The benefits of incorporating the Iron Cap block cave mine earlier into the production schedule of the KSM project have exceeded owner Seabridge Gold’s expectations and should give investors a “compelling view” of the project’s economics.

The TSX-listed company this week published an updated preliminary economic assessment (PEA) for its KSM project, outlining an alternative development option to the 2016 prefeasibility study (PFS).

The 2020 PEA incorporates a much larger Iron Cap block cave mine into the production schedule, accompanied by smaller openpits, compared with prior studies, and developing this opportunity much earlier in the project’s mine life.

In the latest study, openpit mining accounts for a third of production while underground mining comprises the balance. This is the reverse of the 2016 PFS plan where two-thirds of production were derived from openpit mining. Smaller openpits allow the 2020 PEA mine plan to reduce the waste rock storage volume by 57% compared with the 2016 PFS, with a corresponding reduction to environmental impact.

The latest study is based on a significantly higher plant throughput rate, exploitation of deeper inferred mineral resources maximising underground mass mining techniques over openpit mining, and changes to the life-of-mine (LoM) plan and infrastructure design.

Compared with the 2016 PFS, the 2020 PEA boosts the aftertax net present value by about 80% to $6-billion, the aftertax internal rate of return by 40% to 14% and shrinks the projected payback from 6.4 years to four years.

The mine will operate for 44 years and will require an initial capital outlay of $5.2-billion.

The production plan captures 19.6-million ounces of gold and 5.4-billion pounds of copper from the measured and indicated categories, as well as an additional 20.8-million ounces of gold and 13.8-billion pounds of copper from the inferred category.

“The PEA is based on Iron Cap's inferred resource estimate but we are very confident these resources will upgrade to higher categories with further drilling as they have in the past at the project's other deposits," chairperson and CEO Rudi Fronk says.

Over the LoM, this scenario for KSM will recover 27.6-million ounces gold and 17-billion pounds copper. The LoM average operating cost is negative $472/oz of gold, net of copper and silver by-product revenues, while the LoM total cost is $4/oz, inclusive of all project capital and net of copper and silver by-product revenues.

"These PEA economic projections, if achieved, would rank KSM among the best large-scale producing mines in the world," says Fronk.

He adds that the benefits of incorporating Iron Cap into mine plans have “exceeded the upper end” of the company’s expectations – not only for the improvement in projected economics, but also for the reduction in environmental impact.