2021 Prefeasibility Study

Skeena released a Prefeasibility Study ("PFS") for Eskay Creek on July 22, 2021.

Eskay Creek 2021 PFS Highlights:
•    High-grade open-pit averaging 3.37 g/t Au, 94 g/t Ag (4.57 g/t AuEq) (diluted)
•    Proven and Probable Mineral Reserves of 3.88 Moz AuEq (26.4 Mt at 3.37 g/t Au and 94 g/t Ag).
•    After-tax NPV5% of C$1.4 billion, (US$1.1 billion) and 56% IRR at US$1,550/oz Au and US$22/oz Ag
•    After-tax payback period of 1.4 years
•    Pre-production capital expenditures (CAPEX) of C$488M (US$381M)
•    After-tax NPV:CAPEX Ratio of 2.9:1
•    Life of mine (“LOM”) average annual production of 249,000 oz Au, 7,222,000 oz Ag (352,000 oz AuEq) over a 9.8-year mine life
•    LOM all-in sustaining costs (“AISC”) of C$702/oz (US$548/oz) AuEq recovered
•    LOM cash costs of C$651/oz (US$509/oz) AuEq recovered
•    7,945 tonne per day (“tpd”) mill and flotation plant producing saleable concentrate
•    LOM average greenhouse gas (“GHG”) emissions of 0.18 t CO2e/oz AuEq

•    Exchange Rate (US$/C$) of 0.78
•    Cash costs are inclusive of mining costs, processing costs, site G&A, treatment and refining charges and royalties
•    AISC includes cash costs plus estimated corporate G&A, sustaining capital and closure costs
•    t CO2e = tonnes of carbon dioxide equivalent

PFS Overview

The 2021 Eskay Creek PFS considers an open-pit mine with on-site treatment of the mined material by conventional milling and flotation to recover a gold-silver concentrate. The mine will be an owner-operated, standard truck and shovel open-pit, with a leased mining fleet. The plant will process ore at a nominal rate of 2.0 million tonnes per year (“Mt/y”) (5,480 tpd) in Year 1 during ramp-up, 2.9 Mt/y (7,945 tpd) for Years 2 to 4 then reduce to 2.7 Mt/y (7,400 tpd) in Year 5 onward as the material increases in hardness and competency over an expected production lifespan of 9.8 years. An additional 30 months of pre-stripping, stockpiling and mine access development is planned prior to the processing facility becoming fully operational in Year 1. The PFS leverages Eskay Creek’s extensive existing infrastructure, including all-weather access roads, previously permitted tailing storage facilities (“TSF”) and proximity to the 195 MW hydroelectric facilities and linked power grid. 

The PFS is derived from the Company’s pit-constrained resource estimate (April 7, 2021) and does not include results from the recently initiated and ongoing 2021 drill program. The effective date of the PFS is July 22, 2021, and a technical report will be filed on the Company’s website and SEDAR within 45 days of this disclosure.
 

Table 1: 2021 Eskay Creek PFS Project Parameters

Economic Assumptions
Gold Price (US$) $1,550
Silver Price (US$) $22
Exchange Rate (US$/C$) 0.78
Discount Rate 5%
Contained Metals
Contained Gold Ounces (koz) 2,866
Contained Silver Ounces (koz) 80,197
Mining
Mine Life (Years) 9.8
Strip Ratio (Waste:Ore) 8:1
Total Mined Material (excl. rehandle) (kt) 238,030
Total Mineralized Material Mined (kt) 26,419
Processing
Processing Throughput (TPD)

5,480 tpd (Yr 1)

7,945 tpd (Yr 2-4)

7,400 tpd (Yr 5 onwards)

Average Diluted Gold Grade (g/t) 3.37
Average Diluted Silver Grade (g/t) 94
Average Diluted Gold Equivalent Grade (g/t) 4.57
Production
Gold Recovery 84.2%
Silver Recovery 87.3%
LOM Gold Production (koz) 2,448
LOM Silver Production (koz) 70,902
LOM AuEq Production (koz) 3,455
LOM Average Annual Gold Production (koz) 249
LOM Average Annual Silver Production (koz) 7,222
LOM Average Annual AuEq Production (koz) 352
Operating Costs
Mining Cost (C$/t Mined) $3.58
Mining Cost (C$/t Milled) $30.56
Processing Cost (C$/t Milled) $18.22
G&A Cost (C$/t Milled) $6.23
Total Operating Cost (C$/t Milled) $55.01
Other Costs
Transport to Smelter (C$/wmt) $146
Royalty (NSR %) 2.0%
Cash Costs and AISC
LOM Cash Cost (US$/oz Au) Net of Silver By-Product $84
LOM Cash Cost (US$/oz AuEq) Co-Product $509
LOM AISC (US$/oz Au) Net of Silver By-Product $138
LOM AISC (US$/oz AuEq) Co-Product $548
Capital Expenditures
Pre-Production Capital Expenditures (C$M) $488
Sustaining Capital Expenditures (C$M) $47
Reclamation Cost (C$M) $92
Economics
After-Tax NPV (5%) (C$M) $1,399
After-Tax IRR 56%
After-Tax Payback Period (Years) 1.4
After-Tax NPV / Inital Capex 2.9 x
Pre-Tax NPV (5%) (C$M) 2,174
Pre-Tax IRR 68%
Pre-Tax Payback Period (years) 1.3
Pre-Tax NPV / Initial Capex 4.5 x
Average Annual After-tax Free Cash Flow (year 1-10) (C$M) $265
LOM After-tax Free Cash Flow (C$M) $2,118

•    Cash costs are inclusive of mining costs, processing costs, site G&A and royalties
•    AISC includes cash costs plus corporate G&A, sustaining capital and closure costs
•    All dollar ($) figures are presented in CAD unless otherwise stated. Base case metal prices used in this economic analysis are US$1,550/oz Au and US$22/oz Ag. These prices are based on long-term average prices.

Sensitivities

After-tax economic sensitivities to commodity prices, presented in Table 2, illustrate the effects of varying gold and silver prices as compared to the base-case. Additional Project sensitivities will be presented in the Technical Report.

Table 2: After-tax NPV5% and IRR Sensitivities to Commodity Prices

  Lower Case Base Case Higher Case Upside Case
Gold Price (US$/oz) $1,400 $1,550 $1,700 $1,950
Silver Price (US$/oz) $20 $22 $24 $26
After-Tax NPV (5%) (C$M) $1,162 $1,399 $1,635 $1,985
After-Tax IRR (%) 49% 56% 62% 70%
After-Tax Payback (Years) 1.6 1.4 1.2 1.1
After-Tax NPV/Initial Capex 2.4 x 2.9 x 3.4 x 4.1 x
Average Annual After-Tax Free Cash Flow (Years 1-9) (C$M) $231 $265 $300 352

 

Table 3: Pit constrained Mineral Resource Statement reported at a 0.7 g/t AuEq cut-off grade.

  Grade Contained Ounces
  Tonnes
(Mt)
AuEq
g/t
Au
g/t
Ag
g/t
AuEq
(Moz)
Au
(Moz)
Ag
(Moz)
Measured 17.3 5.8 4.2 118.4 3.2 2.3 65.9
Indicated 20.3 2.9 2.2 52.5 1.9 1.4 34.4
Total M & I 37.7 4.2 3.1 82.8 5.1 3.8 100.3

•    These mineral resources are not mineral reserves as they do not have demonstrated economic viability. Results
•    are reported in-situ and undiluted and are considered to have reasonable prospects for economic extraction.
•    As defined by NI 43-101, the Independent and Qualified Person is Ms. S Ulansky, PGeo of SRK Consulting (Canada) who has reviewed and validated the Mineral Resource Estimate.
•    The effective date of the Mineral Resource Estimate is April 7, 2021.
•    The number of metric tonnes and ounces were rounded to the nearest thousand. Any discrepancies in the totals are due to rounding.
•    Pit constrained Mineral Resources are reported in relation to a conceptual Pit shell.
•    Block tonnage was estimated from average specific gravity measurements using lithology groupings.
•    All composites have been capped where appropriate.
•    Pit mineral resources are reported at a cut- off grade of 0.7 g/t, cut off grades must be revaluated considering prevailing market conditions. 
•    Cut-off grades are based on a price of US$1,700/oz Au, US$23/oz Ag, and gold recoveries of 90%, silver recoveries of 80% and without considering revenues from other metals. AuEq = Au (g/t) + [Ag (g/t) / 74]
•    Estimates use metric units (metres, tonnes and g/t). Metals are reported in troy ounces (metric tonne * grade / 31.10348)
•    CIM definitions were followed for the classification of mineral resources.
•    Neither the company nor SRK is aware of any known environmental, permitted, legal, title-related, taxation, socio-political, marketing or other relevant issue that could materially affect this mineral resource estimate.


Table 4: 2021 Proven and Probable Reserves 

  Grade Contained Ounces
  Tonnes
(Mt)
AuEq
g/t
Au
g/t
Ag
g/t
AuEq
oz (000)
Au
oz (000)
Ag
oz (000)
Proven 13.5 5.81 4.25 124 2.53 1.85 53.7
Probable 12.9 3.26 2.46 64 1.35 1.02 26.5
Total 26.4 4.57 3.37 94 3.88 2.87 80.2

Note: This mineral reserve estimate is as of June 30th, 2021 and is based on the mineral resource estimate dated April 7, 2021 for Skeena Resources by SRK Consulting. The mineral reserve calculation was completed under the supervision of Willie Hamilton, P.Eng. of AGP, who is a Qualified Person as defined under NI 43-101. Mineral reserves are stated within the final design pit based on a US$1,475/oz gold price and US$20.00/oz silver price. The NSR cut-off grade of C$30.56/t was used to define the marginal cut-off material. The life-of-mine mining cost averaged C$3.14/t mined, preliminary processing and G&A costs are C$24.50/t ore and C$6.06/t ore respectively. The ore recoveries were varied according to gold head grade and concentrate grades. Gold concentrate grades varied from 20 to 60 g/t gold. The gold equivalent grades are based on 79.3 Ag ounces yielding similar value to an Au ounce.

Qualified Persons
In accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects, Paul Geddes, P.Geo. Vice President Exploration and Resource Development, is the Qualified Person for the Company and has reviewed, validated and approved the technical and scientific content of this news release.

Sheila Ulansky, P.Geo., Senior Resource Geologist for SRK Consulting (Canada) Inc., is an independent Qualified Person as defined by NI43-101 and has reviewed and approved the contents of this news release. Ms. Ulansky is responsible for the 2021 Mineral Resource Estimate for the Eskay Creek Project.

Robert Raponi, P.Eng, Principal Metallurgist for Ausenco Engineering Canada Inc., is an independent Qualified Person as defined by NI43-101 and has reviewed and approved the contents of this news release. Mr. Raponi is responsible for processing, process and infrastructure capital and operating cost estimation, financial analysis and marketing.

Scott Elfen, P.E., Global Practice Lead Geotechnical Services – Ausenco Engineering Canada, Inc is an independent Qualified Person as define by NI43-101 and has reviewed and approved the contents of this news release.  Mr. Elfen is responsible for site wide geotechnical program, tailings and PAG waste rock storage facility and water management tailings and waste rock storage facilities

Willie Hamilton, P.Eng, Mining Engineer for AGP Mining Consultants Inc., is an independent Qualified Person as defined by NI43-101 and has reviewed and approved the contents of this news release.  Mr. Hamilton is responsible for the mineral reserve calculation. 

Gordon Zurowski, P.Eng, Principal Mining Engineer for AGP Mining Consultants Inc., is an independent Qualified Person as defined by NI43-101 and has reviewed and approved the contents of this news release.  Mr. Zurowski is responsible for mine capital and operating cost estimation and supervision of the mine design.

Adrian Dance, P.Eng, Principal Consultant (Metallurgy) for SRK Consulting (Canada) Inc., is an independent Qualified Person as defined by NI43-101 and has reviewed and approved the contents of this news release. Dr. Dance is responsible for mineral processing and metallurgical testing.

The Company strictly adheres to CIM Best Practices Guidelines in conducting, documenting, and reporting the exploration and development activities on its projects.

Cautionary note regarding forward-looking statements
This release contains statements and information which constitute “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and United States securities legislation (collectively, “forward-looking statements”). These statements relate to future events or our future performance. The use of words such as “contemplates”, “generates”, “targets”, “is projected”, “is planned”, “considers”, “estimates”, “expects”, “is expected”, “potential” and similar expressions, or statements that certain actions, events or results “may”, “might”, “will”, “could”, or “would” be taken, achieved, or occur, may identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements. Specific forward-looking statements contained herein include, but are not limited to, statements regarding the results of the PFS, completion of a feasibility study, processing capacity of the mine, anticipated mine life, probable reserves, estimated project capital and operating costs, sustaining costs, results of test work and studies, planned environmental assessments, the future price of metals, metal concentrate, and future exploration and development. Such forward-looking statements are based on material factors and/or assumptions which include, but are not limited to, the estimation of mineral resources and reserves, the realization of resource and reserve estimates, metal prices, taxation, the estimation, timing and amount of future exploration and development, capital and operating costs, the availability of financing, the receipt of regulatory approvals, environmental risks, title disputes and other matters. Such forward-looking statements represent the Company’s management expectations, estimates and projections regarding future events or circumstances on the date the statements are made, and are necessarily based on a number of estimates and assumptions that, while considered reasonable by the Company as of the date hereof, are not guarantees of future performance. Actual events and results may differ materially from those described herein, and are subject to significant operational, business, economic, and regulatory risks and uncertainties. The risks and uncertainties that may affect the forward-looking statements in this release include, among others: the inherent risks involved in exploration and development of mineral properties, including permitting and other government approvals; changes in economic conditions, including changes in the price of gold and other key variables; changes in mine plans and other factors, including accidents, equipment breakdown, bad weather and other project execution delays, many of which are beyond the control of the Company; environmental risks and unanticipated reclamation expenses; and other risk factors identified in the Company’s 2020 Annual Information Form dated March 25, 2021, and in the Company’s other periodic filings with securities and regulatory authorities that are available on SEDAR at www.sedar.com. 

Readers should not place undue reliance on such forward-looking statements. The Company does not undertake any obligations to update and/or revise any forward-looking statements except as required by applicable securities laws.

Neither the Toronto Stock Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.
 

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