Seabridge Gold (TSX:SEA)(NYSE:SA) announced today the results of its first
Preliminary Feasibility Study ("PFS") for its 100%-owned Courageous Lake project
located in Canada's Northwest Territories. The study demonstrates that
Courageous Lake is an economic project at the current gold price while also
offering substantial leverage to higher gold prices. The PFS was prepared by
Tetra Tech Wardrop ("Tetra Tech"). The PFS Executive Summary can be found at
www.seabridgegold.net/CL_ExecSum_2012.pdf. The complete PFS will be filed at
www.sedar.com within 45 days.
Commenting on the study, Seabridge Chairman and CEO Rudi Fronk said: "Our
business plan from inception has been to grow gold resources and reserves while
minimizing equity dilution. With an estimated 6.5 million ounces of newly
defined proven and probable reserves at Courageous Lake, combined with the 38.2
million ounces of gold reserves estimated at our KSM project, we now report
total proven and probable gold reserves of 44.7 million ounces. Not only does
this rank Seabridge among the top ten companies in the world with respect to
gold reserves, but with only 43.4 million common shares outstanding, we provide
our shareholders with more than one ounce of gold reserves per common share
outstanding. Furthermore, this entire reserve base is located in Canada, one of
the safest and most mining-friendly jurisdictions in the world." Proven and
probable reserves at KSM are estimated at 2.2 billion tonnes grading 0.55 grams
per tonne gold, 0.21% copper and 2.74 grams per tonne silver.
Mr. Fronk noted that Seabridge will continue to optimize the Courageous Lake
project. "We believe the most cost effective way to improve project economics is
to add to reserves. We are now drilling some highly prospective targets which
could be accessed easily by the operation proposed in the PFS."
The Courageous Lake PFS is based on a single open-pit mining operation with
on-site processing. A base case scenario was developed for the project
incorporating an estimated 91.1 million tonnes of proven and probable reserves
at an estimated average grade of 2.20 grams of gold per tonne feeding a 17,500
tonnes per day operation (6.1 million tonnes per year annual average
throughput). This yields a projected 15 year operation with average estimated
annual production of 385,000 ounces of gold at a projected life of mine average
cash operating cost of US$780 per ounce recovered (US$674 in years one to five).
Start-up capital costs for the project are estimated at US$1.52 billion,
including a contingency of US$187 million.
At a gold price of US$1,384 per ounce (the 3 year trailing average gold price at
July 3, 2012), the base case has an estimated US$1.5 billion pre-tax net cash
flow, a US$303 million net present value at a 5% discount rate and an internal
rate of return of 7.3%. This base case is consistent with the requirements of
securities regulators. At a gold price of US$1,618 (the spot price on July 3,
2012), the estimated total pre-tax net cash flow nearly doubles that of the base
case to US$2.8 billion, the net present value at a 5% discount rate more than
triples to US$1.1 billion and the internal rate of return increases to 12.5%. To
demonstrate the leverage to gold price, an alternative case was run using last
year's gold price high of $1,925 per ounce which yielded a pre-tax net cash flow
of $4.5 billion, a net present value at a 5% discount rate of $2.1 billion and
an internal rate of return of 18.7%.
The PFS also identifies several opportunities that could significantly improve
the overall project economics. First, the current design incorporates a
combination of diesel and wind generated power resulting in a projected power
generation cost of Cdn$0.184 per kilowatt hour which is nearly 40% lower than
power generation by diesel fuel alone. Seabridge is evaluating nearby potential
hydro-electric sources which would also provide reliable, sustainable and
lower-cost clean energy source and significantly reduce the requirement for
diesel fuel at the site. Secondly, access to the project under the current
design is by winter road which is limited to less than three months per year. It
is during this period that almost all of the project's supplies are transported
to site. The Tibbitt to Contwoyto Winter Road Joint Venture proposes extending
the winter road seasonal use by at least another month with a 150 km extension
from the permanent road access at Tibbitt Lake to Lockhart camp. While this
would result in some reduction in both operating and capital costs for
Courageous Lake, an all-season access road from the Bathurst Inlet would provide
considerably more benefit to Courageous Lake economics. Seabridge will continue
to investigate these options as the project moves forward.
Mine Planning
Lerchs-Grossman ("LG") pit shell optimizations were used to define the mine
plans in the PFS. The pit optimizations incorporated estimated costs for mining,
processing, tailings management, general and administrative and gold recovery
rates. Waste to ore cut-offs were determined using a gold price of US$1,244 per
ounce. Estimated in-pit diluted proven and probable reserves, including mining
dilution within the ultimate pit limit based on a Cdn$20.10 per tonne cut-off,
are as follows:
Courageous Lake Reserves
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Diluted Contained
Tonnes Grade Gold
Reserve Category (000's) (g/t) (000 ounces)
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Proven 12,300 2.41 960
Probable 78,800 2.17 5,500
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Total 91,100 2.20 6,460
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Proven and probable reserves are derived from estimated total undiluted measured
and indicated resources of 8.0 million ounces of gold (107 million tonnes at an
average grade of 2.31 grams of gold per tonne).
Mineral Processing
Seabridge has conducted five major metallurgical testing programs since 2003.
The comminution proposed for Courageous Lake uses an energy efficient process
including: (i) primary crushing by gyratory crusher; (ii) secondary crushing by
cone crusher; (iii) tertiary crushing by high pressure grinding rolls; and (iv)
final grinding by ball mills. The recovery process includes conventional
flotation, flotation concentrate pressure oxidation, cyanidation and gold
refining circuits. Overall gold recovery is projected at 89.4%.
Capital Costs
Start-up capital costs (including contingencies of US$187 million) are estimated
at US$1.52 billion and are summarized as follows:
Start-up Capital Costs
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Description US$'000
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Overall Site 59,745
Open Pit Mining 96,701
Crushing and Stockpiles 83,238
Grinding and Flotation 135,039
Pressure Oxidation 88,660
Thickening, Neutralization & Cyanide Leaching 38,940
Gold ADR Circuit, Cyanide Handling & Electrowinning 14,833
Reagents and Consumables 23,536
Tailings Management Facility 53,422
Water Treatment Plant 8,774
Site Services and Utilities 34,352
Ancillary Buildings 66,839
Airstrip & Loading/Unloading Facilities 12,203
Plant Mobile Equipment 3,058
Temporary Services 49,085
Electrical Power Supply 179,838
Yellowknife & Edmonton Facilities 17,227
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Sub-total 965,490
Project Indirects 315,187
Owner's Costs 55,059
Contingencies 186,703
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Total 1,522,439
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Operating Costs
Average mine, process and G&A operating costs over the project's life (including
waste mining) are estimated at US$47.35 per tonne milled. A breakdown of
estimated unit operating costs is as follows:
Unit Operating Costs
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Cost Category US$ (Per Tonne Milled)
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Mining Costs 26.24
Milling Costs 15.72
Site Services 1.90
G&A 3.49
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Total 47.35
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Economic Analysis
A base case economic evaluation was undertaken incorporating historical
three-year trailing averages for gold prices and currency exchange rates as of
July 3, 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. A spot price case was prepared using the July
3, 2012 spot gold price and currency exchange rates. To demonstrate the leverage
to gold price, a third case was prepared using last year's gold price high of
$1,925 per ounce. Pre-tax economic results for all three cases are as follows:
Projected Economic Results (US$)
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Spot Alternate Gold
Base Case Price Case Price Case
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Gold Price Per Ounce $ 1,384 $ 1,618 $ 1,925
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Net Cash Flow $ 1,507 million $ 2,785 million $ 4,519 million
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NPV @ 5% Discount Rate $ 303 million $ 1,054 million $ 2,080 million
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IRR 7.3% 12.5% 18.7%
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Payback Period 11.2 years 7.4 years 4.0 years
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Operating Costs Per Ounce
of Gold Produced (years
1 to 5) $ 674 $ 683 $ 689
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Operating Costs Per Ounce
of Gold Produced (life
of mine) $ 780 $ 789 $ 796
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Total Costs Per Ounce of
Gold Produced (includes
all capital) $ 1,123 $ 1,134 $ 1,141
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US$/Cdn$ Exchange Rate 0.9803 0.9877 0.9877
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National Instrument 43-101 Disclosure
The PFS for Courageous Lake 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 Dr. John Huang (overall report
preparation, metallurgical testing review, mineral processing,
infrastructures (excluding power supply and airstrip), operating costs
(excluding mining operating costs), capital cost estimate and project
development plan) and Dr. Sabry Abdel Hafez (financial evaluation)
-- 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
generation)
-- Rescan Environmental Services Ltd. under the direction of Pierre
Pelletier (environmental matters)
-- Golder Associates Ltd. under the direction of Cameron Clayton (open pit
slope stability)
-- EBA, a Tetra Tech Company, under the direction of Nigel Goldup
(tailings, surface water management and waste rock storage facilities,
and surficial geology) and Kevin Jones (airstrip upgrade)
-- SRK Consulting (Canada) Inc., under the direction of Stephen Day (metal
leaching and acid rock drainage)
-- Resource Modeling Inc. under the direction of Michael Lechner (mineral
resources)
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; 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, Chairman & C.E.O.
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