Seabridge boosts KSM economics in updated prefeasibility, but capex rises to US$6.4B

Seabridge Gold (TSX: SEA; NYSE: SA) has released an updated preliminary feasibility study for its 100% owned KSM project located in northern B.C., considered to be one of the largest undeveloped gold projects in the world measured by reserves. The study was prepared by Tetra Tech, the same firm that authored the previous prefeasibility (2016).

Compared to the 2016 version, the 2022 study shows a considerably more sustainable and profitable mining operation at KSM, with the project now consisting of an all open pit mine plan that includes the Mitchell, East Mitchell and Sulphurets deposits.

The many design improvements to enhance its sustainability include a smaller environmental footprint, reduced waste rock production, reduced green house gas emissions by electrification of the mine haul fleet, a 50% increase in mill throughput, and the elimination of capital-intensive block cave mining.

“We have redesigned KSM for an inflationary environment. The themes for this PFS are capital and energy efficiency. The mine plan is simplified to bring total capital down below 2016 estimates despite inflation by reducing sustaining capital,” Seabridge’s chairman and CEO Rudi Fronk commented on the prefeasibility update.

The primary reasons for the improvements in the plan arise from the acquisition of the East Mitchell open pit resource and an expansion to planned mill throughput. Since 2016, the reserve base at KSM (proven and probable) has grown 22%, to 47.3 million oz. gold (2.3 billion tonnes grading 0.64 gram gold per tonne) from 38.8 million oz., due to higher gold grades added from the East Mitchell deposit, whose resource was recently updated in April. Mill throughput has increased to 195,000 tonnes per day from 130,000. The strip ratio has also been reduced by 23% to approximately 1:1.

This would result in a significant improvement in the KSM project’s profitability through an estimated 90% increase in average annual gold production, plus a 22% increase in copper production, 36% increase in silver production and 363% increase in molybdenum production.

Over the projected 33-year mine life, total after-tax net cash flow generated by the KSM project would reach US$23.9 billion, up from US$10 billion previously. The initial capital would increase to US$6.4 billion from US$5 billion, primarily due to inflation. Its after-tax net present value (at 5% discount) has increased by 426% to US$7.9 billion from US$1.5 billion, with the internal rate of return doubling from 8% to 16.1%. These parameters would drop the project’s payback period from 6.8 years to 3.7 years.

The 2022 prefeasibility study uses previously disclosed mineral resource estimates that are based on metals prices of US$1,300 per oz. gold, US$3 per lb. copper, US$20 per oz. silver and US$9.70 per lb. molybdenum. In addition, the resources are constrained by conceptual mining shapes.

To date, the measured and indicated resources at KSM are estimated at 5.4 billion tonnes grading 0.51 gram gold, 0.16% copper, 2.4 gram silver, and 63 ppm molybdenum. An additional 5.7 billion tonnes are estimated in the inferred category grading 0.36 gram gold, 0.28% copper, 2.2 grams silver, and 33 ppm molybdenum.