SKE.TO · 2021-07-22 12:00:00

Skeena Completes PFS for Eskay Creek: After-Tax NPV(5%) of C$1.4B, 56% IRR and 1.4 Year Payback

Economic Studies

Skeena Completes PFS for Eskay Creek: After-Tax NPV(5%) of C$1.4B,

56% IRR and 1.4 Year Payback

Vancouver, BC ( July 22, 2021) Skeena Resources Limited (TSX: SKE, OTCQX: SKREF)

(“Skeena” or the “Company”) is pleased to announce the results of the Prefeasibility Study (“PFS”)

completed by Ausenco Engineering Canada Inc. (“Ausenco”), supported by SRK Consulting

(Canada), and AGP Mining Consultants, for the Eskay Creek gold-silver project (“Eskay Creek” or the

"Project") located in the Golden Triangle of British Columbia.

Eskay Creek 2021 PFS Highlights:

• High-grade open-pit averaging 3.37 g/t Au, 94 g/t Ag (4.57 g/t AuEq) (diluted)

• Proven and Probable Mineral Reserves of 3.88 Moz AuEq (26.4 Mt at 3.37 g/t Au

and 94 g/t Ag).

• After-tax NPV5% of C$1.4 billion, (US$1.1 billion) and 56% IRR at US$1,550/oz

Au and US$22/oz Ag

• After-tax payback period of 1.4 years

• Pre-production capital expenditures (CAPEX) of C$488M (US$381M)

• After-tax NPV:CAPEX Ratio of 2.9:1

• Life of mine (“LOM”) average annual production of 249,000 oz Au, 7,222,000 oz

Ag (352,000 oz AuEq) over a 9.8-year mine life

• LOM all-in sustaining costs (“AISC”) of C$702/oz (US$548/oz) AuEq recovered

• LOM cash costs of C$651/oz (US$509/oz) AuEq recovered

• 7,945 tonne per day ( “tpd”) mill and flotation plant producing saleable

concentrate

• LOM average greenhouse gas (“GHG”) emissions of 0.18 t CO2e/oz AuEq

• Exchange Rate (US$/C$) of 0.78

• Cash costs are inclusive of mining costs, processing costs, site G&A, treatment and refining charges and royalties

• AISC includes cash costs plus estimated corporate G&A, sustaining capital and closure costs

• t CO2e = tonnes of carbon dioxide equivalent

Skeena’s CEO, Walter Coles Jr. commented, “Eskay Creek has a rare combination of attributes: scale,

impressive grade and location in a tier one mining jurisdiction with strong First Nations support. In the

first 5 years of operation, it is anticipated that Eskay Creek will produce, on average, 450,000 gold

equivalent ounces per year. We expect further increases to the annual production profile as we move

to the Feasibility Study in Q1 of 2022, and beyond. Our goal is to create a mine produc ing 500,000

gold equivalent ounces per year for 10 years. The PFS is only based on the current open-pit resources.

Skeena has a 35,000-metre exploration program underway at Eskay Creek to continue to grow the

open-pit resources, and we have yet to focus on the considerable underground exploration potential.”

NR: 21-29 | July 22, 2021

PFS Overview

The 2021 Eskay Creek PFS considers an open -pit mine with on-site treatment of the mined material

by conventional milling and flotation to recover a gold -silver concentrate. The mine will be an owner -

operated, standard truck and shovel open-pit, with a leased mining fleet. The plant will process ore at

a nominal rate of 2.0 million tonnes per year (“Mt/y”) (5,480 tpd) in Year 1 during ramp -up, 2.9 Mt/y

(7,945 tpd) for Years 2 to 4 then reduce to 2.7 Mt/y (7,400 tpd) in Year 5 onward as the mater ial

increases in hardness and competency over an expected production lifespan of 9.8 years. An

additional 30 months of pre-stripping, stockpiling and mine access development is planned prior to the

processing facility becoming fully operational in Year 1. The PFS leverages Eskay Creek’s extensive

existing infrastructure, including all-weather access roads, previously permitted tailing storage facilities

(“TSF”) and proximity to the 195 MW hydroelectric facilities and linked power grid.

The PFS is derived from the Company’s pit -constrained resource estimate (April 7, 2021) and does

not include results from the recently initiated and ongoing 2021 drill program. The effective date of the

PFS is July 22, 2021, and a technical report will be filed on the Company’s website and SEDAR within

45 days of this disclosure.

Table 1: 2021 Eskay Creek PFS Project Parameters

Economic Assumptions

Gold Price (US$/oz) $1,550

Silver Price (US$/oz) $22

Exchange Rate (US$/C$) 0.78

Discount Rate 5.0%

Contained Metals

Contained Gold (koz) 2,866

Contained Silver ounces (koz) 80,197

Mining

Mine Life 9.8 years

Strip Ratio (Waste:Ore) 8:1

Total Material Mined (excl. rehandle) (kt) 238,030

Total Mineralized Material Mined (kt) 26,419

Processing

Processing Throughput

5480 tpd (Yr 1)

7945 tpd (Yr 2-4)

7400 tpd (Yr 5

onwards)

Average Diluted Gold Grade 3.37 g/t

Average Diluted Silver Grade 94 g/t

Average Diluted AuEq Grade 4.57g/t

Production

Gold Recovery 84.2%

Silver Recovery 87.3%

LOM Gold Production (koz) 2,448

LOM Silver Production (koz) 70,902

LOM AuEq Production (koz) 3,455

LOM Avg. Annual Gold Production (koz) 249

LOM Avg. Annual Silver Production (koz) 7,222

LOM Avg. Annual AuEq Production (koz) 352

Operating Costs Per Tonne

Mining Cost (C$/t Mined) $3.58

Mining Cost (C$/t Milled) $30.56

Processing Cost (C$/t Milled) $18.22

G&A Cost (C$/t Milled) $6.23

Total Operating Costs (C$/t Milled) $55.01

Other Costs

Transport to Smelter (C$/wmt) $146

Royalty (NSR %) 2.0%

Cash Costs and All-in Sustaining Costs

LOM Cash Cost (US$/oz Au) net of silver by

product $84

LOM Cash Cost (US$/oz AuEq) co-product $509

LOM AISC (US$/oz Au) net of silver by -

product $138

LOM AISC (US$/oz AuEq) co-product $548

Capital Expenditures

Pre-production Capital Expenditures (C$M) $488

Sustaining Capital Expenditures (C$M) $47

Reclamation Cost (C$M) $92

Economics

After-Tax NPV (5%) (C$M) $1,399

After-Tax IRR 56%

After-Tax Payback Period (years) 1.4

After-Tax NPV / Initial Capex 2.9 x

Pre-Tax NPV (5%) (C$M) $2,174

Pre-Tax IRR 68%

Pre-Tax Payback Period (years) 1.3

Pre-Tax NPV / Initial Capex 4.5 x

Average Annual After-tax Free Cash Flow

(year 1-10) (C$M) $265

LOM After-tax Free Cash Flow (C$M) $2,118

• Cash costs are inclusive of mining costs, processing costs, site G&A and royalties

• AISC includes cash costs plus corporate G&A, 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$1,550/oz Au and US$22/oz Ag. These prices are based on long-term average prices.

Sensitivities

After-tax economic sensitivities to commodity prices , presented in Table 2 , illustrate the effects of

varying gold and silver prices as compared to the base -case. Additional Project sensitivities will be

presented in the Technical Report.

Table 2: After-Tax NPV (5%) and IRR Sensitivities to Commodity Prices (PFS)

Lower

Case

Base

Case

Higher

Case

Upside

Case

Gold Price (US$/oz) $1,400 $1,550 $1,700 $1950

Silver Price (US$/oz) $20 $22 $24 $26

After-Tax NPV (5%) (C$M) $1,162 $1,399 $1,635 $1,985

After-Tax IRR (%) 49% 56% 62% 70%

After-Tax Payback (Years) 1.6 1.4 1.2 1.1

After-Tax NPV/Initial Capex 2.4 x 2.9 x 3.4 x 4.1 x

Average Annual After-Tax Free Cash Flow

(Years 1-10) (C$M) $231 $265 $300 $352

Eskay Creek Mineral Resource Estimate

The Company’s current Mineral Resource Estimate (“MRE”; effective date of April 7, 2021) completed

by SRK Consulting (Canada) forms the basis for this PFS. The MRE does not include drilling results

from the Company’s recently initiated and ongoing 2021 drill program.

Table 3: Pit constrained Mineral Resource Statement reported at 0.7 g/t AuEq cut-off:

Grade Contained Ounces

Tonnes

(Mt)

AuEq

(g/t)

AuEq

(Moz)

Measured 17.3 5.8 4.2 118.4 3.2 2.3 65.9

Indicated 20.3 2.9 2.2 52.5 1.9 1.4 34.4

Total M&I 37.7 4.2 3.1 82.8 5.1 3.8 100.3

• These mineral resources are not mineral reserves as they do not have demonstrated economic viability. Results

• are reported in-situ and undiluted and are considered to have reasonable prospects for economic extraction.

• As defined by NI 43-101, the Independent and Qualified Person is Ms. S Ulansky, PGeo of SRK Consulting

• (Canada) who has reviewed and validated the Mineral Resource Estimate.

• The effective date of the Mineral Resource Estimate is April 7, 2021.

• The number of metric tonnes and ounces were rounded to the nearest thousand. Any discrepancies in the totals

• are due to rounding.

• Pit constrained Mineral Resources are reported in relation to a conceptual Pit shell.

• Block tonnage was estimated from average specific gravity measurements using lithology groupings.

• All composites have been capped where appropriate.

• Pit mineral resources are reported at a cut- off grade of 0.7 g/t, cut off grades must be revaluated considering prevailing market conditions.

• Cut-off grades are based on a price of US$1,700 /oz Au, US$23/oz Ag, and gold recoveries of 90%, silver recoveries of 80% and without

considering revenues from other metals. AuEq = Au (g/t) + [Ag (g/t) / 74]

• Estimates use metric units (metres, tonnes and g/t). Metals are reported in troy ounces (metric tonne * grade /

• 31.10348)

• CIM definitions were followed for the classification of mineral resources.

• Neither the company nor SRK is aware of any known environme ntal, permitted, legal, title -related, taxation, socio-political,

marketing or other relevant issue that could materially affect this mineral resource estimate.

Mining Overview

An open-pit mining only scenario is the basis for this PFS. The underground precious metal resource

opportunity has not been considered at this time. The owner -operated, leased mining fleet will utilize

conventional truck and shovel methods with 22 m 3 shovels and 144 tonne haul trucks. Support

equipment is comprised of track dozers, graders , and hydraulic excavators; additional support

equipment to maintain production during seasonal periods of high snowfall has also been

incorporated.

The mine designs and scheduling were engineered to provide 2.9 Mt per year of ore to the process

plant in the first 4 years, followed by 2.7 Mt per year for the remainder of the mine life.

A total of 26.4 Mt of diluted mill feed averaging 3.37 g/t gold and 94 g/t silver (4. 57 g/t AuEq), is

expected to be processed over the life of mine from the main pit area and a smaller satellite pit hosting

the 22 Zone.

Mill feed will be trucked to a primary crusher located to the west of the main pit and then conveyed

overland to the processing facility. Non-acid generating waste totaling 161 Mt will be stored in a waste

storage facility adjacent to the main and satellite open pits with a portion backfilled into the pit as the

mining sequence advances towards the north. Potentially acid-generating waste totaling 50 Mt will be

hauled to the Tom MacKay storage facility and stored sub-aqueously together with tailings.

Open-pit mining dilution has been estimated to cause a 21% increase in tonnes delivered to the mill

and a 16.6% decrease in overall head grades. Pit slopes were grouped into weak and competent

lithology groups. The weak slope domains were applied to the mine design using an inter ramp angle

(“IRA”) of 34 degrees with recognition of areas tha t exhibit lower rock quality. A default IRA of 46

degrees is applied throughout for the competent rocks. Batter angles of 70 degrees have been applied

throughout the entire design with IRA achieved by variable berm widths.

The reserves for Eskay Creek are based on the conversion of the Measured and Indicated resources

within the current Technical Report mine plan. Measured resources are converted to Proven Reserves

and Indicated resources are converted directly to Probable Reserves. The total reserves for Eskay

Creek are shown in Table 4 below. Some variation may exist due to rounding.

Table 4: 2021 Proven and Probable Reserves (Metric Units)

Reserve

Class Tonnes Grade Contained Ounces

(Mt)

AuEq

(g/t)

AuEq

(Moz)

Proven 13.5 5.81 4.25 124 2.53 1.85 53.7

Probable 12.9 3.26 2.46 64 1.35 1.02 26.5

Total 26.4 4.57 3.37 94 3.88 2.87 80.2

Note: This mineral reserve estimate is as of June 30th, 2021 and is based on the mineral resource estimate dated

April 7, 2021 for Skeena Resources by SRK Consulting. The mineral reserve calculation was completed under the

supervision of Willie Hamilton, P.Eng. of AGP, who is a Qualified Person as defined under NI 43-101. Mineral reserves

are stated within the final design pit based on a US$1,475/oz gold price and US$20.00/oz silver price. The NSR cut -

off grade of C$30.56/t was used to define the marginal cut-off material. The life-of-mine mining cost averaged C$3.14/t

mined, preliminary processing and G&A costs are C$24.50/t ore and C$6.06/t ore respectively. The ore recoveries

were varied according to gold head grade and concentrate grades. Gold concentrate grades varied from 20 to 60 g/t

gold. The gold equivalent grades are based on 79.3 Ag ounces yielding similar value to an Au ounce.

Production Profile

The P FS outlines an average production profile of 450 ,000 oz AuEq over the first five years of

production. Average annual production over the full LOM is expected to be 352,000 oz AuEq. Further

optimization or exploration discoveries may increase the production profile or extend the LOM

schedule in the future.

It is anticipated that Skeena will have accumulated approx imately 500,000 tonnes of mineralized

material on surface when the processing plant is expected to reach its designed throughput capacity,

providing flexibility in the early stages of production. This ramp-up profile is expected to lower the risk

of start -up and minimizes sustaining capital investment at the outset of the production. There is

potential for the ramp up profile to be accelerated with further optimization work.

Graph 1: Eskay Creek LOM Production Profile

Metallurgical Optimizations

PFS Test Work

Skeena completed additional Prefeasibility test work in 2020. The samples used in the PFS test

program as well as fresh core intervals from the 21A, 21B, 21C, 21E and HW Zones were evaluated

by Base Metallurgic al Laboratories Ltd. in Kamloops BC. Composite samples representing the first

three years of plant feed were also prepared. An extensive flotation testing program was completed,

resulting in a modified process flowsheet.

Mineralogical studies indicated a portion of the gold was associated with non -sulphide gangue and

flotation performance was negatively influenced by the presence of soft minerals. The solution was to

include a desliming stage where these soft minerals were isolated and floated separately. The result

was improved flotation response for the coarse material. This mill-float-mill-float circuit (“MF2”) is used

in platinum processing for fine-grained precious metal recovery.

Improved Metallurgy

The MF2 flowsheet was tested on both the annual com posites and variability samples to evaluate its

suitability to process a range of Eskay Creek material. The result was the ability to generate a higher

concentrate grade without significant loss in gold recovery. This is a significant improvement over the

PEA flowsheet.

A 45 g/t Au concentrate is being targeted to maximize gold recovery although samples generated final

concentrate grades of more than 55 g/t Au. Concentrate silver grades are expected to be between

900 g/t and 2,400 g/t with the average LOM concentrate grade being 60 g/t AuEq. Arsenic, mercury,

and antimony penalties are primarily incurred during the first three years of operation with an average

cost of approximately C$18M per year. The highest penalties are incurred in the first year of operation

(when the higher gold grade feed is processed). From Year 4 onwards, arsenic in concentrate is

expected to be at or below 1% and mercury below 350 ppm.

Processing Overview

Run-of-mine (“ROM”) material is trucked from the mine and either stockpiled or direct fed into the

primary crusher. Primary crushed feed material is in turn conveyed to the mill facility and stacked onto

a coarse ore stockpile. The ROM material is considered relatively competent with average Bond Rod

and Ball Mill Work Indices of 15.8 kWh/t and 17.9 kWh/t, respectively. To achieve the target primary

particle P80 (80% passing) size of 100 µm the comminution circuit comp rises a 3.8 MW semi -

autogenous grinding (SAG) mill, 7.3 m diameter by 4.3 m effective grinding length, and a 4.9 MW ball

mill, 5.5 m diameter by 9.0 m length. A pebble crushing circuit is also included and will be

commissioned in year 4. Ground material is processed through a split flotation circuit consisting of

roughers, scavengers, fines roughers, cleaners and fines cleaner flotation, along with regrinding of

rougher concentrate, slimes classification of rougher tailings and secondary grinding prior to

scavenger flotation. Rougher concentrate is re -ground to a target P 80 size of 15 µm and slimes

classification underflow is secondary ground to a target P 80 size of 30 µm, prior to multiple stages of

cleaning to produce a combined gold -silver concentrate with the slimes circuit concentrate. Flotation

tailings are pumped to the existing Tom MacKay Storage Facility and sub-aqueously stored together

with the potentially acid generating (“PAG”) waste rock. Flotation concentrate is thickened and filtered,

and trucked to the port at Stewart, BC for loading onto ships and transportation to third-party smelters

worldwide.

Concentrate Marketing Studies

Multiple marketing assessments have been completed to support the PFS which indicate that the

Eskay Creek concentrate is readily saleable at a target grade of 45 g/t Au . The preferred preliminary

contract terms for the concentrate have been provided by Asi an smelters, however multiple offtakes

are available. Smelters/traders within Europe have also provided draft term sheets, and these have

also been identified as potential markets given the high concentrate grades. The Company has been

offered several preliminary term sheets for the entire concentrate production, which ha ve been used

as the basis for the financial model, and include gold and silver payabilities, industry standard

treatment and refining charges, and penalties for impurities. For the purposes of the PFS, smelter

payabilities average 84% for gold and 83% for silver.

Capital Costs

Table 5: Project Capital Cost Estimates (C$M) (totals may differ due to rounding):

Initial

Sustaining

LOM

Total

Mine

Pre-Stripping $88 $88

Mining Equipment $14 $17 $31

Mine Capital $18 $23 $40

Sub-Total Mine $120 $40 $160

Processing

Bulk Earthworks $14 $14

Processing $114 $1 $115

Reagents & Plant Services $1 $1

Onsite Infrastructure $54 $54

Sub-Total Processing $183 $1 $184

Infrastructure

Power $29 $29

TSF, Water Supply & Treatment $8 $6 $14

Sub-Total Infrastructure $37 $6 $44

Total Directs $340 $47 $388

Indirects $68 $68

Total Directs + Indirects $408 $47 $455

Owner’s Costs $27 $27

Total excluding Contingency $435 $47 $483

Project Contingency $53 $53

Sub-total including Contingency $488 $47 $535

Closure $92 $92

Total $488 $140 $627

Environmental and Permitting Considerations

Eskay Creek represents a closed mine with existing permits for mine disturbance and development,

mine discharge and waste disposal. The site has been maintained in good standing and environmental

monitoring has been ongoing during operations and since the site was closed in 2008. There is a

substantial database of environm ental information for the site and region spanning almost 30 years.

To accommodate the mine design contemplated by the PFS, updated environmental assessment and

mine permits will be required. The Company is completing environmental and socio -economic

baseline studies and recently entered the environmental assessment and permitting process.

Eskay Creek is projected to be one of lowest GHG emission open-pit gold mines worldwide, emitting

an average of 0.18 tonnes of CO2e per gold equivalent ounce produced. Several factors contribute to

this low number, such as the high-grade nature of the deposit and access to clean, green hydro energy

near the site.

← Back to feed