Seabridge Puts KSM’s Mine Life At 30 Yrs

Vancouver — A preliminary economic assessment has put a US$3.4- billion price tag on the Kerr-Sulphurets- Mitchell (KSM) gold project in northwest British Columbia, but the investment would buy a 30-year mine life with a handsome production profile for owner Seabridge Gold (SEA-T, SA-X).

In a news release, Seabridge president and CEO Rudi Fronk stressed the favourable characteristics of the project, located about 65 km northwest of Stewart.

“There are very few undeveloped gold projects in the world today with the attributes of KSM: long mine life, significant annual production, cash operating costs well below the gold industry average, and substantial exploration upside, all in a politically stable environment,” he said.

The prefeasibility study investigated the merits of an open-pit mine churning out 120,000 tonnes of ore daily to feed a flotation mill that would produce a combined gold-copper-silver concentrate. The concentrate would then travel by truck or pipeline to the deep-sea port at Stewart. The processing facility would also produce a separate molybdenum concentrate as well as gold-silver dor.

The mill would process 43.2 million tonnes of ore each year, which adds up to 1.28 billion tonnes of ore by the end of its three-decade mine life. Production over that lifespan would total 19.1 million oz. gold, 5.4 billion lbs. copper, 64.1 million oz. silver, and 32.3 million lbs. molybdenum.

Over the first eight years of production, the mine would tap into higher-grade ore from the Mitchell zone, carrying average grades of 0.67 gram gold per tonne, 0.3% copper, 2.21 grams silver and 0.029% molybdenum. Over the mine life, most of the grades drop slightly — gold to 0.6 gram, copper to 0.23%, and silver to 2.14 grams — though the molybdenum grade rises to 0.0398%.

On a yearly basis, the production numbers are large. During years one through eight, annual production is projected at 722,000 oz. gold, 253 million lbs. copper, 2.2 million oz. silver and 655,000 lbs. molybdenum; annual production over the mine’s total life averages to 648,000 oz. gold, 183 million lbs. copper, 2.2 million oz. silver, and 1.27 million lbs. moly.

The cost to develop a project of such scale, however, is steep. Initial capital costs, including contingencies, come in at US$3.4 billion. Sustaining capital, closure, and reclamation costs add US$943 million.

The report evaluated the project using four sets of prices. The base-case scenario used three-year trailing average metal prices; a second assessment used one-year average prices; a third, two-year average prices; and a fourth calculation used recent spot prices (US$750 per oz. gold, US$1.75 per lb. copper, US$10 per oz. silver, and US$25 per lb. moly). The first three scenarios used a U. S.-Canadian dollar exchange rate of 0.92; the spot price evaluation used an exchange rate of 0.8.

At the base case, KSM carries a net present value (NPV) of US$2.8 billion, using a 5% discount rate, and a 13% internal rate of return (IRR). Payback is projected at just under seven years. The total cost to produce each ounce of gold in the base case is estimated at US$233.

In the spot price scenario, KSM has an NPV of US$900 million and an 8% IRR. The project pays back capital investment in just under 10 years and the total cost to produce each ounce of gold sits at US$494.

KSM is located in the Iskut- Stikine River region. Access to the property is by helicopter. An independent road access study for KSM proposed building two routes. One would extend from the Eskay Creek mine some 32 km south to the KSM deposits. That road would require building two bridges. The other road would stretch from Highway 37 southwest to the mill site. The mill would be connected to the deposits via a conveyor some 10 km long.

The Mitchell deposit sits at the north end and is the largest of the three deposits. Mitchell is home to 734.1 million indicated tonnes grading 0.69 gram gold and 0.18% copper, as well as 667.4 million inferred tonnes averaging 0.62 gram gold and 0.15% copper.

At the south end of the line, Kerr hosts 206.3 million indicated tonnes grading 0.25 gram gold and 0.45% copper, plus 51.4 million inferred tonnes averaging 0.21 gram gold and 0.45% copper. And sitting in the middle is Sulphurets, which holds 74.7 million indicated tonnes grading 0.75 gram gold and 0.24%