Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
Skeena Resources (TSX: SKE; NYSE: SKE) has announced a bought deal financing of C$30 million to fund its buydown of a net smelter return (NSR) currently held by Barrick Gold. A syndicate of underwriters led by Raymond James will purchase 4.96 million Skeena common shares at C$6.05 per share. There is also an over-allotment option to purchase nearly 744,000 shares, exercisable for 30 days.
Skeena is currently focused on revitalizing the past-producing Eskay Creek gold-silver mine located in the Golden Triangle of northwest BC. It previously operated from 1994 to 2008 as an underground mine, producing 3.3 million oz. of gold at an average grade of 45 g/t and 160 million oz. of silver at average grade of 2,224 g/t, making it one of the highest-grade gold mines in the world during that time.
Skeena first optioned the property in 2017, with a view of bringing the former mine back into production as a conventional open pit operation. It then acquired 100% ownership of the project from Barrick in October 2020, with the latter retaining a 1% NSR royalty on the Eskay Creek land package. Half of that royalty may be repurchased from Barrick during the 24-month period after closing.
The latest financing package would allow Skeena to buy back a 0.5% NSR royalty for a total of C$17.5 million as previously agreed. The rest of the funds will be used by the company for general administration and corporate purposes.
The announcement follows the recent release of a feasibility study on the Eskay Creek project, which forecasts an after-tax net present value of C$1.4 billion (at a discount rate of 5%) and internal rate of return of 50.2% The payback period of pre-production capital costs is estimated at one year.
