Hochschild Mining walks away from Canadian gold project

Hochschild Mining (LSE: HOC) has informed Skeena Resources (TSX, NYSE: SKE) that it is ending its option to earn a 60% interest in the Canadian miner’s Snip gold project, located in the Golden Triangle of British Columbia.

The precious metals producer said termination of the option, through its wholly-owned subsidiary Hochschild Mining Canada Corp., is effective immediately, adding it has no liability to complete the aggregate expenditure requirement.

In 2021, the London-based miner agreed to spend about $100 million over a three-year period, which would have granted it a majority stake in the gold project. To date, Hochschild has spent $15 million on Snip, according to Skeena.

CEO Ignacio Bustamante said the company had enjoyed working in Canada, but it is currently focusing its capital on later-stage projects in the portfolio, particularly the Mara Rosa project in Brazil.

“We are thrilled to have 100% of Snip back in our portfolio,” Randy Reichert, Skeena’s president and CEO said in a separate statement. “In the months ahead, Skeena plans to investigate opportunities to bolster the Eskay Creek mine life by processing Snip ore at the Eskay Creek mill.” 

In a research note on Wednesday, BMO Capital Markets analyst Andrew Mikitchook wrote that Skeena’s full ownership of Snip will now give optionality for Eskay Creek, where a resource update in the first half of the year is expected to bolster the project’s mine life.

Mikitchook added that BMO expects Skeena shares to revalue as it advances Eskay Creek, with a pre-construction program and permitting that is anticipated in early 2025 and first production in late 2016.

BMO increased its Snip valuation from $150 per oz. to $200 oz. and its target price to $16 from $15.

Skeena shares were down 5% on Wednesday at mid-day, trading at $8.24 apiece, in a 52-week window of $5.64 and $14.45. It has a market capitalization of $640.9 million.

The Snip project is a past-producing mine that Skeena acquired from Barrick Gold (TSX: ABX; NYSE: GOLD) in 2017. 

The operation churned out about one million oz. of gold between 1991 and 1999 at an average gold grade of 27.5 grams per tonne. Since then, the project has been improved with the recent construction of nearby infrastructure and substantially higher gold prices.

The property consists of one mining lease and eight mineral claims totalling about 45.5 sq. km in the Liard mining division.