The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Skeena to gain full ownership of BC gold-silver mine project North of 60 Mining News – August 7, 2020
Since optioning Eskay Creek from Barrick Gold in 2017, Skeena Resources has rapidly outlined a potentially surface mineable gold-silver deposit at this historic mine property in British Columbia's Golden Triangle.
Skeena Resources Ltd. Aug. 4 announced the signing of a definitive agreement with Barrick Gold Inc., a subsidiary of Barrick Gold Corp., to acquire full ownership of the past producing Eskay Creek gold-silver mine project in the Golden Triangle region of northwest British Columbia, Canada.
Barrick operated an underground mine at Eskay Creek from 1995 to 2008 that produced roughly 3.3 million ounces of gold and 160 million oz of silver from ore that averaged 45 grams per metric ton gold and 2,224 g/t silver.
Since securing an option to acquire Eskay Creek from Barrick in 2017, Skeena has rapidly outlined a significant deposit of lower grade gold and silver mineralization that can be mined from the surface.
A preliminary economic assessment completed in November outlines plans for an open-pit mine and a 6,850-metric-ton-per-day mill at Eskay Creek that would produce an average of 236,000 oz of gold and 5.8 million oz of silver annually over an initial 8.6-year mine life.
Roughly 15,000 meters of drilling that is not included in the resource that forms the basis of this PEA and 24,000 meters planned for this year are expected to upgrade and expand Eskay Creek resources.
In July, Barrick and Skeena agreed to amend the terms of the original Eskay Creek option agreement.
Under this amended agreement, Skeena will acquire 100% ownership of Eskay Creek by:
• Issuing Barrick 22.5 million units, with each unit comprised of one common share of Skeena and half of a warrant. Each full warrant, which is non-transferrable, will allow Barrick to acquire an additional Skeena share for C$2.70.
• Granting Barrick a 1% net smelter return (NSR) royalty on the entire Eskay Creek land package. Half of the royalty may be repurchased by Skeena for C$17.5 million over the next two years.
• Making a C$15 million contingent payment if Skeena sells more than a 50% interest in Eskay Creek over the next two years.
As a result of this transaction, Barrick will own roughly 12.4% of Skeena's outstanding shares after closing, which includes the Skeena shares the major gold producer already owns. If Barrick were to exercise the warrants, its ownership of Skeena would increase to 17.2% on a partially diluted basis and Skeena would receive cash proceeds of C$30.4 million.
From the closing of the transaction, expected during the fourth quarter, Barrick's ownership of Skeena is not to exceed 19.9% over an 18-month standstill period.
So long as Barrick maintains at least a 10% ownership in Skeena on a partially diluted basis, it will have a right to maintain its pro-rata ownership via participation in future Skeena financings. Furthermore, Barrick will have a right to appoint a Director to the Board of Skeena.
"The Skeena team has done a great job on its evaluation of Eskay Creek and this is another good example of a transaction that delivers a value creating opportunity for all stakeholders," Barrick Gold President and CEO Mark Bristow said.
Since the July 6 announcement of the terms of the agreement, Skeena's share price has risen roughly 65%.
"We were encouraged by the positive market reaction to the announcement of the binding term sheet in respect to the Eskay Creek transaction with Barrick and are delighted to now announce the signing of the definitive agreement," said Skeena Resources CEO Walter Coles Jr. "On closing, Skeena will gain 100% ownership and operatorship of Eskay Creek, which we hope to revitalize as an open-pit gold-silver mine. Skeena is honored to have Barrick as an important shareholder in the company going forward."
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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