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]

2019 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$) 0.77
Discount Rate 5%
Royalties 1%
Contained Metals
Contained Gold Ounces (koz) 2,212
Contained Silver Ounces (koz) 53,404
Contained AuEq Ounces (koz) 2,857
Mining
Mine Life (Years) 8.6
Strip Ratio (Waste:Mineralization) 7.2:1
Total Tonnage Mined (kt) 175,270
Total Mineralized Material Mined (kt) 21,307
Processing
Processing Throughput (TPD) 6,850
Average Diluted Gold Grade (g/t) 3.23
Average Diluted Silver Grade (g/t) 78
Average Diluted Gold Equivalent Grade (g/t) 4.17
Production
Gold Recovery 91.1%
Silver Recovery 92.4%
LOM Gold Production (koz) 2,022
LOM Silver Production (koz) 49,872
LOM Gold Equivalent Production (koz) 2,624
LOM Average Annual Gold Production (koz) 236
LOM Average Annual Silver Production (koz) 5,812
LOM Average Annual Gold Equivalent Production (koz) 306
Operating Costs
Mining Cost (C$/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

2021 Eskay Creek Mineral Resource Estimate

Table 1: Measured, Indicated and Inferred pit constrained resources reported at a 0.7 g/t AuEq cut-off grade.

  Grade Contained Ounces
  Tonnes
(000)
AuEq
g/t
Au
g/t
Ag
g/t
AuEq
oz (000)
Au
oz (000)
Ag
oz (000)
Measured 17,312 5.8 4.2 118.4 3,213 2,322 65,908
Indicated 20,342 2.9 2.2 52.5 1,903 1,439 34,362
Total M & I 37,654 4.2 3.1 82.8 5,116 3,761 100,270
Inferred 5,239 1.4 1.0 25.0 231 174 4,203

Table 2: Measured, Indicated and Inferred underground constrained resources reported at a 2.4 g/t AuEq cut-off grade for long-hole mining and 2.8 g/t AuEq cut-off grade for drift and fill mining (Underground = UG).

  Grade Contained Ounces
  Tonnes
(000)
AuEq
g/t
Au
g/t
Ag
g/t
AuEq
oz (000)
Au
oz (000)
Ag
oz (000)
Measured UG 345 6.1 5.2 67.3 68 58 747
Indicated UG 506 5.3 4.9 35.8 87 79 583
M + I UG 851 5.7 5.0 48.6 155 137 1,330
Inferred UG 429 4.9 4.1 57.0 67 57 787

1. Mineral resources are not mineral reserves and 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. As defined by NI 43‑101, the Independent and Qualified Person for the Eskay Creek MRE is Ms. S. Ulansky P.Geo., of SRK Consulting (Canada) Inc. who has reviewed and validated the Eskay Creek MRE. The effective date of the MRE is April 7, 2021.
3. Resources are reported in-situ and undiluted for the pit constrained and underground scenarios; both are considered to have reasonable prospects for economic extraction.
4. In accordance with NI 43-101 recommendations, the number of metric tonnes was rounded to the nearest thousand. Any discrepancies in the totals are due to rounding effects.
5. Metal prices used for the AuEq calculation are US$1,700 per ounce of gold, and US$23.00 per ounce of silver. AuEq = Au (g/t) + [Ag (g/t)/74].

Qualified Persons 
The Independent and Qualified Person for the Eskay Creek MRE is Ms. Sheila Ulansky P.Geo., of SRK Consulting (Canada) Inc. (Vancouver), who has reviewed, validated and approved the Eskay Creek MRE as well as the technical disclosure in this release. In accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects, Mr. Paul Geddes, P.Geo. Vice President Exploration and Resource Development, is the Qualified Person for the Company and has validated and approved the technical and scientific content of this news release. The Company strictly adheres to CIM Best Practices Guidelines in conducting, documenting, and reporting its activities on its various exploration 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 forwardlooking statements or information except as may be 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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