Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Seabridge Gold (TSX: SEA; NYSE: SA) has updated the prefeasibility study (PFS) for its 100%-owned Courageous Lake open pit project in the Northwest Territories, creating a more sustainable and profitable operation than the earlier PFS done in 2012. The new PFS led by Ausenco demonstrates the production of 2.5 million oz. of gold over an initial 12.6-year mine life.
Everything that should go up is up, and that which should be lowered is lower. The study increased gold reserves in the measured and indicated resource by 39% to 11 million oz. Courageous Lake now has an after-tax net present value (NPV) with a 5% discount of $523 million, an internal rate of return (IRR) of 20.6%, with a 2.8-year payback. Annual production will be 201,000 oz. of gold at an all-in sustaining cost of $999 per ounce, in the lowest quartile of the World Gold Council cost curve.
The PFS also highlights a 73% increase in the after-tax NPV 5% to $523 million, a 50% reduction in initial capital to $747 million, and an increased after-tax IRR to 20.6% from 7.3%. The average gold reserve grade increased 19% to 2.6 g/t, and the life of mine strip ratio was reduced 39% to 7.58. The increase for contained gold in measured and indicated resources rose to 11 million oz., up 38% from 8 million oz. in 2012.
“We now have a second valuable 10-million-plus ounce gold resource project in a safe jurisdiction. The project consists of an entire greenstone belt which has prospective shallow drill results and gold showings along its 54 km length,” said Seabridge chairman and CEO Rudi Fronk. “As we move towards a joint venture on our KSM project, we will be shifting our attention to Courageous Lake’s potential to generate considerable additional shareholder value.“
He estimated that the PFS covers only 30% of the Courageous Lake resources identified. Therefore, the project has considerable potential to exceed the original 12.6-year mine life.
The Courageous Lake project includes two deposits – Courageous Lake and Walsh Lake. Only the first was included in the PFS. The Courageous Lake resource was estimated using information from 616 drill holes from which 127,169 metres of core was tested. The measured and indicated resource is 145.2 million tonnes grading 2.36 g/t gold and containing 11.0 million oz. The inferred portion is 40.6 million tonnes grading 2.52 g/t and containing 3.3 million oz. of gold.
The Walsh Lake deposit has an inferred resource of 4.1 million tonnes grading 4.18 g/t and containing 554,800 oz. of gold.
The above numbers are from the 2024 PFS using a base gold price of $1,850 per oz. Seabridge also included a separate preliminary economic assessment for a potential underground expansion below the Courageous Lake pit.
The Courageous Lake property is located 240 km northeast of Yellowknife, NWT, and is situated within the Courageous Lake greenstone belt (CLGB) in the Slave Structural Province. The property is a collection of mineral leases and mining claims that trend north-south along the approximately 54 km length of the CLGB. The property includes the past gold producing properties of the Salmita and the Tundra mines.
The project site will be accessed via spur winter road connecting to the Tibbitt to Contwoyto Winter Road (TCWR) that is normally open from late January or early February until the end of March of each year and services the nearby Ekati and Diavik mines.
The 2024 PFS mine plan uses an open pit truck and shovel operation. Mill feed is to be processed onsite by crushing, grinding, and flotation. Flotation concentrate will be pressure oxidized and cyanide leached to produce a gold doré.
Waste rock at the project will be directly hauled to the co-placement storage facility (CPSF) along with flotation tailings. Neutralized leach tailings will be placed in a separate facility.
