Skeena secures $1B finance package for Eskay Creek gold-silver development

Skeena Resources  (TSX: SKE; NYSE: SKE) is getting US$750 million ($1.02-billion) in funding from Orion Resource Partners to finish the Eskay Creek mine redevelopment in northern British Columbia. 

Orion will hold less than 20% of Skeena, now fully funded to begin open-pit production in 2027, the company said on Tuesday. The financing comprises an equity investment, a gold stream, a senior secured loan, and a cost over-run facility, according to a release.  

New York-based Orion is buying US$100 million in Skeena shares and paying US$200 million for a 10.6% gold stream with an option to buy back up to two-thirds of it during a 12-month period after commercial production begins. It’s also providing a US$350-million loan and a US$100-million cost over-run facility in the form of an additional gold stream.

“This complete financing package is a result of a competitive and comprehensive process undertaken to find the best financing solution for the company,” Skeena executive chair Walter Coles said. “The result is certainty of funding to advance Eskay into production while balancing attractive cost of capital, flexibility, and optionality.”

The project, which operated as an underground mine from 1994 to 2008, aims to produce 320,000 oz. gold-equivalent a year during a 12-year mine life. Eskay’s pre-production capital cost is estimated at $713 million including $49 million for contingencies, a feasibility study released in November showed. Skeena also has $60 million in cash-on-hand. 

Shares in Skeena Resources closed 5% lower at $5.85 apiece on Tuesday in Toronto, as most wider markets declined, valuing the company at $531 million. They’ve traded in a 52-week range of $4.20 and $7.31. 

43% return 

Eskay has an after-tax net present value at a 5% discount of $2 billion and an after-tax internal rate of return of 43%, according to the feasibility study. Using a gold price of US$1,800 per oz. and a silver price of  US$23 per oz., the project is to reach payback in 1.2 years. Life of mine all-in sustaining costs are figured at US$687 per ounce.

Skeena is finalizing this year’s early works programs and detailed engineering plans. It expects to reach an impact benefit agreement with the Tahltan central government in next year’s first half. All remaining permits required for mine construction and operation are anticipated by the end of 2025.

Construction should start in 2026 and production begin in the first half of the following year, the company said. 

Eskay Creek’s proven and probable reserves total 39.8 million tonnes grading 2.5 grams gold per tonne and 68.7 grams silver (3.6 grams gold-equivalent). The reserves contain an estimated 33 million oz. of gold and 88 million oz. of silver. Reserves are included in resource numbers.

The measured and indicated resource for an open pit is 50.1 million tonnes grading 2.6 grams gold and 63 grams silver (3.4 grams gold-equivalent). This portion contains an estimated in-situ 4.1 million oz. of gold and 101.4 million oz. of silver. The inferred resource is 652,000 tonnes grading 1.5 grams gold and 32.4 grams silver.

Eskay Creek was the highest-grade gold mine in the world when in production. The mine produced 3.3 million oz. of gold and 160 million oz. of silver at average grades of 45 grms gold and 2,224 grams silver over its 15-year life.