Updated PFS shows Seabridge’s KSM profitable at current prices

20th September 2016 By: Henry Lazenby - Creamer Media Deputy Editor: North America

VANCOUVER (miningweekly.com) – British Columbia-focused Seabridge Gold has published an updated preliminary feasibility study (PFS) on its Kerr-Sulphurets-Mitchell (KSM) project, updating the project capital and operating costs to the 2016 economic environment.

The company said on Monday that, building on a similar treatise completed in 2012, the 2016 PFS incorporates several design improvements, while the updated financial projections confirm that KSM is an economic project at current metal prices.

Highlights of the latest PFS include a 12% lower base case initial capital cost estimate, including preproduction mining costs of $5-billion, despite significant project enhancements. Sustaining capital over the 53-year mine life is estimated at $5.5-billion.

The estimated base case total cost per ounce of gold produced rose 13% over the 2012 PFS to $673/oz produced, mainly owing to lower base metal credits from price declines, which is partially offset by a 9% reduction in per-unit life-of-mine operating costs.

Seabridge said that improved mine sequencing decreases the early strip ratio, while increasing the gold grade by 4% and the copper grade by 1% through the 6.8-year payback period.

Further, the company expects to achieve increased operational flexibility by switching ore transport between the mine and the process plant from conveying to automated trains, allowing for a flexible ore delivery rate to the plant while maintaining ore source scheduling functionality. This will also benefit moving people, fuel and other consumables more efficiently.

The updated study provides for updated designs and costs to reflect the commitments Seabridge has made in the 2014 approved environmental assessment. This includes higher initial capital for water management comprising the provision of increased water retention capacity and the capability for an increased treatment rate, which will improve environmental protection during mining operations and after closure.

Importantly, Seabridge noted that the 2016 PFS results do not include material from recent higher-grade discoveries at Deep Kerr and Iron Cap Lower zone, which are expected to have a positive impact on project economics. An analysis of the integration of these deposits into the proposed project design will be included as a preliminary economic assessment forming part of the National Instrument 43-101 technical report, which the company advised was due to be published “shortly”.

Assuming metals prices of $1 230/oz gold, 2.75/lb copper, $17.75/oz silver and $8.49/lb molybdenum, the PFS calculated an after-tax net present value, at a 5% discount rate, of $1.5-billion, and an internal rate of return of only 8%.

MINE PLAN
The mine production plan starts in lower-cost openpit areas using conventional large-scale equipment before transitioning into block-cave underground bulk mining later in the mine life. Starter pits have been selected in higher-grade areas and cutoff grade strategy optimises revenues to reduce the payback duration.

At an average of 130 000 t/d, the yearly throughput for the mill after ramp up during the initial 35 years of mine life is estimated at 47.5-million tonnes.

At Mitchell, openpit production is scheduled from inception through to year 24, followed by underground block-caving production through to year 53. Openpit production from Sulphurets will augment Mitchell openpit production from startup through year 17, while openpit production from Kerr is designed for years 24 to 34. Iron Cap underground block caving production begins in year 32 through to year 53, essentially replacing Sulphurets and Kerr production. Final production years are dominated by stockpile reclaim and underground production.

At Mitchell, a near-surface higher-grade gold zone outcrops, allowing for gold production in the first seven years, which is substantially above the mine life average. The mine plan is specifically designed for mining highest gold grade first to facilitate a quick capital investment payback.

Estimated proven and probable mineral reserves of 38.8-million ounces of gold and 10.2-billion pounds of copper, held in 2.2-billion tonnes grading 0.55 g/t and 0.21% copper, are slightly above 2012 estimates.

The mine is expected to produce 933 000 oz of gold a year during the first seven years of operation, as well as 205-million pounds of copper, 2.6-million ounces of silver and 1.6-million pounds of molybdenum.