."