Seabridge likes what it sees at Walsh Lake

Mid-year exploration drilling at Seabridge Gold’s (SEA-T, SA-N) Courageous Lake project in Canada’s Northwest Territories uncovered a new gold occurrence 10 km south of the 6.5 million oz. proven and probable gold reserves that the company has developed at its FAT deposit, 240 km northeast of Yellowknife.   

The company hopes the Walsh Lake discovery will be a sizeable deposit that extends the mine life of its 100%-owned FAT deposit. In July, a prefeasibility study (PFS) envisioned FAT would have a 15-year mine life as a 17,500-tonne-per day single-pit operation. The PFS forecast average annual production of 385,000 oz. gold at an average cost of US$780 per oz., and pegged capital costs to bring the mine into production of US$1.5 billion, including a US$187-million contingency.

Seabridge believes that if high-grade material near FAT can be recovered early in the mine’s life, it would improve capital efficiency and offset the higher capital costs of FAT’s remote location by amortizing them over a longer project life. It anticipates spending $8.5 million on exploration this year.

“We’re trying to bring hydro power into the area, and justify that we need a longer mine life [at FAT],” president and chief operating officer Jay Layman explains. “We had not really done any exploring outside of the FAT deposit since we acquired Courageous Lake, so this is the first time we’ve gone out and tried to discover another deposit.”

The company believes that the 52 km long Matthews Lake greenstone belt, which is home to the 2 km FAT deposit and two past-producing underground mines, has lots of potential.

The Walsh Lake discovery, made public in September, appears to be the southern extension of the historical Tundra mine, a high-grade gold mine that the company says was closed in 1999 due to low gold prices. (The target area stretches 1.5 km south of the former mine.)

Highlights from eight drill holes released in mid-October include 1.1 metres of 15.47 grams gold per tonne and 3.7 metres of 4.26 grams gold in hole 228; 1.6 metres of 9.20 grams gold in hole 229; 9.2 metres of 9.50 grams gold in hole 230; and 23.3 metres of 3.62 grams gold in hole 233. Hole 234 returned 1 metre of 58.85 grams gold.

In September the company released the first batch of assays from its drilling at Walsh Lake, which started 1.4 km south of the Tundra mine and moved northward at 200-metre spacing. The drill program targeted a stratigraphic contact traced by geophysical surveys. Grades improved as the drilling moved north towards the former Tundra mine. 

The northernmost drill hole returned intercepts of 21.2 metres averaging 8.16 grams gold, 5.6 metres grading 5.93 grams gold and a further 4.9 metres of 10.49 grams gold. The 21-metre intercept included two intercepts averaging above 1 oz. gold per tonne, which was the grade reportedly exploited in the Tundra mine, Seabridge says.

Layman says the company has identified additional targets that Seabridge will follow up with next year. The company hasn’t finalized its 2013 exploration budget, but he estimates it will spend as much money as it did this year.

“We’re looking for more near-surface,” he adds. “The strip ratio at FAT is pretty high as we get deeper into the mine, so we’re looking for higher-grade material to improve the economics of the deposit.”

Seabridge was trading at $16.72, within a 52-week range of $12.31 to $25.62 at press time in Toronto.