Skeena Resources brings a new shine to BC’s Golden Triangle

"When you combine our high-grade production profile, top-notch infrastructure, community support and low production costs, it's clear why Skeena's projects are considered world-class."
- Randy Reichert, Skeena’s CEO and Director

British Columbia's Golden Triangle, a storied region renowned for its rich deposits of gold, silver, and a range of other valuable minerals, stands as a beacon in the global mining landscape.

For centuries, this area has magnetized the bold and visionary, drawn by its geological bounty. Since the late 1800s, over 150 mines have operated here, developing the Triangle's diverse mineral tapestry.

Today, the Golden Triangle is experiencing a renaissance, driven by geopolitical tensions and the global shift towards renewable energy, which have escalated the demand for gold, silver, and other critical metals that lie beneath the rugged terrain of Northwestern British Columbia. 

At the forefront of this resurgence is Skeena Resources, which is revitalizing the historic Eskay Creek and Snip Projects, located in the traditional territory of the Tahltan First Nation.

Eskay Creek, once the world's highest-grade gold mine, produced 3.3 million ounces of gold and 160 million ounces of silver, with average grades of 45 g/t gold and 2,224 g/t silver between 1994 and 2008. In November 2023, Skeena completed a Definitive Feasibility Study on Eskay Creek, revealing high-grade, pit-constrained reserves of 4.6 Moz AuEq at an average grade of 3.6 g/t AuEq, with an after-tax NPV5% of C$2 billion, a 43% IRR, and a 1.2-year payback at US$1,800/oz Au and US$23/oz Ag.

The Snip mine, another jewel in Skeena's portfolio, produced approximately one million ounces of gold from 1991 to 1999, at an average gold grade of 27.5 g/t. In September 2023, Skeena announced an updated Mineral Resource Estimate for the Snip Gold Project, indicating 823,000 ounces within 2.74 million tonnes at an average grade of 9.35 g/t Au, marking a 237% increase from the 2020 estimate.

Skeena Resources has also forged a historic, consent-based agreement with the Tahltan Nation in 2022, making Eskay Creek the first project in British Columbia to receive permits authorized by a First Nation government. 

The project benefits from excellent infrastructure, including all-weather road access, proximity to the new 287-kV Northwest Transmission Line, and the Volcano Creek hydroelectric facility, just 17 km away. Additionally, port access in Stewart, BC, is only 83 km away via the paved Highway 37.

In June, Skeena secured a US$750 million financing package with Orion Resource Partners, ensuring the Eskay Creek project's full funding as it advances towards open-pit production in the first half of 2027. It expects an annual production of 320,000 oz gold equivalent over a 12-year mine life.

Stock Information TSX:SKE

1. As of market close on August 28, 2024
2. As a top pick at CEM Bermuda Capital Event on June 8, 2024

Skeena Resources is more than gold

While Skeena Resources is primarily recognized for its gold development initiatives, the company also possesses significant interests in other valuable minerals. 

The Eskay Creek project, for instance, not only focuses on high-grade gold but also yields substantial silver by-products, positioning it among the prominent silver producers in the world with an expected annual output of 7.65 million ounces of silver in years 1 – 10 of the mine life. This is particularly significant as the demand for silver in industrial applications has reached unprecedented levels, driven by the green economy's growth, including solar energy and electric vehicle (EV) manufacturing.

In addition to silver, Eskay Creek boasts considerable quantities of other critical minerals such as antimony, zinc, and copper. The project is estimated to contain 28,000 tonnes of antimony, 18,000 tonnes of copper, and 200,000 tonnes of zinc. These resources present Skeena with the opportunity to enhance concentrate payabilities and improve project economics, although they are not currently included in the project's financial assessments.

The recent announcement by China to impose export restrictions on antimony—a metal crucial for military applications and green technologies—is expected to drive antimony prices to record highs due to constrained supply and rising demand. This development could further bolster Skeena's strategic position in the market, given the significant quantity of antimony reserves at Eskay Creek.

Skeena a Top Pick for investors

For the past three years, the Eskay Creek Gold-Silver Project project has been crowned the #1 precious metals project globally by Mining Journal’s Project Pipeline Handbook. That's no small feat! Skeena has also been making waves in the investment world, recently being named a "Top Pick" at CEM’s prestigious Bermuda Capital Event.

Why? Let me break it down for you:

• Gold Potential: This isn't just any gold mine. It's one of the highest-grade and lowest-cost gold mines out there. Plus, the Snip project offers a fantastic chance to improve production in later years as a satellite operation.
• Diverse Mineral Output: While gold is the star, Eskay Creek also churns out a hefty amount of silver, along with antimony, zinc, and copper. These minerals open up avenues for increased payabilities in concentrate.
• Strong Community Ties: Skeena has built a robust partnership with the Tahltan First Nation, contributing over $180 million in wages, contracts, and community support since 2018.
• Fully Funded to Production: With a comprehensive US$750 million financing package, Eskay Creek is all set for production. This funding surpasses the initial pre-production capital needs, ensuring a smooth path forward.
• Infrastructure and Power Access: The project boasts excellent access to power and infrastructure, making it a well-supported endeavor.

In a nutshell, Skeena Resources is not just about gold—it's about a diversified mineral portfolio, strong community relationships, and a fully financed path to production. It's no wonder they're catching the eye of savvy investors!

This week, I caught up with Randy Reichert, Skeena’s CEO and director, a 30-year mining industry veteran, to ask him to expand on his company success, strategies and upcoming plans:

So, Randy, can you give us the lowdown on Skeena Resources and why people are calling your projects "world-class"?

"Absolutely! Our flagship project, Eskay Creek, is a real gem. From 1994 to 2008, it was the highest-grade gold mine globally, producing about 3.3 million ounces of gold and 160 million ounces of silver with impressive grades. 

Once we get Eskay Creek back into production, we’re looking at an annual output of 230,000 ounces of gold and 6.7 million ounces of silver. Plus, we've got a 100% interest in the Snip mine, which produced around a million ounces of gold back in the day. We took it over from Barrick in 2017, and now it's showing promising resources that could boost Eskay's production down the line.

Eskay Creek is set to become one of Canada's largest open-pit gold mines, ranking third in the country during its first five years. Its grades are nearly three times the global average for open-pit mines. We're also a low-cost producer, which is a huge plus.

Beyond Eskay Creek and Snip, we hold over 170,000 hectares in the Golden Triangle, making Skeena the third-largest landholder there, right behind Newmont and Teck. 

We've also built strong partnerships, especially with the Tahltan Nation, who are invested in our projects. Eskay Creek benefits from excellent infrastructure, like all-weather road access, proximity to a new transmission line, and a hydroelectric facility just 17 km away. Plus, port access is only 83 km away via a paved highway. 

Our revitalization project aims to reopen Eskay Creek as an open-pit operation, using existing infrastructure from the old underground mine, which helps cut initial costs and speeds up production.

So, when you combine our high-grade production profile, top-notch infrastructure, community support and low production costs, it's clear why Skeena's projects are considered world-class."

What milestones has Skeena Resources hit recently, and how do these set you up for future growth?

"The biggest thing for us is that we've turned Eskay Creek into a truly world-class project. It's been ranked as the #1 precious metals project globally, which we're really proud of. This recognition really cements Eskay Creek's status as one of the top mining projects out there.

Since we took full ownership of Eskay in 2020, we've made huge progress, moving from exploration to development. 

We've also secured a hefty US$750 million financing package for Eskay Creek's redevelopment. This means we're fully funded as we gear up for open-pit production in the first half of 2027. 

The funding is well above the initial pre-production capital, giving us a solid financial foundation. 

Another thing we're really proud of is our partnership with the Tahltan First Nation. Since 2018, we've generated over $180 million in wages, contracts, and community contributions for Tahltan-related companies.

This year, we've seen significant growth in three key areas. We've increased our reserves at Eskay Creek by 20%, bringing us to a total of 4.6 million gold equivalent ounces in our 2023 Definitive Feasibility Study. Over 80% of these reserves are now in the Proven category. We've also extended the mine life to 12 years, optimized the metallurgy, and simplified the flowsheet, which all contribute to a stronger economic outlook with a $2 billion post-tax net present value and a 43% internal rate of return.

Beyond these technical achievements, I'm thrilled about the growth of our team. We've added valuable members across all functions, setting us up for a strong 2024. 

We're focused on operational excellence, sound environmental management, and working closely with local First Nations. All these milestones and team additions have really prepared us for a strong future."

What's next for Skeena Resources?

"We're gearing up to be one of the next major mines to hit the global stage in the coming years, and that's catching the eye of a lot of investors. We've been getting quite a bit of market recognition for our efforts so far.

Looking ahead, we're diving into an engineering study for Snip. We're exploring the idea of using Snip as a satellite operation, which means we could send mineralized material over to a centralized mill at Eskay Creek. This high-grade mineralization from Snip could help extend the mine life at Eskay Creek by processing ore there. 

We're also seeing opportunities to boost our reserves and extend the mine life even further. As we push forward with permitting, project financing, construction, we're focused on getting Eskay Creek up and running quickly. That's the key to delivering big value for our shareholders.

With our project financing already secured, we're now working on finalizing the early works programs, detailed engineering plans, and an Impact Benefit Agreement with the Tahltan Central Government, which we expect to wrap up in the first half of 2025.

By the end of 2025, we anticipate having all the permits needed for full-scale construction and operation of the Eskay mine, with construction kicking off in 2026. We're aiming for initial production at Eskay Creek in the first half of 2027.

As for potential off-take agreements, we've had plenty of offers, but we'll be in a better spot to consider them as we get closer to production. We're likely looking at sending about 70% of our concentrates directly to smelters and the remaining 30% through traders.

On top of all that, we're projecting another potential C$700 million in contracts to Tahltan businesses throughout the mine's life. The project is set to create over 800 direct jobs and potentially 2,000 more for outside service and contract organizations. 

Plus, it's expected to contribute roughly C$1.5 billion in direct tax revenue to British Columbia and Canada over the mine's lifespan. We're confident that with further exploration on our expansive property, the mine life for Eskay will likely extend beyond the current estimate of 12 years. This means steady employment and long-term jobs for the local communities in northwestern British Columbia."

Our View

At the Investor Breakout Exchange, we see Skeena Resources as an exciting investment opportunity in the mining sector, thanks to its high-grade assets and solid financial standing. 

The Definitive Feasibility Study for their Eskay Creek project showcases impressive numbers: an after-tax NPV of C$2 billion, a 43% IRR, and a payback period of just 1.2 years. 

These figures underline the project's strong economic potential. 

Skeena's stock has shown a strong positive correlation with gold prices, which is appealing to investors, especially as gold remains a safe haven during economic slowdowns and geopolitical tensions. 

Currently, the company is trading at a discount, with the potential for a significant re-rating as it moves closer to production.

With its strategic position in the market, Skeena Resources is poised to deliver substantial returns, making it a compelling choice for investors looking to capitalize on the mining sector's opportunities.

The Investor Breakout advantage

As you already know, our Investor Breakout newsletter is based on the top picks and performers at CEM’s conferences, which are held seven times a year. These invite-only conferences serve as the meeting ground for North America’s most influential investors and industry leading issuers that attend a day-long series of 1-1 meetings.

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Next Stop - Muskoka 

Mark your calendars! CEM’s 12th annual Muskoka Capital Event, a premier networking summit, will be held on September 27 - 29, 2024. This exclusive gathering is a catalyst for innovation and investment, connecting high-potential growth-stage companies in Resource, Technology, Biotech, and Special Situations sectors with elite capital finance leaders. 

Designed to forge powerful partnerships and drive transformative deals, this September weekend retreat provides an unparalleled platform for visionary entrepreneurs and discerning investors to shape the future of emerging industries.

Warm Regards and Happy Investing,
Fabian Dawson