VANCOUVER — SSR Mining (TSX: SSRM; NASDAQ: SSRM), formerly Silver Standard Resources, is planning a US$90-million expansion of its Seabee underground gold mine in northern Saskatchewan that would boost production, cut costs and extend the mine life to 2024.
According to the company’s new preliminary economic assessment (PEA), the investment has an after-tax net present value of US$292 million, assuming a 5% discount rate at US$1,300 per oz. gold.
“We’re absolutely going ahead with the expansion — the economics look great,” Paul Benson, SSR Mining’s president and CEO, told The Northern Miner during a phone interview in October.
The expansion would be the first big development since SSR acquired the operation, which consists of two underground mines, Seabee and Santoy, as part of its $337-million friendly takeover of Claude Resources in May 2016.
Benson said SSR acquired Claude for Seabee’s “exploration upside, grade and the potential to increase the mines throughput at minimal capital.”
As noted in the PEA, mining rates would hit 1,050 tonnes per day in a 20% increase, compared to 2016 production of 870 tonnes per day.
Annual gold production would increase 29% compared to 2016 levels, averaging 100,000 oz. per gold annually from 2018 to 2023. Life-of-mine cash costs would total US$548 per payable oz. gold — down from US$575 to US$625 per oz. gold based on 2017 guidance — due to higher throughput and a mill feed grade of 8.51 grams gold per tonne.
“We don’t know the operating capacity on the mill yet. There are some signs that suggest we could get it up to 1,200 tonnes per day, and so we’ll do a trial sometime next year. But 1,050 tonnes per day is absolutely doable,” Benson said.
After 2022, gold production is scheduled to taper off, but Benson expects that will likely change.
“We’ll find more in and around the current known reserves and resources, so production won’t taper off as quickly as the plan says,” he said.
Drilling completed by SSR last year boosted reserves 50%, at 7% higher grades than in the company’s 2016 resource update. Resources for the project total 2.1 million measured and indicated tonnes of 8.02 grams gold for 540,000 oz. gold, and 2.5 million inferred tonnes of 7.66 grams gold for 620,000 oz. gold.
“We’ve done quite a bit of drilling this year — none of which is included in our study — and we’ve been getting really good grades both within and outside the resource,” he said. “We’ll continue to add to the resource, and potentially discover new zones in the near-mine environment.”
Drill results outside of Santoy’s resource shell include 2.5 metres of 27.7 grams gold, 2.8 metres of 17.6 grams gold and 2.1 metres of 6.5 grams gold.
Benson expects the company will spend more than US$5 million on near-mine exploration next year.
The 570 sq. km property covers part of a 50 km long greenstone belt entrained within the Proterozoic-aged Trans-Hudson orogen — a collisional suture zone that divides the Rae-Hearne cratons in the west from the Superior craton in the east.
The company has eyes on an ore-controlling shear structure that crosscuts the property and extends onto the company’s newly acquired Fisher property in the south.
“The shear that hosts the Santoy deposit extends for a longer strike length on the Fisher property than it does on our ground, so we’re really exposing ourselves to as much prospective ground as possible,” he said. “This year we’ve completed mapping, geochemistry and flown high-resolution magnetics with a drone — all to set us up for drilling on the property next year.”
Other targets along the same structural trend include the Carr, 4 km north of Santoy, where recent drilling returned intercepts of 2.5 metres of 9 grams gold and 1.5 metres of 6.3 grams gold near surface.
“We’re investing heavily and aggressively in the exploration potential of this property, but in a sensible way,” Benson said. “You have to maximize the value of each individual asset — that’s how we run our business.”
After the tabling of the Seabee PEA and the interview came news on Oct. 31 that two of SSR’s Marigold gold mine employees in Nevada — Pete Kuhn, a safety superintendent; and Omar Bernal, an open-pit operator — were killed in what SSR describes as a “result of contact between a haul truck and a van” at the mine, with eight other individuals involved in the incident taken to the hospital with minor injuries.
SSR said it is cooperating with the U.S. Department of Labor’s Mine Safety and Health Administration and other authorities that are investigating the incident, and it is conducting its own operational and safety review.
“All of us at SSR Mining are deeply saddened by these tragic events,” Benson said in a company statement. “Our immediate focus is on supporting the family and friends of our colleagues during this difficult time. The investigation is going to take some time to complete and we are doing all we can to support those efforts. We would also like to thank the mine rescue team and all those who responded to the incident for their invaluable help.”
SSR reported on Nov. 7 that for the third quarter, it had generated net income of US$1.8 million (1¢ per share) on US$106 million in revenue, compared with a profit of US$38 million (32¢) on US$143 million in revenue during the same period last year. The drop in revenue and profit comes from lower head grades at Marigold, forest fires interrupting the Seabee operations, and mining lower-grade stockpiles at its 70%-owned Puna operations in Argentina. (Puna is comprised of SSR’s Pirquitas silver-zinc mine and Golden Arrow Resources’ [TSXV: GRG; US-OTC: GARWF] Chinchillas silver-lead-zinc property.)
SSR generated US$30.3 million in cash flow from operations in the third quarter, compared to US$53.1 million a year ago.
For the first nine months of 2017, SSR posted net income of US$54.6 million (45¢ per share) on US$341 million in revenue, compared with a profit of US$52.8 million (54¢) on US$364 million in the year-ago period.
The company increased its cash and equivalents another US$38.6 million to US$424 million at the end of September, after selling 6.4 million shares of B.C. gold miner Pretium Resources (TSX: PVG; NYSE: PVG).
SSR’s production guidance for Marigold is now set at between 195,000 to 205,000 oz. gold this year. That’s a reduction of 10,000 oz. gold from previous guidance owing to lower pumping rates to the leach pad due to higher clay content, and a production halt on Oct. 31 that lasted over a week, after the two fatalities.