Seabridge Gold Inc. (TSX:SEA)(NYSE: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 Tetra Tech Wardrop ("Tetra Tech"). The PFS Executive
Summary can be found at http://seabridgegold.net/KSM2012ExecSum.pdf. The
complete PFS will be filed at www.sedar.com within 45 days.
Since completion of the 2011 PFS, Seabridge has hosted frequent working group
sessions with federal and provincial regulators, aboriginal groups and their
technical consultants to review the project in detail. In general, public
feedback on the project has been positive and feedback from this engagement
process has been used to make the following design changes which have been
incorporated in the new PFS:
-- A combined open pit and underground block cave mining scenario for the
Mitchell deposit and underground panel caving for the Iron Cap deposit.
These changes substantially reduce the project's strip ratio from 2.7 to
1.5, eliminating approximately 2.3 billion tonnes of waste rock
stripping and storage and significantly reducing environmental impact.
-- Revised project access routes from Highway 37 to reflect feedback from
the Nisga'a Nation and First Nations.
-- Relocation of the fine crushing and grinding facilities from the
Mitchell plant site to the Teigen site and, therefore, conveying ore
through the Mitchell Teigen tunnel instead of via a slurry transport
system.
-- Lining a portion of the tailings management facility for carbon-in-leach
sulphide tailings which have been processed with cyanide. Although such
a lining is not required under existing regulations, Seabridge has
chosen to design its tailings management facility to the standards of
the International Cyanide Management Code to accommodate feedback from
Treaty and First Nations, regulators and stakeholders addressing
potential environmental impacts. Most major international gold mining
companies voluntarily adhere to this Code.
-- Engineering for the tailings management facility and project water
management has been completed to a Feasibility level as required by
regulators for the Environmental Assessment.
Commenting on these design changes, Seabridge President and CEO Rudi Fronk said
that "our aim from the beginning has been to put forward an Environmental Impact
Statement that reflects extensive input from aboriginal communities, the public
and the coordinated prior involvement of both provincial and federal regulators.
This process has anticipated and addressed many of the possible concerns about
KSM before applying for permits. Analysis of development alternatives is a key
component of the Canadian environmental assessment process. Accordingly, based
on feedback and dialogue with the regulators, Treaty and First Nations and
potential joint venture partners, this updated PFS will provide the basis of our
formal application for permits which we expect to file in this year's 4th
quarter."
In addition to the above noted design changes, the 2012 PFS also incorporates
updated capital and operating cost estimates and metal price assumptions within
the context of the current environment. Although initial capital costs and unit
operating costs have increased over the 2011 study (13% and 3% respectively),
base case economic projections from this year's PFS are superior to the 2011
study due to increasing throughput by 10,000 tonnes per day to 130,000 and
higher three-year average metal prices. Some comparisons are as follows:
-- Net project cash flow (pre-tax) has increased by 25% to $20.3 billion.
-- Net present value at a 5% discount rate (pre-tax) has increased by 74%
to $4.5 billion
-- Internal rate of return (pre-tax) has increased by 25% to 11.5%.
-- Payback has been reduced by six months to 6.2 years or 11% of the
project's 55 year mine life.
-- Life of mine average cash costs per ounce of gold produced (after by-
product credits) are now estimated at US$148, down significantly from
last year's estimate of $231 per ounce.
The updated PFS envisages a combined open-pit/underground block caving mining
operation that is scheduled to operate for 55 years. During the initial 25 years
of mine life, all ore will be mined by open pit methods with the mill scheduled
to operate at an average of 130,000 metric tonnes per day (tpd). As mining at
the Mitchell deposit switches to block caving in year 26, daily production will
decline to an average of approximately 90,000 tpd over the remaining 30 years of
mine life. Over the entire 55 year mine life, ore will be 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. for 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.
Reserves
Updated reserves for the project are based on open pit mining and underground
block caving for the Mitchell deposit, open pit mining for the Sulphurets and
Kerr deposits and underground block caving for the Iron Cap deposit.
Approximately 70% of the stated proven and probable reserves will come from open
pit operations and 30% from underground block caving.
Lerchs-Grossman ("LG") pit shell optimizations were used to define open pit 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$1,244 per ounce gold, US$3.21 per pound copper, US$22.98 per ounce
silver and US$14.14 per pound molybdenum for net smelter return calculations.
Net smelter return cut-offs for each pit are Cdn$9.57 per tonne of ore for
Mitchell, Cdn$10.17 for Sulphurets and Cdn$9.61 for Kerr. Mineral Reserves for
the KSM project are stated as follows:
The underground block caving mine designs for both Mitchell and Iron Cap are
based on modeling using Gemcom's Footprint Finder (FF) and PCBC software. The
ramp-up and maximum yearly mine production rates were established based on the
rate at which the drawpoints are constructed, and the initial and maximum
production rates at which individual drawpoints can be mucked. The values chosen
for these inputs were based on industry averages adjusted to suit the
anticipated conditions. Mitchell is estimated to have a production ramp-up
period of 6 years, steady state production at 20 million tonnes per year for 14
years, and then ramp-down production for another 7 years. Iron Cap is estimated
to have a production ramp-up period of 4 years, steady state production at 15
million tonnes for 8 years, and then ramp-down production for another 8 years.
The pre-production periods are 7 years at Mitchell and 6 years at Iron Cap with
first underground ore production from Mitchell in year 26 and from Iron Cap in
year 32. The underground mining NSR cut-offs are Cdn$15.41 per tonne at Mitchell
and Cdn$15.57 per tonne at Iron Cap. Mining dilution has been estimated at 9%
for Mitchell and 5% at Iron Cap, all at zero grade.
KSM Proven and Probable Reserves
------------------------------------------------------------------------
Mining Reserve Tonnes
Zone Method Category (millions) Average Grades
-------------------------------
Gold Copper Silver Moly
(gpt) (%) (gpt) (ppm)
------------------------------------------------------------------------
Mitchell Open
Pit Proven 476 0.67 0.17 3.05 60.9
-----------------------------------------------------
Probable 497 0.61 0.16 2.78 65.8
-------------------------------------------------------------
Block
Cave Probable 438 0.53 0.17 3.48 33.6
------------------------------------------------------------------------
Iron Cap Block
Cave Probable 193 0.45 0.20 5.32 21.5
------------------------------------------------------------------------
Sulphurets Open
Pit Probable 318 0.59 0.22 0.79 50.6
------------------------------------------------------------------------
Kerr Open
Pit Probable 242 0.24 0.45 1.2 0.0
------------------------------------------------------------------------
Totals Proven 476 0.67 0.17 3.05 60.9
-----------------------------------------------------
Probable 1,688 0.51 0.22 2.65 40.1
-----------------------------------------------------
Total 2,164 0.55 0.21 2.74 44.7
------------------------------------------------------------------------
----------------------------------------------------------------------------
Mining Reserve Tonnes
Zone Method Category (millions) Contained Metal
-----------------------------------
Gold Copper Silver Moly
(million (million (million (million
ounces) pounds) ounces) pounds)
----------------------------------------------------------------------------
Mitchell Open
Pit Proven 476 10.3 1,798 47 64
---------------------------------------------------------
Probable 497 9.8 1,707 44 72
-----------------------------------------------------------------
Block
Cave Probable 438 7.4 1,589 49 32
----------------------------------------------------------------------------
Iron Cap Block
Cave Probable 193 2.8 834 33 9
----------------------------------------------------------------------------
Sulphurets Open
Pit Probable 318 6.0 1,535 8 35
----------------------------------------------------------------------------
Kerr Open
Pit Probable 242 1.9 2,425 9 0
----------------------------------------------------------------------------
Totals Proven 476 10.3 1,798 47 64
---------------------------------------------------------
Probable 1,688 27.9 8,090 144 149
---------------------------------------------------------
Total 2,164 38.2 9,888 191 213
----------------------------------------------------------------------------
Estimated proven and probable reserves of 38.2 million ounces of gold (2.164
billion tonnes at an average grade of 0.55 grams of gold per tonne) are
essentially identical to last year's estimates. Proven and probable reserves are
derived from estimated total measured and indicated resources of 49.0 million
ounces of gold (2.780 billion tonnes at an average grade of 0.55 grams of gold
per tonne) including allowances for mining losses and dilution.
Production
At 130,000 tonnes per day, annual throughput for the mill during the initial 25
years of mine life is estimated at 47.5 million tonnes. KSM's mine life is
estimated at approximately 55 years. At Mitchell, open pit production is
scheduled from inception through year 23, to be followed by underground block
caving operations from years 26 through 55. Open pit production from Sulphurets
will augment Mitchell open pit production from start-up through year 6, and then
from years 23 through 27. Open pit production from Kerr is scheduled from years
27 through 50. Finally, underground block caving production will come from Iron
Cap during years 32 through year 51.
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 6.2 years for the Base Case or less than 11% 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
----------------------------------------------------------------------------
Years 1-7 Life of Mine
Average Average
----------------------------------------------------------------------------
Average Grades:
Gold (grams per tonne) 0.79 0.55
Copper (%) 0.24 0.21
Silver (grams per tonne) 2.39 2.74
Molybdenum (parts per million) 47 45
----------------------------------------------------------------------------
Annual Production:
Gold (ounces) 830,000 508,000
Copper (pounds) 190 million 147 million
Silver (ounces) 2.0 million 2.2 million
Molybdenum (pounds) 1.3 million 1.1 million
----------------------------------------------------------------------------
Capital Costs
Start-up capital costs (including contingencies of US$666 million) are estimated
at US$5.31 billion, approximately 13% (US$0.6 billion) above the start-up
capital cost estimate from the 2011 PFS. Approximately half of the increase in
start-up capital costs is due to the design changes including: (i) lining a
portion of the tailings management facility and additional dam structure; (ii)
changing road and power line access from Teigen Creek to Treaty Creek; (iii)
additional water management and water treatment facilities; and (iv) additional
costs for tunnel conveying and ore stockpiling. The balance of the capital cost
increase is due to: (i) a more conservative estimated productivity rate during
construction; (ii) higher labor rates compared to last year; and (iii) equipment
cost inflation.
Start-up Capital Costs
----------------------------------------------------------------------------
Description US$'000
---------------
Overall Site 173,609
Open Pit Mining 227,299
Crushing, Stockpiles and Grinding 159,252
Tunneling 344,214
Mitchell Teigen Tunnel Transfer System 277,764
Plant-site Crushing 343,264
Plant-site Grinding 462,067
Tailings Management Facility 315,392
Water Treatment and Water Storage Dam 312,254
Environmental 44,225
Avalanche Control 46,251
Site Services and Utilities 34,601
Ancillary Buildings 96,969
Plant Mobile Equipment 10,735
Temporary Services 189,694
Treaty Road Marshalling Yard 10,875
Permanent Electrical Power Supply 218,087
Mini Hydro Plants 16,595
Energy Recovery Plants 7,626
Permanent Access Roads 93,433
Temporary Winter Access Roads 18,472
Off-site Infrastructure and facilities 73,896
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sub-total 3,476,564
Project Indirects 1,063,318
Owner's Costs 106,315
Contingencies 666,627
---------------
Total 5,312,824
----------------------------------------------------------------------------
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$13.64 per tonne
milled (before base metal credits). Estimated unit operating costs are up
approximately 3% from the 2011 PFS due primarily to increased labor, consumables
and diesel costs. A breakdown of estimated unit operating costs is as follows:
Unit Operating Costs
----------------------------------------------------------------------------
US$s
(Per Tonne
Cost Category Milled)
----------------------------------------------------------------------------
Mining Costs 5.39
Milling Costs: Staff & Supplies
Staff and Supplies 4.91
Power (Process only) 1.12
G&A 1.13
Site Services 0.32
Tailings 0.52
Water Treatment 0.43
Energy Recovery (0.17)
----------------------------------------------------------------------------
Total 13.64
----------------------------------------------------------------------------
Economic Analysis
A Base Case economic evaluation was undertaken incorporating historical
three-year trailing averages for metal prices as of April 15, 2012. This
approach is consistent with the guidance of the United States Securities and
Exchange Commission, adheres to National Instrument 43-101 and is consistent
with industry practice. An Alternate Case was also constructed using more
conservative prices for gold, copper and silver at 20% below current levels.
Finally, a Spot Price Case was prepared using April 15, 2012 spot metal prices
and currency exchange rates. The pre-tax economic results in U.S. dollars for
all three cases are as follows:
Projected Pre-Tax Economic Results (U.S. Dollars)
----------------------------------------------------------------------------
Alternate Spot Price
Base Case Case Case
----------------------------------------------------------------------------
Metal Prices:
Gold ($/ounce) 1,330 1,320 1,650
Copper ($/pound) 3.45 3.00 3.75
Silver ($/ounce) 25.20 25.60 32.00
Molybdenum ($/pound) 15.00 15.00 15.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net Cash Flow $20.3 $16.6 $31.0
billion billion billion
----------------------------------------------------------------------------
NPV @ 5% Discount Rate $4.5 $3.5 $7.7
billion billion billion
----------------------------------------------------------------------------
Internal Rate of Return 11.5% 10.3% 14.6%
----------------------------------------------------------------------------
Payback Period (years) 6.2 6.6 5.2
----------------------------------------------------------------------------
Operating Costs Per Ounce of Gold
Produced During Years 1 to 7 $43 $141 -$15
----------------------------------------------------------------------------
Operating Costs Per Ounce of Gold
Produced (life of mine) $148 $270 $67
----------------------------------------------------------------------------
Total Costs Per Ounce of Gold Produced
(includes all capital) $603 $725 $541
----------------------------------------------------------------------------
US$/Cdn$ Exchange Rate 0.96 0.96 1.00
----------------------------------------------------------------------------
Note: Operating and total costs per ounce of gold are after copper, silver and
molybdenum 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, net present value, internal rate of return
and payback periods have improved significantly when compared to the 2011 PFS.
National Instrument 43-101 Disclosure
The updated KSM PFS was prepared by Tetra Tech, 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:
-- Tetra Tech, under the direction of John Huang (metallurgical testing
review, mineral processing and process operating cost and overall report
preparation) and Sabry Abdel Hafez (financial analysis)
-- Moose Mountain Technical Services under the direction of Jim Gray (open
pit mining operations, 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 Pierre
Pelletier (environment and permitting)
-- Bosche Ventures Ltd. under the direction of Harold Bosche (site
infrastructure layouts, tunnel conveyor, rope conveyor, tailing
delivery, reclaim pumping and piping systems, and associated capital
costs)
-- Klohn Crippen Berger Ltd. under the direction of Graham Parkinson
(tunnel geotechnical, water diversion and seepage collection ponds,
tailings dams, water storage dam, water treatment and related operating
and closure costs)
-- Allnorth Consultants Ltd. under the direction of Mr. Darby Kreitz
(capital cost estimates for water storage dam, diversion earthworks and
tailings starter dams)
-- 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)
-- Golder Associates Inc. under the direction of Ross Hammett (block caving
assessments and associated costs)
-- Stantec Consulting Ltd. under the direction of Tony Wachmann (tunnel
design, construction procedures 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 estimated amount and
grade of mineral reserves and mineral resources; (ii) estimates of the capital
costs of constructing mine facilities and bringing a mine into production,
including financing payback periods; (iii) the amount of future production; (iv)
estimates of operating costs, net cash flow and economic returns from an
operating mine; (v) completion of and submission of an Environmental Impact
Statement and permit applications; and (vi) the prospect of obtaining necessary
permits and proceeding with the construction and operation of a mine and the
value of such a venture to Seabridge Gold shareholders. Any statements that
express or involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives 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 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 Treaty and 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, 2011 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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