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.
Skeena Resources (TSX: SKE) (NYSE: SKE) announced on Monday it has arranged a private placement with Franco-Nevada (TSE: FNV) (NYSE:FNV) that will see the Canadian miner raise gross proceeds of C$30.9 million ($24.1m).
The structured non-brokered offering will comprise approximately 1.47 million common shares of Skeena priced at C$21.00 each. The stock closed at C$11.95 a share last Friday.
Proceeds of the offering will be directed towards Skeena’s exploration activities focused on reawakening the past-producing Eskay Creek gold-silver mine, located in the Golden Triangle of northwest British Columbia.
Eskay Creek contains open-pit reserves of 3.88 million ounces at 4.57 g/t AuEq in the proven and probable category. A prefeasibility dtudy (PFS) completed by Skeena in July highlighted an after-tax NPV (5% discount rate) of C$1.4 billion, an IRR of 56% and a 1.4-year payback period.
As part of the financing, Skeena will grant to Franco-Nevada a right of first refusal (ROFR) over the sale of a 0.5% net smelter return (NSR) royalty over the Eskay Creek project, matching the portion of the existing Barrick royalty that can be bought back by the company.
The ROFR granted to Franco-Nevada will be subject to a competitive auction process conducted by Skeena, in which Franco-Nevada will participate, prior to October 2, 2023.
If Skeena has not sold the royalty to Franco-Nevada or a third party by that date, Franco-Nevada will have the right to purchase the royalty for C$22.5 million for a period of 30 days.
Additionally, upon closing of the offering, Skeena and Franco-Nevada will amend the terms of their existing royalty agreement such that it will cover the same tenures as are covered in the existing Barrick royalty agreement.
Skeena would continue to have the right to buy down a 0.5% NSR royalty (from a 1.0% NSR royalty) currently held by Barrick for a payment of C$17.5 million, until October 2, 2022.
Shares of Skeena Resources surged 8.4% by 12:10 p.m. in Toronto, giving the BC-focused miner a market value of C$828.3 million.
