Seabridge refines vision for KSM Project

Seabridge Gold Inc. is inching closer to production of one of the world's five-largest undeveloped gold deposits, the KSM Project located in the Iskut-Stikine region about 65 kilometers, or 40 miles, northwest of Stewart, B.C.

The aggressive junior envisions building a huge open-pit copper-gold mine in this highly prolific mountainous terrain, known as the "Golden Triangle" of northern British Columbia.

Toronto-based Seabridge has pursued development of the project, which also boasts significant silver and molybdenum resources, for most of the past decade. Both the Kerr and Sulpurets zones were known when the junior acquired the project in 2000 during an extended period of low gold prices.

The original Kerr-Sulphurets project, which was extensively explored by notable mining companies, including Placer Dome and Noranda Inc. (later Falconbridge and Xstrata plc), was comprised of two contiguous claim blocks.

Seabridge completed three major drill programs since reacquiring 100 percent of the project in April 2006. These programs discovered a new zone, Mitchell, and substantially expanded and upgraded resources for the Kerr, Sulphurets and Mitchell zones.

The project has 34.5 million ounces of gold and 8.5 billion pounds of copper in estimated measured and indicated resources throughout three major ore zones - Kerr, Sulphurets and Mitchell. The deposits also contain an estimated 12.1 million ounces of gold and 2.8 billion pounds of copper in inferred resources.

Latest PEA improves economics

Seabridge released results of an updated NI 43-101-compliant preliminary economic assessment July 30 for the KSM Project. The updated PEA estimates a 30-year mine life for the project, during which Seabridge would operate a 120,000-metric-ton-per-day mine and mill to recover 19.3 million ounces of gold, 5.3 billion pounds of copper, 2.8 million ounces of silver and 1.9 million pounds of molybdenum.

Base case cash operating costs per ounce of gold were estimated at negative US$51 after recovery of base metal credits and total costs per ounce of gold were estimated at US$178, including all capital. Significant capital and operating cost improvements were achieved compared to the 2008 PEA.

But a new pit study completed in June, based on a new resource model, also examined a possible 48-year mine life for KSM, suggesting that the project could have a positive economic impact on the region for an even longer period.

The revised PEA reflected changes in design and a reduction in the strip ratio, materially reducing capital and operating costs compared to results of a similar study completed in December.

"The updated PEA confirms that KSM can be a significant gold producer at a total cost per ounce well below the gold industry average with the added benefits of a very long mine life within a stable political environment," said Seabridge President and CEO Rudi Fronk. "We are now undertaking final in-fill drilling, engineering and environmental programs, which will allow us to complete a preliminary feasibility study in early 2010. At that point, we will have successfully taken the KSM project to reserve status."

Results of a new drill program this summer are expected to generate the remaining data required for completion of a preliminary feasibility study in the first quarter of 20 10 converting resources to reserves.

Analysts like KSM

Several mining industry analysts have indicated that Seabridge's efforts at KSM are impressive.

Mike Niehuser, an analyst with Beacon Rock Research in Portland, said KSM Project is shaping up to be one of the world's largest gold-copper porphyry deposits.

"As the project is advanced with additional studies and development work, it should stand out among other projects attractive for construction and operation by a major mining company. With 61 million ounces of gold resources and total diluted shares of 38.8 million shares, Seabridge is highly leveraged to the price of gold," Niehuser wrote in a June 16 report. "We are bullish on both gold and copper prices for the near- to mid-term and consider shares of Seabridge to be significantly undervalued."

Singular Research initiated coverage of Seabridge in July with a "buy" rating and analyst Robert Maltbie noting that it has the most gold per share (1.6 ounces per share ) in the industry, no debt and $23 million to develop the project. He also praised the company's strategy of focusing on its core assets at KSM and Courageous Lake in Northwest Territories, while pruning its noncore assets.

Deal adds more claims

Seabridge Aug. 12 said it entered into an agreement with Max Minerals Ltd. to purchase its 22 mineral claims totaling 8,975 hectares, or about 22,160 acres, immediately adjacent to the KSM Project.

On closing of the transaction, which is expected to occur within 30 days, Seabridge said it will pay Max C$1.0 million in cash, issue 75,000 common shares of Seabridge stock to the junior and grant a 2.5 percent net smelter royalty on the claims being purchased.

The purchased claims are also subject to a 2 percent NSR in favor of the original owner of the claims under which Seabridge would be required to pay 10 annual advance royalty payments of C$100,000 each, ending in 2018, which amounts would be credited against any payments due under the 2 percent NSR. Closing of the transaction is subject to regulatory approval.

Fronk said the added claims significantly increase Seabridge's land position, adding prospective ground for additional exploration, needed room for waste rock storage and project infrastructure as well as securing mineral rights to a part of the proposed tunnel route between the planned mining and milling facilities.

Infrastructure advantages

The project is situated on Crown land and falls within and adjacent to traditional territories of two or more First Nations near a deepwater port in Stewart. KSM is located about 21 kilometers, or 13 miles, southeast of the Eskay Creek Mine site, which is served by a year-round road.

An extension of this road and another short access road will serve the project, along which a power transmission spur line from the BC Hydro grid along Highway 37 from the Meziadin Junction is expected to run 12 kilometers, or about 7.5 miles, long.

The estimated power requirement for KSM is 150 megawatts.

Seabridge also intends to build a run-of-river hydroelectric plant in a nearby creek to supplement BC Hydro power.

The KSM deposits are adjacent to Silver Standard's Snowfield project, which offers potential infrastructure synergies and savings for developers of the two projects.

The project's immediate access to roads, power and the port in Stewart are significant logistical advantages.

The high sulphide content of naturally exposed bedrock on the property has made nearby water bodies acidic with limited aquatic life, and water treatment facilities at the mine will improve the quality of water leaving the area.

Seabridge also plans to link KSM's mining facilities with its mill via a 1-kilometer-long underground tunnel system aimed at improving safety for workers and minimizing the surface environmental impact of the project.

KSM is currently in the pre-application stage of regulatory permitting, including environmental baseline data collection and engineering studies in consultation with regulators and First Nations groups in the area.

Construction of the mine is expected to take four years once Seabridge secures permits for the project. The project's earliest expected startup date is 2015.