Skeena Resources: Constructive Drill Results at Snip Gold Project
May 20 Skeena Resources Limited (TSX: SKE) reported impressive assay results from its 2021 Phase 3 drill program on its Snip gold project. One hole intersected 155.76 grams per tonne (g / t) of gold over a span of 3.22 meters. The Snip Gold Mine is a former mine located in the famous Golden Triangle region of northwestern British Columbia.
Eskay Creek and Snip Properties
Skeena’s main focus is the development of the former Eskay Creek mine, also located in the Golden Triangle. According to a mineral resource estimate prepared this year, the Eskay Creek open pit resource contains 5.1 million ounces of gold equivalent (AuEq) at an AuEq grade of 4.2 g / t on a measured basis and indicated. Eskay Creek has a net present value (NPV) of $ 638 million based on a conservative gold price assumption of US $ 1,325 per ounce.
Skeena completed 83,000 meters of infill and exploration drilling programs in 2020. Another 25,000 meters of exploration drilling is planned this year. Skeena hopes to complete a feasibility study on Eskay Creek in 1Q 2022.
From 1994 to 2008, Eskay Creek was one of the most impressive high-grade gold and silver mines in recorded history. During this period 3.3 million ounces of gold and 160 million ounces of silver were produced at average grades of 45 g / t gold and 2,224 g / t silver.
Skeena acquired the Snip mine from Barrick Gold in 2017. It produced approximately 1 million ounces of gold at an average grade of 27.5 g / t over the period 1991 to 1999. Based on a mineral resource estimate under Underground constraints of July 2020, Snip contains 244,000 ounces of gold at an average grade of 14 g / t on an indicated basis and an additional 402,000 ounces at a grade of 13.3 g / t on an inferred basis.
Skeena’s exploration spending has increased over the past three quarters
The company’s quarterly operating cash deficit exceeded $ 30 million in Q4 2020 and Q1 2021 as it significantly increased its exploration spending. Skeena’s cash balance as of March 31, 2021 was $ 27.6 million, which is less than a quarter of its recent consumption. The company strengthened its balance sheet on May 17 by selling 21 million new shares in a firm takeover bid totaling $ 57.5 million.
|(in thousands of Canadian dollars, except for outstanding shares)||1Q 2021||4th quarter 2020||3 quarter 2020||2 quarter 2020||1 quarter 2020|
|Operating income||($ 29,912)||($ 36,231)||($ 17,883)||($ 5,237)||($ 5,079)|
|Operating cash flow||($ 31,928)||($ 35,914)||($ 16,940)||($ 7,085)||($ 6,441)|
|Cash||$ 27,648||$ 37,821||$ 24,396||$ 44,726||$ 22,421|
|Debt – End of period||$ 2,280||$ 2,634||$ 2,710||$ 1,593||$ 1,485|
|Shares outstanding (millions)||221.3||216.7||171.7||171.4||149.2|
Like many miners in the exploration and development stage, Skeena depends on the quality of its drill results. If the results of future assays from its ongoing drilling program at the Eskay mine were to be less constructive than they have been, the stock could suffer. In addition, any significant drop in the price of gold could have a similar negative impact.
Skeena Resources has two promising properties in the Golden Triangle, both of which were previously produced high-grade mines. In addition, recently completed mineral resource estimates for Eskay Creek and Snip suggest that substantial amounts of high grade gold could be mined in the future. As these properties move closer to production, Skeena’s inventory may continue its upward trend over the past 18 months.
Skeena Resources Limited last traded at $ 3.35 on the TSX.
Information for this briefing was found through Sedar and the companies mentioned. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.