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INDEPENDENT ROAD ACCESS STUDY COMPLETED FOR SEABRIDGE GOLD'S KSM PROJECT
McElhanney Consulting Services Ltd. has completed a scoping-level study evaluating road-access alternatives for Seabridge Gold Inc.'s 100-per-cent-owned KSM project located near Stewart, B.C., Canada. The McElhanney study is appropriate for use in the ongoing National Instrument 43-101 Preliminary Assessment for the KSM project which is expected to be completed later this year. The McElhanney study will be filed on SEDAR in its entirety.
In its report, McElhanney evaluated several alternative access routes to the project and to the proposed plant site. Based on their work, McElhanney has concluded that the least cost scenario for permanent year round access to the KSM project and proposed plant sites is achieved by constructing the Teigen Plant Site road from Highway 37 and the Eskay-Coulter-Mitchell road from the Eskay Creek mine. McElhanney estimates that completion of both these single lane roads would take two years at a total cost of approximately C$82.8 million. McElhanney has also identified a temporary winter road that, at a cost of approximately C$5.6 million, could provide access to the property across the Frank Mackie Glacier for equipment and supplies while the two permanent roads are under construction.
To view the KSM Baseline project Layout, please visit the following link: http://media3.marketwire.com/docs/KSM%20Baseline.pdf
The Eskay-Coulter-Mitchell road heads south from the existing Eskay Creek mine road and climbs gently towards Tom Mackay Lake. The road then follows the height of land on the east side of Coulter Creek down to a proposed bridge crossing of the Unuk River just upstream of Sulphurets Creek. The road then traverses across the north side of the Sulphurets Canyon up to the Mitchell deposit. McElhanney estimates the total distance of this road at 32 kilometers costing approximately C$51.5 million including C$2.0 million for the two bridges over the Unuk River and Coulter Creek.
The Teigen Plant Site road leaves Highway 37 just north of Bell II. The road than bridges Teigen Creek and continues up the south side of the valley to the proposed plant site. McElhanney estimates the total distance of this road at 29 kilometers costing approximately C$31.3 million including C$1.3 million for the two bridge crossings over Teigen Creek.
Seabridge President and CEO Rudi Fronk stated that the McElhanney Road study "supports our assertion that access to the KSM project enjoys significant logistical and cost advantages over other large projects in the region. Clearly, road access has been a problem for other projects in the region. Due to our close proximity to both the Eskay Creek Mine and Highway 37, as well as favourable topography, we can achieve year round access to the KSM project at a reasonable cost and in a relatively short period of time. When completed, we expect the Preliminary Assessment to confirm additional advantages for KSM compared to other nearby projects."
The KSM project Road Access Scoping Level Study by McElhanney Consulting Services Ltd. was prepared under the direction of Robert Parolin, P.Eng. and David Pow, P.Eng., both of whom are Qualified Persons under National Instrument 43-101.
Seabridge holds a 100% interest in several North American gold resource projects. The Corporation's principal assets are the KSM property in British Columbia, one of the world's largest undeveloped gold/copper projects, and the Courageous Lake gold project located in Canada's Northwest Territories. For a breakdown of the Corporation's mineral resources by project and resource category please visit the Corporation's website at http://www.seabridgegold.net/Resource.htm.
Mr. Rudi Fronk reports:
Metallurgical test work for Seabridge Gold Inc.'s 100-per-cent-owned KSM project predicts gold recoveries averaging 77.4 per cent and copper recoveries averaging 84.8 per cent at a concentrate grade of 25 per cent copper. The results of the test work will be incorporated into the preliminary assessment scheduled for completion later this year. The testing focused on the Mitchell zone, which at this early planning stage accounts for more than 85 per cent of the KSM gold resource.
Seabridge President and CEO Rudi Fronk noted that projected gold recoveries are above average for a large porphyry deposit and copper recoveries are in line with deposits having similar grade. "This metallurgical work indicates that there are no apparent issues preventing metal recoveries and production of a salable copper-gold concentrate. This testing demonstrates that commonly used technology and conventional processing are appropriate for commercial recovery of gold and copper values for KSM."
The test work was conducted by G&T Metallurgical Services Ltd. of Kamloops, B.C. G&T is a highly reputable independent laboratory with more than 18 years experience in the field.
Seabridge Gold Inc.'s results from another nine holes drilled this summer at the Kerr-Sulphurets-Mitchell (KSM) project continue to confirm the geological model and extend the resource area to the north and at depth. Five of these were successful infill drill holes which are expected to upgrade a significant portion of the project's inferred resources to the indicated category. Hole M-08-73, a deep drill test following the northwest plunge of the Mitchell zone, confirms the continuity of this zone beyond the current model. Three geotechnical holes drilled to test the proposed north and south pit walls identified several zones of mineralization within the conceptual pit which had been classified in the geological model as waste. To view the drill plan map, please visit the following link: http://media3.marketwire.com/docs/seamap123.pdf
To date, Seabridge has reported on 19 holes drilled this summer at KSM of which five are exploratory, 11 are infill and three are geotechnical (intended to evaluate slope stability for mining operations). Results from another 11 holes are awaited. A total of 17,000 meters were drilled in the now completed program.
Seabridge Gold President and CEO Rudi Fronk said the new results have "exceeded our expectations. We will now need to expand our geological model to incorporate extensions of the high grade plunge of the Mitchell zone and to redefine material in the pit slopes that is currently classified as waste. In addition, the success of our infill program should mean a significant conversion of inferred resources into the measured and indicated category."
Base Case Estimates 30 Year Mine Life Recovering +19 Million Ounces of Gold
Seabridge President and CEO Rudi Fronk stated that the PEA clearly demonstrates that KSM has the potential to be a significant gold mine with compelling economics. "There are very few undeveloped gold projects in the world today with the attributes of KSM-- long mine life, significant annual production, cash operating costs per ounce well below the gold industry average and substantial exploration upside all within a stable political environment. We see this PEA as a benchmark to build on. We expect this year's drilling to improve the size and grade of the Mitchell and Sulphurets zones. This first iteration has identified enhancements which could reduce capital and operating costs, both of which could also benefit from the changing economic environment. The next iteration of the PEA is scheduled for Q2 2009 which will include an updated resource, new mine plans and revised cost estimates. We are also planning exploration, engineering and environmental initiatives in 2009 culminating in a Preliminary Feasibility Study in early 2010."
The PEA envisages a large tonnage open-pit mining operation at 120,000 metric tonnes per day of mill feed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck or pipeline to the nearby deep-sea port at Stewart, B.C. A separate molybdenum concentrate and gold-silver dore will also be produced at the processing facility. A mine plan combining production from the Kerr, Sulphurets and Mitchell zones would sustain a mine life of approximately 30 years...
Seabridge notes that the PEA incorporates inferred mineral resources. They are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Therefore, Seabridge advises that there can be no certainty that the estimates contained in the PEA will be realized. To address this issue, Seabridge designed its 2008 KSM drill program with the aim of upgrading inferred resources in the mine plan to the indicated category. The KSM resource model will be updated to include 2008 drill results in the first quarter of 2009.
Initial capital costs, including contingencies, for the proposed operation total US$3.4 billion, or approximately US$180 per ounce of gold produced over the projected life of the mine. Sustaining capital, closure and reclamation costs are estimated at US$943 million, or approximately $50 per ounce of gold produced. Average mine, process and G & A operating costs (including pre-stripping and waste handling) over the project's life are estimated at US$11.89 per tonne before base metal credits. These capital and operating costs use 2008 third quarter input prices which are above current levels.
Seabridge Gold Inc. has completed the sale of its 100-per-cent-owned Noche Buena gold project in Sonora, Mexico, to Minera El Bermejal, S de RL de CV, an affiliate of Minera Penmont, S de RL de CV, which operates the La Herradura gold mine in Sonora. Bermejal and Penmont each are owned 56% by Fresnillo plc. and 44% by Newmont USA Limited, a subsidiary of Newmont Mining Corporation. At closing, Seabridge Gold was paid US$25 million in cash. A further US$5 million is payable upon commencement of commercial production from Noche Buena and a 1.5% net smelter royalty is payable on all production sold for US$800 per ounce or greater of gold.
Seabridge Gold President and CEO Rudi Fronk said that the cash proceeds will enable the company to advance its core projects - KSM and Courageous Lake - towards feasibility without share dilution. "We will be looking to make other sales of non-core assets in the months ahead," he said.
Seabridge Gold Inc. has received the results from the final 13 holes drilled this summer on the Mitchell zone at the KSM project, including two exploration holes to intersect the northern plunge of a higher-grade zone, three infill holes to upgrade inferred resources to the indicated category, and eight geotechnical holes designed to test the slope stability of the north and south walls in the proposed Mitchell pit. All 13 drill holes successfully met their objectives. Results from two more holes drilled this year at the Sulphurets zone have yet to be released.
Seabridge Gold president and chief executive officer, Rudi Fronk, said the new results "enhance confidence in our resource model. We believe the results of the 2008 program should upgrade a significant portion of Mitchell's in pit inferred resources to the indicated category. We now have two more successful tests of the higher grade northern extension which should enable us to incorporate this feature into the next iteration of our resource model. Meanwhile, the geotechnical program could allow us to convert a significant amount of waste material into a mineable resource in addition to helping us define appropriate slopes for the Mitchell pit."
Seabridge Gold Inc. has released the results of the final two drill holes from the 2008 program at the KSM project, which continue to confirm the extension of a higher-grade breccia zone in the Sulphurets resource area. These two drill holes were added to the 2008 program after positive results on Seabridge's first drill hole into the target. These results are expected to expand the Sulphurets resource model down dip and along strike to the north and west.
Seabridge Gold president and chief executive officer, Rudi Fronk, said that these results continue to confirm an "expansion of the Sulphurets higher-grade breccia zone. Our recently completed preliminary assessment for KSM delineated separate open pits for the Sulphurets and Mitchell zones. We are becoming more confident that the Sulphurets and Mitchell zones could be exploited in a single pit, which would provide numerous operational advantages. A new resource estimate for KSM will be completed in February, after which we will construct new mine plans and update the 2008 preliminary assessment."
Seabridge Gold Inc. has signed a letter of intent to sell 100 per cent of its interest in the Red Mountain property located in British Columbia, Canada, to BonTerra Resources Inc. for $7.0-million in cash plus a $5.0-million convertible debenture. The transaction is expected to close at the end of September, 2009.
Seabridge President and CEO Rudi Fronk said "BonTerra is in a strong position to take our Red Mountain project forward. They have generated excellent exploration results on contiguous ground which could increase the size of the high-grade Red Mountain project and enhance its economics. We elected to take part of the proceeds of this proposed sale in the form of a convertible debenture so that we can continue to participate in Red Mountain's potential success. Cash proceeds from this transaction will enable Seabridge to continue advancing KSM and Courageous Lake towards feasibility without share dilution."
Cortez Resources Corp. has amended its letter agreement dated March 25, 2009, whereby Cortez will acquire various mineral claims in Nevada held by Seabridge Gold Inc.'s wholly owned subsidiaries, Seabridge Gold Corporation and Pacific Intermountain Gold Corporation.
The proposed acquisition consists of interests in all or, at the election of Cortez, any number of Seabridge's mineral properties located in various counties in Nevada, including Churchill, Elko, Esmeralda, Humboldt and Nye, and includes Seabridge's Castle Blackrock property.
Pursuant to the agreement, Cortez provided notice to Seabridge of its intent to proceed with the transaction and made a payment to Seabridge of a non-refundable deposit of $20,000 (U.S.). The exclusive option to Cortez has been extended by Seabridge to July 31, 2009, within which period a formal agreement with Seabridge must be finalized for the purchase of the properties, and the deadline for completing the proposed acquisition has been extended to Sept. 30, 2009. In consideration for this extension, Cortez has agreed, subject to exchange approval, to pay an additional $80,000 (U.S.) to Seabridge. Upon execution of the formal agreement, Cortez has agreed, subject to regulatory approvals, to pay Seabridge the further sum of $409,925 (U.S.) as an advance of lease and claims maintenance fees in respect of the properties subject of the proposed acquisition, that are due prior to Sept. 30, 2009. Seabridge will use the funds to pay the maintenance fees on the properties. Funds advanced for maintenance fees that are not used prior to the closing will be returned to Cortez. If the formal agreement is not executed by the parties by July 31, 2009, the parties' obligations in respect of the transaction shall terminate.
The consideration for the proposed acquisition to acquire 100 per cent of Seabridge's interest in the properties (subject to existing underlying royalty and leaseholder entitlements), has also been amended.
Cortez will:
Issue five million common shares to SEA at a deemed price of 20 U.S. cents per share, and a convertible debenture in the principal amount of $1.25-million.
The following terms and conditions will attach to the debenture:
The debenture shall have a three-year term, bearing no interest.
Should the closing price of the common shares of Cortez on the TSX Venture Exchange be above $1.50 per share for 10 consecutive trading days, Cortez shall have the right for a period of 30 days to redeem the debenture in full. The redemption period shall commence on the 11th day following the 10 consecutive trading days and will end 30 days thereafter. The right to redeem will not apply should the redemption condition reoccur within the three-year term.
After the redemption period, or if the redemption period does not occur then immediately before the maturity date, Seabridge can convert the note into common shares of Cortez at a conversion price of 25 cents per share. Unless the debenture is earlier redeemed or converted, on the maturity date Cortez will pay Seabridge the principal sum of the debenture then outstanding.
The debenture shall be transferable by Seabridge, subject to Cortez giving its consent, which consent shall not be unreasonably withheld.
All other terms of the original agreement, including the appointment of additional directors after closing, remain unchanged.
Cortez is a capital pool company and the proposed acquisition will constitute its qualifying transaction (as such term is defined in the policies of the exchange). The proposed acquisition is an arm's-length transaction and upon completion of the proposed acquisition, Cortez expects to be a Tier 2 mineral exploration issuer. No non-arm's-length party (as defined in the policies of the exchange) to the capital pool company has any direct or indirect beneficial interest in the properties or the shares of Seabridge.
Financing
Cortez proposes to raise the first tranche of the funds required pursuant to the agreement, by way of a private placement of up to five million common shares priced at 20 cents per share for gross proceeds of up to $1-million. Cortez has engaged Jordan Capital Markets Inc. as its exclusive agent to assist in completing the financing with a closing date of July 29, 2009. As agent for the private placement, Jordan Capital will receive a cash commission of 8 per cent of the gross proceeds raised in this offering, in addition to a corporate finance fee. The proceeds from this initial private placement will be used to complete the due diligence on the proposed acquisition, complete the advance due upon signing of the formal agreement and to add to working capital. Cortez will require additional funds in order to complete the proposed acquisition, which Cortez expects to complete through an additional private placement financing prior to closing.
Description of significant conditions to closing
Pursuant to Section 2.1 of exchange policies, as the proposed qualifying transaction is not a non-arm's-length qualifying transaction, the company will not be required to obtain shareholder approval of the qualifying transaction but will be submitting a filing statement for exchange acceptance. Sponsorship for this qualifying transaction is not required under the policies of the exchange.
The remaining conditions to closing the proposed acquisition are: (a) the execution and delivery of the formal agreement; (b) completion of financing sufficient to enable Cortez to complete the proposed acquisition; and (c) approval of the proposed acquisition as a qualifying transaction by the exchange. There can be no assurance that the transaction will be completed as proposed or at all.
Seabridge Gold Inc. today released positive results from an updated National Instrument 43-101 preliminary economic assessment (PEA) for its 100-per-cent-owned KSM project located in Northern British Columbia, Canada. The Executive Summary from the updated PEA can be found at www.seabridgegold.net/KSM-ES2009. The complete PEA will be filed on SEDAR at www.sedar.com.
Seabridge President and CEO Rudi Fronk stated that the updated PEA "shows that we are continuing to improve the economics of this outstanding project. Changes in design and a reduction in the strip ratio have materially reduced capital and operating costs compared to our 2008 study. The updated PEA confirms that KSM can be a significant gold producer at a total cost per ounce well below the gold industry average with the added benefits of a very long mine life within a stable political environment. We are now undertaking final in-fill drilling, engineering and environmental programs which will allow us to complete a Preliminary Feasibility Study in early 2010. At that point, we will have successfully taken the KSM project to reserve status."
Similar to the 2008 study, the updated PEA envisages a large tonnage open-pit mining operation at 120,000 metric tonnes per day of mill feed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck or pipeline to the nearby deep-sea port at Stewart, B.C. A separate molybdenum concentrate and gold-silver dore will also be produced at the processing facility.
Two mine plans are considered in the updated PEA: (i) a 30 year mine life designed to maximize a 5% net present value discounted mining schedule; and (ii) an extended 45+ year mine life based on larger pits designed to maximize total undiscounted net cash flow for the project. Both the 30 Year and the extended mine life scenarios would follow a similar development path and capital payback would occur in the same time frame for both scenarios. Although the extended mine life scenario provides useful information, the updated PEA concentrated on the 30 Year scenario which will be used in the preparation of a Preliminary Feasibility Study and in Seabridge's ongoing permitting program. Production highlights for the updated 30 year mine life are as follows (note the higher gold production in the earlier years):
Total tonnes to mill 1.29 billion
Annual tonnes to mill 43.2 million
Average grades
Gold (grams per tonne) 0.61
Copper (%) 0.22
Silver (grams per tonne) 2.21
Molybdenum (parts per million) 51.9
Total production
Gold (ounces) 19.3 million
Copper (pounds) 5.3 billion
Silver (ounces) 67.1 million
Molybdenum (pounds) 60.0 million
Year 1 to year 8 annual production
Gold (ounces) 766,000
Copper (pounds) 136 million
Silver (ounces) 2.8 million
Molybdenum (pounds) 1.9 million
Life-of-mine annual production
Gold (ounces) 644,000
Copper (pounds) 176 million
Silver (ounces) 2.2 million
Molybdenum (pounds) 2.0 million
Initial capital costs for KSM are now estimated at US$3.08 billion, compared to US$3.43 billion in the 2008 study, a reduction of approximately US$350 million, or about 10%. Reduced mine equipment requirements and several project design changes contributed to the reduced capital costs. A revised mining schedule optimized the mining operation by reducing waste-to-ore stripping ratio. The primary grinding plant is now located at the Mitchell mine site allowing ore to be transported by slurry pipelines and pumping stations (rather than conveyors) through a tunnel to a further processing site near the tailings management area with access to Highway 37. A high pressure grinding roll (HPGR) circuit now replaces the SAG mill circuit used in the 2008 study. The HPGR circuit will be refined subject to future test work. Rather than using a single large tunnel for ore transport and delivery of supplies to Mitchell, two smaller tunnels have been shown to be more cost effective, facilitating construction, ventilation and operational efficiencies. One of the tunnels will be used to transport ore slurry from Mitchell while returning water, diesel fuel and electrical power to the KSM mine site. The other tunnel will be used for transport of personnel and supplies to the Mitchell mine site from the plant location near Highway 37. After delivery of the slurry to the process plant, further primary grinding prior to flotation will be accomplished with efficient tower mills rather than ball mills.
Average mine, process and G&A operating costs over the project's life (including pre-stripping and waste handling) are now estimated at US$10.57 per tonne milled (before base metal credits) compared to US$11.89 per tonne milled in the 2008 study, a reduction of about 11%. Operating costs have been improved from the 2008 study by a new mine schedule which reduced waste-to-ore strip ratios, resulting in lower equipment and manpower requirements. Additionally, the use of the HPGR grinding and further regrinding with tower mills reduced operating costs for grinding media and electrical power.
PRETAX ECONOMIC RESULTS IN U.S. DOLLARS FOR ALL THREE CASES
Alternate Recent spot
Base case case metal prices
Net cash flow $11.6-billion $6.3-billion $11.7-billion
NPV at 5% $3.4-billion $1.4-billion $3.7-billion
IRR (%) 12.6 8.5 13.6
Payback period (years) 6.6 8.8 5.8
Operating costs per ounce of
gold produced (life of mine) -51 243 114
Total costs per ounce of gold
produced (includes all capital) 178 472 343
Metal prices
Gold ($/ounce) 778 800 950
Copper ($/pound) 3.00 2.00 2.50
Silver ($/ounce) 13.68 12.50 14.00
Molybdenum ($/pound) 26.05 15.00 15.00
U.S./Canadian-dollar exchange rate 0.90 0.90 0.90
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