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The mining newspaper for Alaska and Canada's North
Funding will be used to get BC mine "substantially started" North of 60 Mining News – March 4, 2022
Drilling at KSM has outlined 2.2 billion metric tons of reserves containing 38.8 million oz of gold, 10.2 billion lb of copper, 183 million oz of silver, and 207 million lb of molybdenum.
Seabridge Gold Inc. Feb. 26 announced that it has secured US$225 million (C$285 million) to advance its world-class KSM copper-gold-silver project in British Columbia's Golden Triangle to the status of "substantially started."
Sprott Resource Streaming and Royalty Corp. ("Sprott") and Ontario Teachers' Pension Plan have agreed to purchase a US$225 secured note from KSM Mining ULC, a Seabridge subsidiary, that these investors can exchange for a 60% gross silver royalty for the KSM project.
"This investment highlights Ontario Teachers' growing commitment to invest in the global metals industry, where we can achieve inflation protection, real returns and cash flow diversification," said Christopher Metrakos, managing director of natural resources at Ontario Teachers'.
While a 60% silver royalty seems steep, this precious metal accounts for only a small portion of the expected revenue from mining at KSM, and Seabridge has the option to buy back 50% of the royalty for an amount that provides Sprott and Ontario Teachers' a minimum guaranteed annualized return.
"Although KSM is best known for its mineral reserves and resources of gold and copper, the project also hosts a large inventory of silver. In KSM's latest Technical Report, silver accounts for less than 3% of projected KSM revenues, with the transaction representing a very small charge against the project's future total revenues," said Seabridge Gold CEO Rudi Fronk. "Furthermore, the transaction does not require share dilution which furthers our long-standing strategy of providing the industry's best leverage to gold as measured by ounces of gold per share."
Seabridge will use the money raised from this financing to advance the KSM project to the point where the BC Minister of Environment and Climate Change Strategy can designate the project as substantially started, a status that will keep the previously approved environmental assessment certificate for KSM in effect for the life of the project.
To achieve this, the environment minister must determine that enough physical work has been completed to surpass a certain threshold. Other mining projects in Northern BC, including Newmont and Teck Resources' Galore Creek copper-gold project, have been granted the substantially started designation.
Gaining the substantially started designation and securing the environmental certificate for the life of the project would further de-risk and enhance the value of KSM as Seabridge negotiates with potential joint venture partners for developing a mine at the enormous mine project. The physical work carried out to achieve substantially started status would also involve the completion of key tasks that would shorten the mine development timeline once a partner is secured and the decision to initiate full-scale construction is made.
"KSM is Canada's largest gold-copper-silver development project and an outstanding economic opportunity that we confidently expect to become one of our longest-life silver royalties," said Sprott Managing Partner Michael Harrison. "Seabridge has done an excellent job exploring, engineering and de-risking KSM, including securing an approved Environmental Assessment and building strong relationships with its local indigenous peoples. We support the plan to continue advancing substantial start activities at KSM while Seabridge secures an operating partner."
A 2016 prefeasibility study detailed plans for a world-class mine at KSM that would produce an average of 540,000 ounces of gold, 156 million pounds of copper, 2.2 million oz silver, and 1.2 million lb molybdenum annually over a 53-year mine life.
This mine plan is based on 2.2 billion metric tons of proven and probable reserves averaging 0.55 grams per metric ton (38.8 million oz) gold, 0.21% (10.16 billion lb) copper, 2.6 g/t (183 million oz) silver, and 42.6 parts per million (207 million lb) molybdenum.
Toward the end of 2020, Seabridge acquired Snowfield, a large gold deposit immediately east of the Mitchell deposit on the KSM property, from Pretium Resources Inc.
According to a calculation prior to Seabridge's acquisition, Snowfield hosts 1.37 billion metric tons of measured and indicated resources averaging 0.59 g/t (25.92 million oz) gold, 1.72 g/t (75.8 million oz) silver, 0.1% (2.98 billion pounds) copper, 85.5 parts per million (258.3 million lb) molybdenum, and 0.51 ppm (22.5 million oz) rhenium.
With Snowfield basically being an extension of Mitchell, Seabridge has decided to rename the acquired deposit East Mitchell, which is expected to be incorporated into an updated resource and PFS for KSM that will benefit from the synergies of the adjacent near-surface deposits.
This updated PFS would provide updated details of the work that will be needed to advance KSM to a point where the BC environmental office can designate the mine project as substantially started before the environmental assessment would need to be renewed in 2024.
"We are planning on staying well ahead of the deadline by getting the work done as early as we can," said Fronk. "This financing provides most of the capital necessary to reach this objective as well as having the added advantage of cutting time from the construction schedule once a construction decision has been made."
If Seabridge has not secured the financing needed to develop and place KSM into commercial production by the fifth anniversary of the closing of the financing, which is expected around March 15, Sprott and Ontario Teachers' can require that KSM Mining buy back the note for US$232.5 million. KSM Mining will have the option of paying this amount with cash or by delivering Seabridge shares. This right expires once such project financing is in place
Additionally, if KSM's environment assessment certificate expires at any time while the note is outstanding, the silver royalty investors can require KSM mining to buy it back at US$247.5 million in cash or Seabridge shares.
If commercial production is not achieved at KSM prior to the tenth anniversary from closing, the gross silver royalty payable to Sprott and Ontario Teachers' will increase to 75%.
"This is an innovative structure that provides excellent exposure to a combination of fixed returns and long-term silver prices," said Metrakos. "KSM is a world class Canadian mining project; we are proud that our funding will accelerate its development."
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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