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TABLE OF CONTENTS Oct 7 - 13, 2013 Volume 99 Number 34 - 0 comments

Seabridge finds more high-grade core zones at KSM

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VANCOUVER — Seabridge Gold’s (TSX: SEA; NYSE: SA) KSM project encompasses four deposits that contain 38 million oz. gold and 10 billion lb. copper. But mines for deposits that big are usually expensive to build and operate, and KSM is no exception. A prefeasibility study last year predicted the KSM  mine would cost US$5.3 billion and only generate an 11.5% internal rate of return.

So the company turned its attention to improving KSM’s economics — and it seems geology is on Seabridge’s side. Drills probing beneath two of the deposits at KSM are returning gold and copper at twice the project’s average grade, suggesting KSM still has high-grade zones to offer that could increase returns and make the megaproject more appealing to potential partners.

KSM is located in northwest B.C., 65 km northwest of Stewart. The project’s four deposits are part of a large and deformed intrusive complex. The abundance of porphyry mineralization and the complexity of deformation in the area meant that no one had probed the district at depth for the high-grade core zones that would have fed metals into the porphyries.

No one, that is, until Seabridge drilled four deep holes beneath the Kerr deposit last year. These holes returned what Seabridge describes as “favourable markers, characteristic of core zones,” along with the copper grades that a core zone should carry. Hole 12-21, for example, returned 473 metres grading 0.9% copper, along with 0.31 gram gold per tonne and 3.7 grams silver per tonne. KSM’s measured and indicated resources bear an average copper grade of just 0.21%.

With those results Seabridge’s exploration goal in 2013 became a “core zone discovery at Deep Kerr.” The company returned to Kerr with five drill rigs, and those rigs have produced several intervals grading better than 1% copper and 1.7 grams gold.

The results confirmed the sought-after core zone at Deep Kerr. Seabridge has the zone tracked along 1,600 metres strike and across 300 metres width. It remains open to the north and at depth. Mineralization in the core holds mostly chalcopyrite and gold, but in its latest holes Seabridge has found wide intervals of stockwork veining carrying abundant bornite.

Bornite is a copper-iron-sulphide mineral that forms at higher temperatures than its counterpart chalcopyrite, the most common copper mineral. Each bornite molecule has five copper atoms, compared to just one in each chalcopyrite. As a result, bornite-bearing ores usually carry higher copper grades.

For example, the Deep Kerr intercept from  hole 29 carried 0.55 gram gold, 0.89% copper and 1.39 grams silver over 238 metres, but a bornite-rich segment graded 1.14 grams gold, 1.78% copper and 2.06 grams silver over 69 metres.

Seabridge says that the first bornite intercept assayed contained the highest-grade copper mineralization ever drilled at KSM, and that “wall rock in these intervals is intensely altered. The style of alternation and mineralization are characteristic of a deep, high-temperature core zone, as targeted by Seabridge in this year’s program.”

The zone represents a large target, so Seabridge chairman and CEO Rudi Fronk says they are confining their drills to a 1000-metre section. This would provide enough drill data to inform an initial resource estimate, due out later this year. Next year Fronk says drills will step out farther and assess Deep Kerr’s size.

But Seabridge is already contemplating how Deep Kerr might fit into KSM’s mine plan. The company says the bornite zone “appears at moderate depths within Deep Kerr, indicating that this material could be accessed from the valley floor.” This is important because if high-grade material from Kerr could enhance KSM’s economics in the mine’s early years, Seabridge would likely take its production plan back to the drawing board.

The 2012 preliminary economic analysis (PEA) for KSM lays out a production plan that starts with open pits at the Mitchell and Sulphurets deposits. Mining at Kerr would get underway in year 27, followed by underground block caving at the Iron Cap deposit.

Seabridge also thinks it has found a deep, high-grade core zone at Iron Cap.

The company drilled three deep holes into Iron Cap this season. As at Kerr, previous explorers at Iron Cap had done shallow drilling and concluded that the deposit was a small, epithermal vein system. But Seabridge has shown that the epithermal system at Iron Cap covers a large gold-copper porphyry.

The company spent three years delineating that porphyry, which now contains 361.7 million measured and indicated tonnes grading 0.44 gram gold, 0.21% copper and 5.4 grams silver, plus 297.3 million inferred tonnes of slightly lower grade. This year Seabridge searched for the magmatic core zone that could lie below.

Two of the three holes drilled in that effort show promise. Hole 49 cut 1,023 metres grading 0.77 gram gold, 0.24% copper and 5.2 grams silver. The intercept started at surface and so includes the porphyry. A 207-metre section from below the defined resource, however, carried 1.22 grams gold and 0.45% copper — more than twice Iron Cap’s average grades.

Hole 50 hit 35 metres grading 1.38 grams gold, 0.38% copper and 9.7 grams silver in a vein structure that Seabridge describes as “consistent with the core zone of a porphyry system.”

According to Seabridge, the results “strongly suggest the Iron Cap deposit sits above a high-grade core zone.” The company thinks its drills brushed the edges of this zone. Later this season, with data from bore-hole geophysical surveys and a 3-D model in hand, Seabridge plans to drill more deep holes into Iron Cap.

“Iron Cap is located in the same valley as the proposed crusher, tunnel portal and other key infrastructure, so there really is no better place for nature to put a core zone, if we can in fact find one there,” Fronk said.

In other KSM news, in mid-August Seabridge reached an agreement in principle with the Nisga’a First Nation on the material components of a benefits agreement for KSM. The agreement came out of months of negotiations around economic benefits, job opportunities, environmental concerns and project certainty. This is the first formal agreement between Seabridge and the Nisga’a, who have been talking for more than five years.

The Nisga’a agreement in principle came two months after Seabridge received confirmation that its application for an environmental assessment certificate for KSM has completed the first stage of the regulatory process, known as screening, and has moved onto the second stage, known as formal review. KSM is undergoing a harmonized environmental assessment review, conducted by the B.C. and federal government.

The review is contemplating the mine plan laid out in the 2012 PEA. That mine would churn through 130,000 tonnes of ore daily for the first 25 years, falling to 90,000 tonnnes per day in year 26, when more of the mining takes place underground.

Over the mine’s 55-year life, annual output would average 508,000 oz. gold, 147 million lb. copper, 2.2 million oz. silver and 1.1 million lb. moly. Output would be higher in the first seven years, so that the project could repay its US$5.3-billion capital cost in six years.

Seabridge released news of drilling at Deep Kerr and Iron Cap in August. During that month the company’s share price climbed, adding 50% to reach $17.20. But despite another Deep Kerr announcement Seabridge has since lost half of that gain, closing recently at $13.79. The company has 46 million shares outstanding.

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The surface of the Mitchell deposit at Seabridge Gold's KSM gold-copper project, 65 km northwest of Stewart, B.C. Source: Seabridge Gold
The surface of the Mitchell deposit at Seabridge Gold's...
The surface of the Mitchell deposit at Seabridge Gold's KSM gold-copper project, 65 km northwest of Stewart, B.C. Source: Seabridge Gold
The surface of the Mitchell deposit at Seabridge Gold's...

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