Silvercorp Metals Inc. press release
Skeena Completes Positive Definitive Feasibility Study for Eskay Creek: After-Tax NPV (5%) of C$2.0 Billion, 43% IRR and 1.2 Year Payback
TSX - Toronto Stock Exchange · Silver · Gold · Lead · Zinc · Copper · Canada
VANCOUVER, BC / ACCESSWIRE /November 14, 2023 / Skeena Resources Limited(TSX:SKE)(NYSE:SKE) ("Skeena" or the "Company") is pleased to announce the results of the Definitive Feasibility Study ("DFS" or the "Study") for its 100% owned Eskay Creek Gold-Silver Project ("Eskay Creek" or the "Project") located in Tahltan Territory in the Golden Triangle of northwest British Columbia.
Eskay Creek 2023 DFS Highlights:
After-tax net present value ("NPV")(5%) of C$2.0 billion at a base case of US$1,800 gold and US$23 silver Industry-leading after-tax internal rate of return ("IRR") of 43% and an after-tax payback of 1.2 years on pre-production capital expenditures ("CAPEX") Life of mine ("LOM") all-in sustaining cost ("AISC") of US$684/oz gold equivalent ("AuEq") sold Proven and Probable Mineral Reserves for open-pit mining of 39.8 million tonnes ("Mt") containing 3.3 million ounces ("Moz") gold and 88.0 Moz silver (4.6 Moz AuEq) Years 1-5: Average annual production of 455,000 oz at 5.5 g/t AuEq and average annual after-tax free cashflow of C$474 million Years 1-10: Average annual production of 370,000 oz at 4.2 g/t AuEq and average annual after-tax free cashflow of C$365 million Estimated pre-production CAPEX of C$713 million, yielding a compelling after-tax NPV:CAPEX ratio of 2.8:1
The Company will be hosting a conference call to present the DFS results for Eskay Creek on November 15 at 8:00 AM PT / 11:00 AM ET. A presentation by management will be followed by an opportunity for Q&A.
Conference Call Webcast and Dial in Details:
Webcast URL with Audio - https://services.choruscall.ca/links/skeenaresources202311.html
Participant Telephone Numbers - Canada/US 1-800-319-4610, International Toll +1-604-638-5340
Definitive Feasibility Study Presentation - https://skeenaresources.com/investors/2023-definitive-feasibility-study-presentation/*presentation will be available on the morning of November 15, 2023
If you would like to ask a question, please dial in. All callers should dial in 5-10 minutes prior to the scheduled start time and simply ask to join the call. If you are unable to join the call, a replay will be made available herefollowing the completion of the call.
Randy Reichert, Skeena's President & CEO, commented, "This Definitive Feasibility Study was a critical de-risking step for the Company in the development of Eskay Creek. In this Study, we had multiple breakthroughs in metallurgy, increased Mineral Reserves by approximately 20% and continued to increase the Project value for our shareholders. This study is robust and engineered to construct Eskay Creek."
The Company's Executive Chairman, Walter Coles, added "Randy and the team have done a phenomenal job of improving the Project. With our base case after-tax NPV surpassing C$2.0 billion, Eskay Creek stands out as a rare potential Tier 1 gold mining project, located in a politically stable jurisdiction. Excitingly, we see additional opportunities to increase Reserves and mine life, while continuing to advance the project through permitting, project financing, construction and production in 2026. We're frustrated by the massive valuation gap between non-revenue generating mine developers and junior gold producers. However, we recognize that rapidly advancing Eskay Creek toward production and generating cash flow is the obvious path to delivering tremendous shareholder value."
Eskay Creek Definitive Feasibility Study
The DFS for Eskay Creek was completed by Global Resource Engineering ("GRE") and Sedgman Canada Limited ("Sedgman"), a CIMIC Group Company. The Study demonstrates a robust Project with industry-leading economics for a conventional open-pit mining and milling operation. The DFS is a continuation of the September 2022 Feasibility Study("FS") with key updates including an updated Mineral Reserve statement, optimized mine plan and improved metallurgy.
Summary of Key Results and Assumptions in the DFS
Table 1: After-Tax NPV(5%) and IRR Sensitivities to Commodity Prices
| | Lower Case | Base Case | Spot 31/10/23 | Higher Case | | Gold Price (US$/oz) | 1,600 | 1,800 | 1,997 | 2,200 | | Silver Price (US$/oz) | 21 | 23 | 23.20 | 27 | | After-Tax NPV (5%) (C$M) | 1,596 | 2,003 | 2,321 | 2,811 | | After-Tax IRR(%) | 37.0 | 42.9 | 47.1 | 53.0 | | After-Tax Payback (years) | 1.6 | 1.2 | 1.1 | 1.0 | | Average Annual After-TaxFree Cash Flow (Years 1 - 5) (C$M) | 408 | 474 | 525 | 605 | | Average Annual After-TaxFree Cash Flow (Years 1 - 10) (C$M) | 311 | 365 | 406 | 472 | | Average Annual After-TaxFree Cash Flow (Years 1 - 12) (C$M) | 270 | 317 | 354 | 411 |
All dollar ($) figures are presented in CAD unless otherwise stated. Base case metal prices used in this economic analysis are US$1,800/oz Au and US$23.00 Ag. These prices are supported by 3-year trailing average prices. Spot price taken as of October 31, 2023
Realized Improvements & Optimizations
The 2023 DFS incorporates several key enhancements and de-risking strategies relative to the 2022 FS including:
Increase in the Mineral Reserve estimate and an extended mine life to 12-years Remodelled orebody based on a more selective mining approach with a smaller block size Pre-production mining accelerated to create a larger ore stockpile at startup, de-risking initial production and improving ability to blend for optimal concentrates Metallurgical testwork completed that supports a simplified flowsheet and results in a 43% reduction of mass pull with no material change in recovery to concentrate Lower concentrate tonnes at higher grade result in increased payables and decreased transport and smeltertreatment costs Updated capital costs to reflect a plan that is executable, technically proven and significantly de-risked with an additional year of engineering and studies On-site permanent camp brought forward in plan and relocated away from mine infrastructure to improve workforce attraction and retention, promote employee well-being and to ensure adequate camp space during construction
Table 2: 2023 Eskay Creek DFS Project Parameters
| Base Case Economic Assumptions | | | Gold Price (US$/oz) | 1,800 | | Silver Price (US$/oz) | 23 | | Exchange Rate (US$/C$) | 0.74 | | Discount Rate (%) | 5 | | Contained Metals | | | Contained Gold (koz) | 3,340 | | Contained Silver (koz) | 87,970 | | Mining | | | Strip Ratio (Waste: Ore) | 8.0:1 | | Total Material Mined (excluding rehandle) (Mt) | 357.7 | | Total Ore Mined (Mt) | 39.8 | | Processing | | | Processing Life (years) | 12 | | Processing Throughput (Mtpa) | 3.0 (Yr 1 - 5)
3.5 (Yr 6 -12) | | Average Diluted Gold Grade (g/t) | 2.6 | | Average Diluted Silver Grade (g/t) | 68.7 | | Production | | | Gold Recovery (% to Concentrate) | 83 | | Silver Recovery (% to Concentrate) | 91 | | LOM Gold Production (koz) | 2,800 | | LOM Silver Production (koz) | 81,140 | | LOM AuEq Production (koz) | 3,937 | | LOM Average Annual Gold Production (koz) | 230 | | LOM Average Annual Silver Production (koz) | 6,674 | | LOM Average Annual AuEq Production (koz) | 324 | | Operating Costs Per Tonne | | | Mining Cost (C$/t Mined) | 3.00 | | Mining Cost (C$/t Milled) | 26.74 | | Processing Cost (C$/t Milled) | 19.11 | | G&A Cost (C$/t Milled) | 5.65 | | Water Treatment Cost (C$/t Milled) | 2.48 | | Total Operating Costs (C$/t Milled) | 53.98 | | Other Costs | | | Transport to Smelter (C$/dmt Concentrate) | 154 | | Au Refining Costs (C$/oz) | 34.50 | | Ag Refining Costs (C$/oz) | 1.67 | | Treatment Costs (C$/dmt Concentrate) | 175 | | Royalty (Net Smelter Return ("NSR") %) | 2 | | Cash Costs and All-in Sustaining Costs | | | LOM Cash Cost (US$/oz Au) net of silver by-product | 130 | | LOM Cash Cost (US$/oz AuEq) co-product | 567 | | LOM AISC (US$/oz Au) net of silver by-product | 296 | | LOM AISC (US$/oz AuEq) co-product | 684 | | Capital Expenditures | | | Pre-production Capital Expenditures (C$M) | 713 | | Expansion Capital Expenditures (C$M) | 9 | | Sustaining Capital Expenditures (C$M) | 561 | | Closure Expenditures (C$M) | 175 | | Economics | | | After-Tax NPV (5%) (C$M) | 2,003 | | After-Tax IRR | 42.9 | | After-Tax Payback Period (years) | 1.2 | | After-Tax NPV / Initial Capex | 2.8 | | Pre-Tax NPV (5%) (C$M) | 3,107 | | Pre-Tax IRR (%) | 53.1 | | Pre-Tax Payback Period (years) | 1.1 | | Pre-Tax NPV / Initial Capex | 4.4 | | Average Annual After-tax Free Cash Flow (Year 1-5) (C$M) | 474 | | Average Annual After-tax Free Cash Flow (Year 1-12) (C$M) | 317 | | LOM After-tax Free Cash Flow (C$M) | 3,038 |
Cash costs are on an ounce payable basis and are inclusive of operating mining costs, processing costs, site G&A costs, royalties, smelting, refining, and transports costs AISC are on an ounce payable basis and include cash costs plus sustaining capital and closure costs All dollar ($) figures are presented in CAD unless otherwise stated. Base case metal prices used in this economic analysis are US$1,800/oz Au and US$23.00 Ag. These prices are based on 3-year trailing average prices. Pre-production capital expenditure of C$713M is exclusive of initial working capital, primarily C$43.3M of pre-production mining operating costs associated with establishing initial ore stockpile inventory
Mineral Resource Estimate
The Company's current Mineral Resource Estimate ("MRE") with an effective date of June 20, 2023, forms the basis of the DFS. Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Table 3: 2023 Measured and Indicated Pit Constrained Resource Reported at a 0.7 g/t AuEq Cut-off Grade
| Category | Tonnes (Mt) | AuEq (g/t) | Au (g/t) | Ag
(g/t) | AuEq Ounces (Moz) | Au Ounces (Moz) | Ag Ounces (Moz) | | Measured | 27.8 | 4.6 | 3.3 | 87.9 | 4.1 | 3.0 | 78.6 | | Indicated | 22.3 | 2.1 | 1.6 | 32.0 | 1.5 | 1.1 | 22.9 | | Total M+I | 50.1 | 3.4 | 2.6 | 63.0 | 5.5 | 4.1 | 101.4 |
1. All references to AuEq in this disclosure for the 2023 MRE have factored metallurgical recoveries as per the calculation: AuEq = ((Au (g/t)*1700*0.84) + (Ag (g/t)*23*0.88)) / (1700*0.84). US$1,700/oz Au, US$23/oz Ag, 84% gold recovery and 88% silver recovery 2. The Qualified Person for the estimate is Ms. Terre Lane, MMSA QP, Principal Mining Engineer of GRE who reviewed and validated the Mineral Resource estimate 3. The effective date of the mineral resource estimate is June 20, 2023 4. The number of metric tonnes and ounces was rounded to the nearest million. Any discrepancies in the totals are due to rounding 5. Open pit-constrained mineral resources are reported in relation to a conceptual pit shell 6. Block tonnage was estimated from average specific gravity measurements using lithology and zone groupings 7. All grades within different zone groupings were capped where appropriate 8. Mineral resources are potentially amenable to open pit mining methods reported at a cut-off grade of 0.7 g/t AuEq. 9. Cut-off grades are based on a price of US$1,700 per ounce of gold, US$23 per ounce of silver, gold recoveries of 84%, and silver recoveries of 88%, and without considering revenues from other metals. 10. Open pit key assumptions for reasonable prospects of eventual economic extraction are as follows: 1. An overall pit wall angle of 45 degrees 2. A reference mining cost of US$3.00 per tonne mined 3. A processing cost of US$15.50 per tonne processed 4. General and administrative costs of US$6.00 per tonne processed 5. Mining dilution of 5% 6. Mining recovery of 95% 7. Transportation and refining costs of US$18.5 per ounce Au. 8. Transportation and refining costs of US$7 per ounce Ag.
11. Estimates use metric units (metres, tonnes, and g/t). Metals are reported in troy ounces (metric tonne * grade/31.10348) 12. The 2014 CIM Definition Standards were used for the reporting of mineral resources. 13. The reported resource has been updated to reflect an updated topography surface and underground depletion wireframes.
Mining Overview
Eskay Creek is planned to be an open-pit operation using conventional mining equipment. Pit designs were developed for the north and south pit areas. The initial phases were designed for the purpose of obtaining a technical sample and necessary non-acid generating waste material ("NAG") to create supporting infrastructure. Open-pit mining follows down slope of the ridge where the deposit is located. The north pit will consist of 10 phases, while the south pit will be developed as a single phase.
Mining will be executed on 10 metre benches using a combination of 400 and 200 ton excavators and ore will be mined selectively on three sub-benches (flitches) using 200 ton excavators. Application of selective mining techniques in ore resulted in substantial improvements to mined ore grade, compared to non-selective ore mining that was contemplated in the 2022 FS mine plan. Selective mining techniques were evaluated by reducing the resource model block size from 10x10x10 metre to 5x5x5 metre to accurately model reduced ore dilution by operating 200 ton excavators in ore to reduce the smallest mining unit. The mining fleet was increased compared to the 2022 FS plan to provide higher mining rates in the no-snowfall months to compensate for anticipated lower production rates during the winter months.
Table 4: 2023 Eskay Creek Proven and Probable Mineral Reserves
| | | Grade | Contained Ounces | | | | | | Reserve
Class | Tonnes
(Mt) | AuEq (g/t) | Au (g/t) | Ag
(g/t) | AuEq (Moz) | Au (Moz) | Ag
(Moz) | | Proven | 28.0 | 4.1 | 3.0 | 80.9 | 3.7 | 2.7 | 72.7 | | Probable | 11.9 | 2.3 | 1.8 | 40.1 | 0.9 | 0.7 | 15.3 | | Total | 39.8 | 3.6 | 2.6 | 68.7 | 4.6 | 3.3 | 88.0 |
Note: This Mineral Reserve estimate has an effective date of November 14, 2023 and is based on the Mineral Resource estimate dated June 20, 2023 for Skeena Resources by GRE. The Mineral Reserve estimate was completed under the supervision of Terre Lane, Principal Mining Engineer of GRE, who is a Qualified Person as defined under NI 43-101. Mineral Reserves are stated within the final design pit based on a US$1,700/oz gold price and US$23.00/oz silver price. An NSR cut-off of C$24.45/t was used to estimate Mineral Reserves based on preliminary processing costs of $18.22/t ore and G&A costs of C$6.23/t ore. Gold and silver recoveries were 83% and 91%, respectively during the LOM scheduling. AuEq = ((Au (g/t) 1700 0.83) + (Ag (g/t)* 23 0.91))/(1700 0.83). Final operating costs within the pit design were C$3.00/t mined, with associated process costs of C$19.11/t ore processed, G&A costs of C$5.65/t ore processed and water treatment costs of C$2.48/t ore processed.
The DFS outlines an average production profile of 455,000 AuEq oz in the first five years of operation. It is anticipated that Skeena will have a substantial stockpile developed ahead of mill start-up. The run-of-mine ("ROM") and low-grade stockpile areas were increased in size to allow higher mining rates in no-snowfall months and to provide adequate space for blending feed to the mill.
Graph 1: 2023 Eskay Creek Planned LOM Annual Production Profile
The mine schedule plans for delivery of 39.8 Mt of mill feed grading 2.6 g/t Au and 68.7 g/t Ag (3.6 g/t AuEq) over the 12-year life of mine. Waste tonnage from the pits totalling 317.9 Mt will be placed into either NAG or potentially acid generating waste ("PAG") storage facilities. The overall forecast strip ratio is 8.0:1.
Metallurgy and Processing
Metallurgical tests were conducted through 2023 in support of the DFS to optimize the flowsheet and to increase grades of payable metals in the concentrate.
Metallurgical Optimization
As part of the DFS, metallurgical testing was conducted on composite samples that represented a range of 15-35% Mudstone with the balance as Rhyolite, matching the expected range to be produced by the mine.
An alternative flowsheet compared to the 2022 FS was tested with the purpose of simplifying the process flowsheet. The new testwork program evaluated a range of primary grinds and determined that 40 µm is optimal prior to rougher flotation. Following rougher flotation, regrinding rougher concentrate to approximately 10 µm was determined to provide the best flotation results.
The additional metallurgical testing has shown excellent results in producing a higher-grade gold and silver concentrate with lower concentrate volumes, compared to previous testing. Recoveries for gold were largely unchanged at 83%, slightly conservative based on test results, and silver recoveries increased from 88% to 91%, as compared to the 2022 FS.
Table 5: Concentrate Comparison of 2022 FS vs. 2023 DFS
| | Units | 2022 Feasibility Study | 2023 Definitive Feasibility Study | | Mass Yield to Concentrate (range) | % | 4.6 - 7.8% | 2.6 - 5.3% | | Mass Yield to Concentrate (average) | % | 6.8% | 3.9% | | Concentrate Production | dmt | 2,018,000 | 1,574,000 | | Au Concentrate Grade (range) | g/t | 25 - 50 | 40 - 95 | | Au Concentrate Grade (Y1-5 average) | g/t | 48 | 82 | | Au Concentrate Grade (LOM average) | g/t | 37 | 55 | | Ag Concentrate Grade (range) | g/t | 674 - 1,629 | 1,020 - 2,970 | | Ag Concentrate Grade (Y1-5 average) | g/t | 1,313 | 2,466 | | Ag Concentrate Grade (LOM average) | g/t | 1,024 | 1,595 |
Concentrate production of 2,018,000 dmt in 2022 FS considered 29.9 Mt of mill feed over a 9-year life. Concentrate production of 1,574,000 dmt in 2023 DFS considers 39.8 Mt of mill feed over a 12-year life.
The outcome of producing a higher-grade concentrate led to a substantial cost reduction of an estimated C$400 million pre-tax over LOM in both treatment charges and transportation costs in comparison to the 2022 FS. In addition to decreasing costs, the higher-grade concentrate also provides an opportunity for the base metals content to be payable, and some previous penalty elements are now neutral and do not incur penalties.
Graph 2: Eskay Creek LOM Concentrate Comparison of FS vs. DFS
Processing Overview
The process flowsheet in the DFS has been simplified and de-risked from that which was developed for the 2022 FS. In Years 1 through 5, 3.0 million tonnes per annum ("Mtpa") will be processed. A pebble crusher will be added in Year 3 to maintain production when harder ore is processed in Year 4. An expansion will be completed in Year 5 to increase processing capacity to 3.5 Mtpa, when harder and lower grade ore is processed starting in Year 6. Only minor upgrades will be required to the processing plant equipment list, as most of the major equipment items, such as the mills, are pre-sized for this higher throughput and harder ore. Mill-motor footprints will be capable of having larger electrical motors installed at that time.
ROM material will be trucked from the open-pits and either stockpiled or directly fed into the primary crusher. Primary crushing remains unchanged from the 2022 FS; however, the location was re-assessed due to the increase of ROM ore stockpile capacity to 17.5 Mt. Crushed material will now report to a new ore bin with approximately 7 hours storage capacity. Emergency overflow and reclaim will be located adjacent to the ore bin.
The ROM ore is considered relatively competent with bond rod and ball mill work indices between 14.1 kWh/t in the early years of the mine life up to 24 kWh/t later in the mine life as the 22 Zone material is more competent. Larger semi-autogenous grinding ("SAG") and ball mills will be installed in initial construction to minimise any major disruptive expansion works when the throughput is increased to 3.5 Mtpa in Year 6. To achieve the target primary P80(80% passing) particle size of 40 μm, the comminution circuit will consist of a 6.1 MW SAG mill with an 8.5 metre diameter by 4.9 metre effective grinding length ("EGL"), a 7.9 MW ball mill with a 6.4 metre diameter by 9.8 metre EGL and a tertiary stirred mill with 6 MW of installed power.
Ground material will be processed through a flotation circuit consisting of roughers, cleaners, and cleaner-scavengers. The rougher concentrate will be re-ground to a target P8010 μm prior to cleaning to produce a combined gold-silver concentrate. Flotation concentrate will be thickened, filtered and if necessary dried, and trucked to a nearby port for loading onto ships for transportation to third-party smelters worldwide.