PEA & Resource

Skeena released a Preliminary Economic Assessment ("PEA") for Eskay Creek on November 7, 2019.

Eskay Creek 2019 PEA Highlights:

  • High-grade open-pit averaging 3.23 g/t Au, 78 g/t Ag (4.17 g/t AuEq) (diluted)
  • After-tax NPV5% of C$638M (US$491M) and 51% IRR at US$1,325/oz Au and US$16/oz Ag
  • After-tax payback period of 1.2 years
  • Pre-production capital expenditures (CAPEX) of C$303M (US$233M)
  • After-tax NPV:CAPEX Ratio of 2.1:1
  • Life of mine (“LOM”) average annual production of 236,000 oz Au, 5,812,000 oz Ag (306,000 oz AuEq)
  • LOM all-in sustaining costs (AISC) by-product of C$799/oz (US$615/oz) Au recovered
  • LOM cash cost by-product of C$756/oz (US$582/oz) Au recovered
  • 6,850 tonne per day (TPD) mill and flotation plant producing saleable concentrate

1. Exchange Rate (US$/C$) of 0.77
2. Cash costs are inclusive of mining costs, processing costs, site G&A, treatment and refining changes and royalties
3. AISC includes cash costs plus estimated corporate G&A, sustaining capital and closure costs
4. Gold Equivalent (AuEq) calculated via the fomula: Au (g/t) + [Ag (g/t) / 82.8]

PEA Overview

The 2019 Eskay Creek PEA considers an open-pit mine with on-site treatment of the mined material by conventional milling and flotation to recover a gold-silver concentrate for provision to third-party smelters. The mine will be an owner-operated, standard truck and shovel open-pit, with a leased mining fleet. At present, no contributions from previously reported underground resources are NR: 19-18 November 7, 2019 incorporated into this study. 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 1. The PEA leverages Eskay Creek’s extensive existing infrastructure, including all-weather access roads, previously permitted tailing storage facilities (TSF) and proximity to the recently commissioned 195 MW hydroelectric facilities and linked power grid.

The PEA is derived from the Company’s pit-constrained resource estimate (February 28, 2019), and does not include results from the recently initiated and ongoing 2019 Phase I infill drilling program. The effective date of the PEA is November 7, 2019 and a technical report will be filed on the Company’s website and SEDAR within 45 days of this disclosure.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. The PEA is preliminary in nature and includes inferred mineral resources that are too speculative to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that PEA results will be realized.

Table 1: 2019 Eskay Creek 2019 PEA Detailed Parameters and Outputs

Assumptions
Gold Price (US$) $1,325
Silver Price (US$) $16
Exchange Rate (US$/C$) 0.77
Discount Rate 5%
Royalties 1%
Contained Metals
Contained Gold Ounces (koz) 2,212
Contained Silver Ounces (koz) 53,404
Contained AuEq Ounces (koz) 2,857
Mining
Mine Life (Years) 8.6
Strip Ratio (Waste:Mineralization) 7.2:1
Total Tonnage Mined (t) 175,270
Total Mineralized Material Mined (t) 21,307
Processing
Processing Throughput (TPD) 6,850
Average Diluted Gold Grade (g/t) 3.23
Average Diluted Silver Grade (g/t) 78
Average Diluted Gold Equivalent Grade (g/t) 4.17
Production
Gold Recovery 91.1%
Silver Recovery 92.4%
LOM Gold Production (koz) 2,022
LOM Silver Production (koz) 49,872
LOM Gold Equivalent Production (koz) 2,624
LOM Average Annual Gold Production (koz) 236
LOM Average Annual Silver Production (koz) 5,812
LOM Average Annual Gold Equivalent Production (koz) 306
Operating Costs
Mining Cost (C$/t Mined) $3.44
Mining Cost (C$/t Milled) $26.32
Processing Cost (C$/t Milled) $21.64
G&A Cost (C$/t Milled) $6.06
Total Operating Cost (C$/t Milled) $54.03
Cash Costs and AISC
LOM Cash Cost (US$/oz Au) Net of Silver By-Product $582
LOM Cash Cost (US$/oz AuEq) Co-Product $731
LOM AISC (US$/oz Au) Net of Silver By-Product $615
LOM AISC (US$/oz AuEq) Co-Product $757
Capital Expenditures
Pre-Production Capital Expenditures (C$M) $303
Sustaining Capital Expenditures (C$M) $27
Reclamation Cost (C$M) $52
Economics
After-Tax NPV (5%) (C$M) $638
After-Tax IRR 51%
After-Tax Payback Period (Years) 1.2

1. Cash costs are inclusive of mining costs, processing costs, site G&A, treatment and refining charges and royalties
2. AISC includes cash costs plus corporate G&A, sustaining capital and closure costs
3. Gold Equivalent (AuEq) calculated via the formula: Au (g/t) + [Ag (g/t) / 82.8]

Sensitivities

After-tax economic sensitivities to commodity prices are presented in Table 2 illustrating 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
Gold Price (US$/oz) $1,200 $1,325 $1,500
Silver Price (US$/oz) $14 $16 $18
After-Tax NPV (5%) (C$M) $453 $638 $878
After-Tax IRR (%) 40% 51% 63%
After-Tax Payback (Years) 1.6 1.2 0.9
Average Annual After-Tax Free Cash Flow (Years 1-9) (C$M) $117 $147 $187

Eskay Creek Mineral Resource Estimate

The Company’s current Mineral Resource Estimate (MRE; effective date of February 28, 2019) completed by SRK Consulting (Canada) forms the basis for this PEA. The MRE does not include drilling results from the Company’s recently initiated and ongoing 2019 Phase I infill program.

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

  Grade Contained Ounces
  Tonnes
(000)
AuEq
g/t
Au
g/t
Ag
g/t
AuEq
oz (000)
Au
oz (000)
Ag
oz (000)
Total Indicated 12,650 5.8 4.3 110 2,340 1,740 44,660
Total Inferred 14,420 2.9 2.3 47 1,340 1,050 21,720

Table 4: Underground Mineral Resource Statement reported at a 5.0 g/t AuEq cut-off:

  Grade Contained Ounces
  Tonnes
(000)
AuEq
g/t
Au
g/t
Ag
g/t
AuEq
oz (000)
Au
oz (000)
Ag
oz (000)
Total Indicated 819 8.2 6.4 139 218 169 3,657
Total Inferred 295 8.2 7.1 82 78 68 778

1. Mineral resources are not mineral reserves as they do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves.
2. Results are reported in-situ and undiluted and are considered to have reasonable prospects for economic extraction
3. The quantity and grade of reported Inferred Mineral Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred Mineral Resources as an Indicated Mineral Resource and it is uncertain if further exploration will result in upgrading them to an Indicated Mineral Resource category.
4. For the PEA study, the open-pit block model was regularized to 9 m x 9 m x 4 m whole blocks using mineralization greater than 0.5 g/t AuEq within a single mineralization percent field; therefore a slight difference exists between the resources reported herein, and the resources released in the February 28, 2019 press release
5. The number of metric tonnes and ounces were rounded to the nearest thousand. Any discrepancies in the totals are due to rounding
6. Reported underground resources are exclusive of the resources reported within the conceptual pit shell
7. Cut-off grades are based on a price of US$1,275 per ounce of gold, US$17 per ounce silver, and gold recoveries of 80%, silver recoveries of 90% and without considering revenues from other metals. AuEq = Au (g/t) + (Ag (g/t) / 75)
8. Estimates use metric units (meters, tonnes and g/t). Metals are reported in troy ounces (metric tonne * grade / 31.10348)
9. CIM definitions were followed for the classification of mineral resources

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 prepared, 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 2019 Mineral Resource Estimate for the Eskay Creek Project.

Robin Kalanchey, P.Eng, Director, Minerals & Metals - Western Canada for Ausenco Engineering Inc., is an independent Qualified Person as defined by NI43-101 and has reviewed and approved the contents of this news release. Mr. Kalanchey is responsible for processing, process and infrastructure capital and operating cost estimation, financial analysis and marketing.

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
Certain statements made and information contained herein may constitute “forward looking information” and “forward looking statements” within the meaning of applicable Canadian and United States securities legislation. These statements and information are based on facts currently available to the Company and there is no assurance that actual results will meet management’s expectations. Forward-looking statements and information may be identified by such terms as “anticipates”, “believes”, “targets”, “estimates”, “plans”, “expects”, “may”, “will”, “could” or “would”. Forward-looking statements and information contained herein are based on certain factors and assumptions regarding, among other things, 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. While the Company considers its assumptions to be reasonable as of the date hereof, forward-looking statements and information are not guarantees of future performance and readers should not place undue importance on such statements as actual events and results may differ materially from those described herein. The Company does not undertake to update any forward-looking statements or information except as may be required by applicable securities laws.

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