Seabridge Gold Inc. (TSX:SEA)(NYSE Amex:SA) announced today the results of an
updated National Instrument 43-101 compliant Preliminary Feasibility Study
("PFS") for its 100% owned KSM project located in northern British Columbia,
Canada. The updated PFS was prepared by Wardrop, A Tetra Tech Company (Wardrop).
The PFS Executive Summary can be found at
www.seabridgegold.net/ksm_exec_sum2011. The complete PFS will be filed at
www.sedar.com within 45 days.
The new PFS includes 2010 drilling results and enhanced engineering work to:
-- Increase estimated mineral reserves by 27% for gold, 42% for copper, 61%
for silver and 22% for molybdenum.
-- Extend mine life to 52 years from 37 (2.2 billion tonnes of reserves at
a throughput of 120,000 tonnes per day).
-- Put in place the potential to expand throughput by 50% in the early
years after start-up.
-- Produce gold at an estimated base case cash operating cost of US$105 per
ounce during first 7 years of mine life.
-- Reduce base case capital payback to 6.6 years or 13% of mine life.
-- Improve base case total net cash flow by US$4.5 billion.
The comparisons noted above are against the KSM March 31, 2010 PFS also prepared
by Wardrop.
Seabridge President and CEO Rudi Fronk stated that "the KSM project represents
an extraordinary opportunity in the current economic environment. Our estimated
operating costs and total costs per ounce of gold produced are well below the
current average of the major gold producers. At current metal prices and
currency exchange rates, estimated life of mine cash operating costs are minus
US$79 per ounce while total costs including all capital and closure costs are
just US$220 per ounce. Projected capital costs are in line with those of
comparable, large-scale undeveloped gold-copper projects and at current metal
prices and currency exchange rates, capital payback takes only to 4.8 years or
9% of mine life. Furthermore, KSM has the advantage of being located in a
low-risk jurisdiction."
The PFS envisages an open-pit mining operation at 120,000 metric tonnes per day
(tpd) of ore fed to a flotation mill which would produce a combined
gold/copper/silver concentrate for transport by truck to the nearby deep-water
sea port at Stewart, B.C. and shipment to a Pacific Rim smelter. Extensive
metallurgical testing confirms that KSM can produce a clean concentrate with an
average copper grade of 25%, making it readily saleable. A separate molybdenum
concentrate and gold-silver dore would be produced at the KSM processing
facility.
The designed throughput of 120,000 tpd is the industry standard start-up
capacity for large tonnage copper and copper-gold projects (even when reserves
are large enough to justify greater rates of production) because it is the
practical limit for developing the necessary working space for sufficient ore
production to feed the plant in the early years of an open pit mine. Examples
include Cerro Verde, Batu Hijau, Boddington, Quebrada Blanca, Las Bambas and
Conga, with start-up throughput varying between 100,000 and 140,000 tpd
depending on ore hardness. Planned expansion comes later as mining capacity
increases, allowing the project economics to be improved with a higher
throughput. Examples of projects that were originally built at 100,000 to
140,000 tpd throughput and have gone through or have planned expansions include
Escondida, Cerro Verde and Batu Hijau. In the new KSM PFS, the project has been
designed to accommodate a 50% expansion in the early years of operation,
essentially removing anticipated bottle-necks in advance. Start-up capital costs
have been increased accordingly.
Reserves
Lerchs-Grossman ("LG") pit shell optimizations were used to define the mine
plans in the updated PFS. Because of the difficulty in predicting relevant metal
prices over such a long project life, the ultimate LG pit limits were set at the
point where an incremental increase in pit size did not significantly increase
the pit resource (an incremental increase in the pit resource results in only
marginal economic return). Waste to ore cut-offs were determined using metal
prices of US$990 per ounce gold, US$2.91 per pound copper, US$15.40 per ounce
silver and US$15.00 per pound molybdenum for net smelter return calculations.
Net smelter return cut-offs for each pit are US$7.48 per tonne of ore for
Mitchell and Iron Cap, US$7.82 for Sulphurets and US$7.56 for Kerr. Mineral
Reserves for the KSM project are stated as follows:
KSM Proven and Probable Reserves
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Average Grades
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Reserve Tonnes Gold Copper Silver Molybdenum
Zone Category (millions) (gpt) (%) (gpt) (ppm)
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Mitchell Proven 617.9 0.64 0.17 3.06 60.2
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Probable 848.6 0.59 0.16 3.02 61.8
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Total 1,466.5 0.61 0.16 3.04 61.2
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Iron Cap Probable 334.1 0.42 0.20 5.46 48.4
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Sulphurets Probable 179.1 0.62 0.26 0.61 59.8
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Kerr Probable 212.7 0.25 0.46 1.28 Nil
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Totals Proven 617.9 0.64 0.17 3.06 60.2
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Probable 1,574.5 0.51 0.22 3.03 50.4
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Total 2,192.4 0.55 0.21 3.04 53.2
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KSM Proven and Probable Reserves
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Contained Metal
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Gold Copper Silver Moly
(million (million (million (million
Zone ounces) pounds) ounces) pounds)
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Mitchell 12.6 2,279 61 82
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16.0 3,040 82 116
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28.7 5,320 143 198
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Iron Cap 4.5 1,490 59 36
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Sulphurets 3.6 1,021 4 24
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Kerr 1.7 2,155 9 Nil
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Totals 12.6 2,279 61 82
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25.8 7,706 153 175
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38.5 9,985 214 257
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Estimated proven and probable reserves of 38.5 million ounces of gold (2.192
billion tonnes at an average grade of 0.55 grams of gold per tonne) are derived
from estimated total measured and indicated resources of 45.3 million ounces of
gold (2.549 billion tonnes at an average grade of 0.55 grams of gold per tonne)
including allowances for mining losses and dilution.
Production
At 120,000 tonnes per day, annual throughput for the mill is estimated at 43.8
million tonnes. With 2.19 billion tonnes of proven and probable reserves, KSM's
mine life is estimated at approximately 52 years. Production is scheduled to
commence at the Mitchell deposit (years 1 to 40), to be augmented by Sulphurets
(years 6 to 13), Kerr (years 14 to 36) and finally Iron Cap (years 38 to 52).
Based on pit availability of ore and operating space, a potentially highly
accretive ramp-up in production to 180,000 tonnes per day could be achieved
prior to year 10 but this anticipated expansion is not included in cash flows.
The economic impact of this expansion will be estimated in the PFS Final Report.
At Mitchell, there is a near-surface higher grade gold zone that would allow for
gold production in the first seven years substantially above the mine life
average. This higher grade gold zone significantly reduces the project's payback
period to approximately 6.6 years for the Base Case or within 13% of mine life.
A payback period representing less than 20% of mine life is considered highly
favorable. Metal production for the first seven years compared to life of mine
average production is estimated as follows:
Average Annual Metal Production
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Years 1-7 Average Life of Mine Average
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Average Grades:
Gold (grams per tonne) 0.83 0.55
Copper (%) 0.21 0.21
Silver (grams per tonne) 3.32 3.04
Molybdenum (parts per million) 42.5 53.2
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Annual Production:
Gold (ounces) 854,000 546,000
Copper (pounds) 166 million 157 million
Silver (ounces) 2.9 million 2.7 million
Molybdenum (pounds) 1.1 million 1.7 million
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Capital Costs
Start-up capital costs (including contingencies of US$576 million) are estimated
at US$4.68 billion, approximately US$1.3 billion above the start-up capital cost
estimate from the 2010 PFS. Start-up capital costs are higher due to: (i) the
increase in reserves which requires additional mine waste rock placement and
storage as well as associated water diversions, storage dams and water treatment
facilities; (ii) building into the design the flexibility to be able to increase
production by 50% early in the project's life (essentially removing anticipated
bottle-necks in advance); (iii) a more conservative estimated productivity rate
during construction; (iv) higher labor rates compared to last year; and (v)
equipment cost inflation. The design also includes five on-site small energy
recovery plants which would provide green power to the site and to the B.C.
power grid.
Start-up Capital Costs
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Description US$'000
Overall Site 121,485
Open Pit Mining 257,518
Crushing, Stockpiles and Grinding 491,363
Tunneling 323,200
Mitchell Teigen Tunnel Transfer System 180,364
Plantsite Grinding and Flotation 327,330
Tailings Management Facility 116,468
Water Treatment 267,372
Environmental 15,887
Avalanche Control 78,855
Site Services and Utilities 81,583
Ancillary Buildings 82,943
Plant Mobile Equipment 11,393
Temporary Services 217,450
Permanent Electrical Power Supply 169,410
Mini Hydro Plants 47,642
Energy Recovery Plants 10,954
Permanent Access Roads 64,986
Temporary Winter Access Roads 15,763
Offsite Infrastructure and facilities 62,210
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Sub-total 2,994,176
Project Indirects 1,070,615
Owner's Costs 94,428
Contingencies 575,753
Total 4,684,972
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Operating Costs
Average mine, process and G&A operating costs over the project's life (including
waste mining and on-site power credits) are estimated at US$13.29 per tonne
milled (before base metal credits). Estimated unit operating costs are up
approximately 14% from the 2010 PFS due primarily to increased labor,
consumables and diesel costs. A breakdown of estimated unit operating costs is
as follows:
Unit Operating Costs
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US$s
(Per Tonne
Cost Category Milled)
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Mining Costs 5.37
Milling Costs:
Staff and Supplies 5.03
Power (Process only) 1.07
G&A 0.97
Site Services 0.26
Tailings 0.39
Water Treatment 0.36
On-Site Power Credit (0.16)
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Total 13.29
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Economic Analysis
A Base Case economic evaluation was undertaken incorporating historical
three-year trailing averages for metal prices as of April 15, 2011. This
approach is consistent with the guidance of the United States Securities and
Exchange Commission, is accepted by the Ontario Securities Commission and is
industry standard. An Alternate Case was also constructed using a more
conservative copper price approximately 40% below current market (assumes a
significant worldwide recession) and gold and silver prices about 20% below
current levels. Finally, a Spot Price Case was prepared using April 15, 2011
spot metal prices and currency exchange rates. The pre-tax economic results in
U.S. dollars for all three cases are as follows:
Projected Economic Results
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Alternate Spot Price
Base Case Case Case
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Metal Prices:
Gold ($/ounce) 1,069 1,200 1,477
Copper ($/pound) 3.04 2.60 4.27
Silver ($/ounce) 18.12 36.00 42.57
Molybdenum ($/pound) 17.35 17.35 17.00
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Net Cash Flow $16.2 billion $18.8 $35.7 billion
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NPV @ 5% Discount Rate $2.6 billion $3.3 $7.8 billion
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IRR (%) 9.2 10.2 14.9
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Payback Period (years) 6.6 5.9 4.8
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Operating Costs Per Ounce of Gold
Produced During Years 1 to 7 105 134 -110
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Operating Costs Per Ounce of Gold
Produced (life of mine) 231 272 -79
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Total Costs Per Ounce of Gold
Produced (includes all capital) 498 539 220
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US$/Cdn$ Exchange Rate 0.93 0.93 1.04
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Note: Operating and total costs per ounce of gold are after base metal credits.
Total costs per ounce include all start-up capital, sustaining capital and
reclamation/closure costs.
It is important to note that even with the increased capital and operating
costs, the base case net cash flow and payback periods have improved when
compared to the 2010 PFS.
National Instrument 43-101 Disclosure
The updated KSM PFS was prepared by Wardrop, and incorporates the work of a
number of industry-leading consulting firms. These firms and their Qualified
Persons (as defined under National Instrument 43-101) are independent of
Seabridge and have reviewed and approved this news release. The consultants and
their QPs are listed below with their responsibilities:
-- Wardrop, under the direction of John Huang (overall report preparation,
metallurgical testing review, mineral processing and process operating
cost) and Hassan Ghaffari (infrastructure capital cost estimate,
financial analysis and process related infrastructure)
-- Moose Mountain Technical Services under the direction of Jim Gray
(mining, mine capital and mine operating costs)
-- W.N. Brazier Associates Inc. under the direction of W.N. Brazier (power
supply, energy recovery plants and associated costs)
-- Rescan Environmental Services Ltd. under the direction of Greg McKillop
(environment and permitting)
-- Bosche Ventures Ltd. under the direction of Harold Bosche (rope
conveying, slurry pipeline system, tailings delivery, reclaim pumping
and piping systems and associated capital costs)
-- Klohn Crippen Berger Ltd. under the direction of Graham Parkinson (water
diversion and seepage collection ponds, tailings dam, water treatment
dam and related capital, operating and closure costs)
-- Allnorth Consultants Ltd. Under the direction of Mr. Darby Kreitz
(storage dam and tailings starter dam construction cost estimates)
-- Resource Modeling Inc. under the direction of Michael Lechner (mineral
resources)
-- McElhanney Consulting Services Ltd. under the direction of Robert
Parolin (main and temporary access roads and associated costs)
-- BGC Engineering Inc. under the direction of Warren Newcomen (rock
mechanics and mining pit slopes)
-- EBA Engineering Consultants Ltd. (EBA) under the direction of Kevin
Jones (winter access roads and associated costs)
-- Thyssen Mining Construction of Canada Ltd. under the direction of Adrian
Bodolan (tunnel design and costs).
Seabridge holds a 100% interest in several North American gold resource
projects. The Company's principal assets are the KSM property located near
Stewart, British Columbia, Canada and the Courageous Lake gold project located
in Canada's Northwest Territories. For a breakdown of Seabridge's mineral
reserves and resources by project and category please visit the Company's
website at http://www.seabridgegold.net/resources.php.
All reserve and resource estimates reported by the Corporation were calculated
in accordance with the Canadian National Instrument 43-101 and the Canadian
Institute of Mining and Metallurgy Classification system. These standards differ
significantly from the requirements of the U.S. Securities and Exchange
Commission. Mineral resources which are not mineral reserves do not have
demonstrated economic viability.
This document contains "forward-looking information" within the meaning of
Canadian securities legislation and "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995.
This information and these statements, referred to herein as "forward-looking
statements", are made as of the date of this document. Forward-looking
statements relate to future events or future performance and reflect current
estimates, predictions, expectations or beliefs regarding future events and
include, but are not limited to, statements with respect to: (i) the amount of
mineral reserves and mineral resources; (ii) any potential for the increase of
mineral reserves and mineral resources, whether in existing zones or new zones;
(iii) the amount of future production; (iv) further optimization of the PFS
including capacity expansion; (v) completion of, and submission of, the
Environmental Assessment Application; and (vi) potential for engineering
improvements. Any statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words or phrases
such as "expects", "anticipates", "plans", "projects", "estimates", "envisages",
"assumes", "intends", "strategy", "goals", "objectives" or variations thereof or
stating that certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved, or the negative of any of these terms
and similar expressions) are not statements of historical fact and may be
forward-looking statements.
All forward-looking statements are based on Seabridge's or its consultants'
current beliefs as well as various assumptions made by them and information
currently available to them. These assumptions include: (i) the presence of and
continuity of metals at the Project at modeled grades; (ii) the capacities of
various machinery and equipment; (iii) the availability of personnel, machinery
and equipment at estimated prices; (iv) exchange rates; (v) metals sales prices;
(vi) appropriate discount rates; (vii) tax rates and royalty rates applicable to
the proposed mining operation; (viii) financing structure and costs; (ix)
anticipated mining losses and dilution; (x) metallurgical performance; (xi)
reasonable contingency requirements; (xii) success in realizing further
optimizations and potential in exploration programs and proposed operations;
(xiii) receipt of regulatory approvals on acceptable terms, including the
necessary right of way for the proposed tunnels; and (xiv) the negotiation of
satisfactory terms with impacted First Nations groups. Although management
considers these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect. Many forward-looking statements
are made assuming the correctness of other forward looking statements, such as
statements of net present value and internal rates of return, which are based on
most of the other forward-looking statements and assumptions herein. The cost
information is also prepared using current values, but the time for incurring
the costs will be in the future and it is assumed costs will remain stable over
the relevant period.
By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and risks exist that estimates,
forecasts, projections and other forward-looking statements will not be achieved
or that assumptions do not reflect future experience. We caution readers not to
place undue reliance on these forward-looking statements as a number of
important factors could cause the actual outcomes to differ materially from the
beliefs, plans, objectives, expectations, anticipations, estimates assumptions
and intentions expressed in such forward-looking statements. These risk factors
may be generally stated as the risk that the assumptions and estimates expressed
above do not occur, but specifically include, without limitation: risks relating
to variations in the mineral content within the material identified as mineral
reserves or mineral resources from that predicted; variations in rates of
recovery and extraction; developments in world metals markets; risks relating to
fluctuations in the Canadian dollar relative to the US dollar; increases in the
estimated capital and operating costs or unanticipated costs; difficulties
attracting the necessary work force; increases in financing costs or adverse
changes to the terms of available financing, if any; tax rates or royalties
being greater than assumed; changes in development or mining plans due to
changes in logistical, technical or other factors; changes in project parameters
as plans continue to be refined; risks relating to receipt of regulatory
approvals or settlement of an agreement with impacted First Nations groups; the
effects of competition in the markets in which Seabridge operates; operational
and infrastructure risks and the additional risks described in Seabridge's
Annual Information Form filed with SEDAR in Canada (available at www.sedar.com)
for the year ended December 31, 2010 and in the Corporation's Annual Report Form
40-F filed with the U.S. Securities and Exchange Commission on EDGAR (available
at www.sec.gov/edgar.shtml). Seabridge cautions that the foregoing list of
factors that may affect future results is not exhaustive.
When relying on our forward-looking statements to make decisions with respect to
Seabridge, investors and others should carefully consider the foregoing factors
and other uncertainties and potential events. Seabridge does not undertake to
update any forward-looking statement, whether written or oral, that may be made
from time to time by Seabridge or on our behalf, except as required by law.
ON BEHALF OF THE BOARD
Rudi Fronk, President & C.E.O.
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