Barrick Gold (TSX: ABX; NYSE: GOLD), the world’s second-largest bullion miner, said today that Canadian junior Skeena Resources (TSX-V: SKE) has decided to exercise an option to acquire a 100% interest in the past-producing Eskay Creek property.
Discovered in 1988, the Eskay Creek mine in British Columbia’s Golden Triangle was, according to Skeena, once the world’s highest-grade gold mine and the fifth-largest silver operation by volume. It produced approximately 3.3 million oz. gold and 160 million silver oz. at average grades of 45 grams gold per tonne and 2,224 grams silver per tonne during its mine life.
As part of the definite agreement announced on Aug. 4, Skeena will gain full ownership of Eskay Creek and will be the mine operator. Barrick will become a significant shareholder in Skeena and will waive its back-in right on the project.
Once the deal closes, expected in the fourth quarter of the year, Barrick would hold more than 24 million Skeena common shares on a pro-forma basis. That amounts to about 12.4% of the junior’s issued and outstanding common shares.
Skeena will also grant a 1% net smelter return royalty on the entire Eskay Creek land package. Half of that royalty may be repurchased from Barrick during the 24-month period after closing at a cost of $17.5 million.
A contingent payment of $15 million is also agreed upon, which will become active if Skeena sells more than a 50% interest in Eskay Creek during the 24-month period after closing.
“We were encouraged by the positive market reaction to the announcement of the binding term sheet in respect to the Eskay Creek transaction with Barrick … Skeena is honoured to have Barrick as an important shareholder in the company going forward,” chief executive, Walter Coles, said in a statement.
Based on the preliminary economic assessment released by Skeena in late 2019, once reopened, the Eskay Creek mine would produce 236,000 oz. gold and 5.81 million oz. silver per year.
The Vancouver-based company is currently focused on infill and exploration drilling to advance the project towards the pre-feasibility stage.