Skeena Resources is a tier one company

Marc Zerbola Challande
3
minute read

If you are seeking an undervalued proven-track company, Skeena resources (TO: SKE, NYSE: SKE, FRA: RXF) could assuredly interest you. The stock traded on the TSX exchange is down by 40%, while it offers a significant upside. Indeed, the company recently discovered new mineralization intersecting 2.15 g/t over 40.70m. Earlier, it shared a high-grade in-pit extension of the 21A West zone crossing 7.91 g/t AuEq over 17.20m.


Company Overview

Skeena Resources (TO: SKE, NYSE: SKE, FRA: RXF) is a Canadian company with operations located in Northwest British Columbia, specifically in the Golden Triangle. British Columbia is one of the best mining jurisdictions in the world. Based on pure mineral potential, British Columbia ranked 5th of 112 global mining jurisdictions and led Canada in terms of geological attractiveness. Skeena Resources owns a promising property named Eskay Creek, an open pit containing 3.85 million ounces at 4.00 g/t AuEq in the Proven and Probable categories. Skeena completed a Feasibility Study in September 2022 on Eskay Creek, highlighting an after-tax NPV5% C$1.4B, 50% IRR, and a 1 year payback of US$1,700/oz Au and US$19/oz Ag. The company also owns the Snip mine, acquired from Barrick Gold in July 2017. The Snip mine produced approximately one million ounces of gold from 1991 until 1999 at an average gold grade of 27.5 g/t.

Eskay Creek

Regarding Eskay Creek’s history, it is a precious metal-rich volcanogenic massive sulphide (VMS) deposit. Starting in 1932, the area has been the focus of considerable exploration activity, and in 1988, the 21A and 21B zone were the first discovered, leading to the Eskay Creek Mine opening in 1994. The Eskay Creek portal consists of 8 mineral leases, 2 surface leases, and several unpatented mining claims totaling 6,151 hectares. Eskay has excellent infrastructure, including all-weather road access and proximity to the new 287-kV Northwest Transmission Line. The Volcano Creek Hydroelectric Power Station is 7 km away from Eskay.

Since Eskay was in production, over $2 billion has been invested in infrastructure in the area.

During production, Eskay was the highest-grade gold mine in the world.

Recent News: Skeena Encounters Additional Mineralization in 23 Zone Intersecting 1.05 g/t AuEq over 79.97 MetresInfill drill holes SK-22-1092 and SK-22-1089 have successfully confirmed additional Rhyolite-hosted gold-silver mineralization from surface, intersecting 0.92 g/t Au, 12.5 g/t Ag (1.05 g/t AuEq) over 79.97 m and 0.77 g/t Au, 7.9 g/t Ag (0.86 g/t AuEq) over 29.90 m , respectively . These drill holes were collared from the same pad as previously reported drill hole SK-22-1090, which intersected 1.13 g/t Au, 6.6 g/t Ag (1.20 g/t AuEq) over 96.02 m.

"Exploration and infill drilling by Skeena continues to confirm and expand zones of mineralization in areas deemed non-prospective by previous operators. We are excited about the drill results we are seeing and expect a steady stream of new results in the coming weeks."
Adrian Newton, Skeena's Director of Exploration

A strong Feasibility Study

On September 8, the company released a promising feasibility study for Eskay Creek. The company shared many highlights:

-The property represents an after-tax net present value (NPV) of $1.41B considering a gold value of US $1,700 and US $19 for silver, combined with robust economics with an after-tax internal rate of return (IRR) of 50.2%, and an industry-leading after-tax payback on pre-production capital expenditures of 1 year. Eskay Creek revealed high-grade open-pit averaging 3.87 g/t gold equivalent (“AuEq”) (2.99 g/t gold, 79 g/t silver) (diluted) with a strip ratio of 7.5:1, and the first 5 years of production should bring 431,000 AuEq ounces, placing Eskay Creek as a tier one operation. The Life of mine (“LOM”) production represents 3.2 million AuEq ounces from 2.4 million ounces of gold and 66.7 million ounces of silver.

About expenses, the estimated pre-production capital expenditures (“CAPEX”) of C$592 million, yielding a compelling after-tax NPV: CAPEX ratio of 2.4:1. Proven and Probable open-pit mineral Reserves of 29.9 million tonnes containing 2.87 million ounces gold and 75.5 million ounces silver (combined 3.85 million AuEq oz). Another positive piece of information is the carbon intensity. A carbon intensity of 0.20 t CO2e/oz AuEq produced positions Eskay Creek to be one of the lowest carbon intensity mines worldwide

Snip Mine

Skeen acquired 100% of Snip Mine in 2017 from Barrick Gold. The property comprises one mining lease and eight mineral claims totaling approximately 4,546 hectares in the Liard Mining Division. The Snip mine produced about one million ounces of gold from 1991 until 1999 at an average gold grade of 27.5 g/t. In 2020, Skeena released an underground-constrained Mineral Resource Estimate for the Snip Gold Project. The Indicated resources include 244,000 ounces of gold hosted within 539,000 tonnes at an average gold grade of 14.0 g/t Au. Resources within the Inferred category include 402,000 ounces of gold hosted within 942,000 tonnes at an average gold grade of 13.3 g/t Au.

The Snip vein mineralization was discovered in 1964 by Cominco geologist Ted Muraro who started to witness drilling operations in 1986. This resulted in a massive claim staking rush and exploration boom throughout the Golden Triangle that led to the discovery and development of Barrick Gold’s Eskay Creek (past production of 3.27 million ounces of gold at a grade of 49 g/t and 158 million ounces of silver at 2,406 g/t). Other significant projects in the Golden Triangle include Pretium’s Brucejack and Valley of the Kings gold deposits, Imperial Metal’s Red Chris porphyry copper-gold mine, Teck and Novagold’s Galore Creek deposit, Teck’s Shaft Creek porphyry copper-gold deposit, Seabridge’s porphyry copper-gold Deep Kerr Project, and Ascot’s re-activated Premier Project.

Bottom Line

Skeena Resources (TO: SKE, NYSE: SKE, FRA: RXF) is a tier-one company that is currently undervalued. The company’s stock price is now down by 40%, representing a solid opportunity to witness a positive return on investment. The feasibility study revealed many positive data, showing Eskay Creek’s full potential.