New woe besets BC’s two biggest gold projects

Seabridge Gold’s (TSX: SEA; NYSE: SA) push for permits to dig tunnels at its giant KSM project is being delayed by British Columbia until the miner’s court fight with neighbour Tudor Gold (TSXV: TUD) is resolved.

The twin tunnels are a core link in the $6.4-billion (C$8.8-billion) capex KSM project, carrying ore from mining in the Mitchell Valley to processing facilities in the Treaty Valley. Part of the route crosses Tudor claims and Seabridge already holds some permits. But the province won’t rule on the rest of them while Tudor challenges Seabridge in provincial court.

“We have always been clear that if Tudor has an approved and permitted mine plan for its Goldstorm project, then we are willing to sit down and find an amicable solution to the Mitchell Treaty tunnels (MTT) issue,” CEO Rudi Fronk said Friday in a news release. “However, agreeing to move the MTT route before Tudor has a defined project makes no sense.”

The delay comes after Seabridge’s KSM had cleared other major hurdles. These include the mid-2024 ‘substantially started’ designation from the B.C. government which cemented KSM’s Environmental Assessment Act permit for the life of the project; the narrowing of its search for a development partner to one company; and last month’s small victory in court when Tudor dropped one of its appeals.

Several fights

The details of the court fight concern whether Seabridge’s conditional mineral reserve for KSM, first granted in 2012, binds claims that predate it, and whether the province has authority to grant tunnel-related rights across them. The ministry has on several occasions confirmed in writing that the reserve applies to Tudor’s ground, Seabridge said.

Tudor has argued for months that the tunnel route, as planned, would cut through the Goldstorm deposit and the nearby Perfectstorm target on its Treaty Creek project. In October, it proposed a northern reroute that it said could let both projects advance. In December the company said negotiation with Seabridge and the province offered the best path, even as it said it was pressing ahead with court proceedings to preserve its rights.

“We continue to believe that negotiation is the best path forward to resolve the issues for the benefit of all parties,” President Joe Ovsenek wrote in an October newsletter to investors. “We are counting on the B.C. government to support the potential of Treaty Creek and not sacrifice it for the sake of KSM.”

Seabridge said it still has no plans to start tunnel construction before it completes a final feasibility study after it’s announced a project partner.

Tudor started compiling a preliminary economic assessment due by the third quarter for a 10,000-tonne-per-day underground mine at Goldstorm after updating the resource in January. Seabridge, meanwhile, said last month that securing a KSM partner is its top goal this year and updated KSM’s resources days later.

Seabridge’s Toronto-listed shares fell 4.3% on Friday-afternoon trades to C$42.89 per share, giving it a market capitalization of C$4.6 billion. Tudor shares were trading down 1% at C99¢ by midday, giving it a market cap of C$404 million.

Big resources

The size of the resources helps explain why neither side has backed down. Tudor’s January resource estimate outlined 912.3 million indicated tonnes grading 0.85 gram gold, 5.07 grams silver and 0.15% copper for 24.9 million oz. gold, 148.7 million oz. silver and 3.1 billion lb. copper.

Inferred resources add 86.1 million tonnes grading 1.43 grams gold, 5.22 grams silver and 0.17% copper for 4 million oz. gold, 18.6 million oz. silver and 327.7 million lb. copper.

Seabridge’s resource update last month showed higher metal price assumptions lifted measured and indicated resources by 6.8 million oz. gold and inferred resources by 12.9 million oz. without changing the underlying geology model. The project carries proven and probable reserves of 2.3 billion tonnes grading 0.64 gram gold, 0.14% copper and 2.2 grams silver for 47.3 million oz. gold, 7.3 billion lb. copper and 160 million oz. silver.

The same study outlined a 33-year mine life and average yearly output of 1.03 million oz. gold and 178 million lb. copper.