Walter Coles


May 24, 2017

How has Skeena Resources aimed for success during the mining downturn?

Skeena Resources has multiple projects, all of which are in different stages. One of our main themes has been contrarianism. When the market was down a couple of years ago, we thought it was a good opportunity to buy assets. The key to dealing with the mining industry’s volatility is buying when no one is interested and selling when the interest returns. Another theme has been avoiding grassroots exploration and only pursuing post-discovery assets where, through our expertise, we see a path to make the deposit much bigger. A third theme has been paying as little for new assets as possible to mitigate risk. Our Snip project is an example of this model being successful. We paid just over 2 million shares upfront, that equated to about $150,000, for a project that had not produced gold since the 1990’s, when nearby infrastructure was poor, operations were costly, and gold prices were declining significantly. Today, gold prices are much higher, and infrastructure in the Golden Triangle has vastly improved.

Additionally, we already know the gold is there and that it is high-grade, so our biggest risk is simply trusting the data we have collected. Gold mining is still an extremely risky business, but our goal is to try to protect against the commodity price risk. Also, the fact that our chairman, Ron Netolitzky, has discovered some of the highest-grade mines in the province has instilled confidence in our investors.

How would you characterize your partnership with Barrick for Snip and what are you plans for the property?

Skeena Resources has worked with Barrick Gold since we acquired the Snip project in March 2016. Barrick Gold inherited the asset when they acquired Homestake Mining Company in 2001. As a result, they also inherited the environmental obligations of this property and they felt it would be more effective to focus their resources on new revenue-generating projects instead of monitoring a closed site. Barrick Gold is not interested in a mine that might only produce 100,000 to 150,000 ounces per year, but they will get royalty payments if we go into production. Also, if we make a new discovery over 2 million ounces, Barrick Gold has the ability to buy back 51% of the company at three times our cumulative expense. The deal was structured as a win-win for both companies. This year, our drilling program at Snip envisages 15,000 meters of surface and underground drilling, which should lead to an initial 43-101 resources estimate in late 2017.

Can you please give us an update on your recently acquired Porter Idaho project?

Skeena Resources acquired Porter Idaho in September 2016. The mine produced 2.2 million ounces of silver from 1929 to 1931 at an impressive 74 ounces per ton. The project is located next to Stewart, British Columbia and the surrounding area’s infrastructure is very good. The previous owner had it for 30 years, but they are primarily focused on oil and gas, so they never really developed the mine. Currently there are known high-grade deposits and historic workings on either side of the mountain and because there is a fault that traces all the way through the mountain, we have a theory that there is mineralization throughout the entire mountain. There could be potential for several hundred million ounces of silver, as opposed to the 13 million ounces we know to be there already. Skeena Resources owns 100% of the project, which we acquired in an all share transaction, so the price was very attractive.

Can you please give us an update on your Spectrum-GJ project?

Spectrum was Skeena Resources’ original project, which was about 250,000 ounces of gold with some copper. We then bought the GJ project from Teck Resources. We viewed GJ as a strategic way to access the highway as well as the power line which was built for Red Chris that runs through the property. We were able to land the deal for $4.5 million, which can be paid over five years. Teck Resources sold the asset because they did not like the grade of the copper porphyry, but we do not like to dismiss a project solely based on grade. For example, if you have a favourable recovery rate or strip ratio, like we do at Spectrum-GJ, then the grade issue is less significant. Because of today’s higher gold and copper prices, we are optimistic that Spectrum-GJ will be a successful mine. In April, we announced a 43-101 Preliminary Economic Assessment. There are few copper dominant projects in politically stable jurisdictions that have an initial capex of less than US$200 million, combined with a 25-year mine life. Moreover, it is important to note that the PEA production statistics and financial outcomes can still be optimized.

Have you experienced any difficulties with First Nations?

Skeena Resources is very fortunate to be in Tahltan First Nation territory. The Tahltan Central Government is very experienced with mining deals and have technical people on staff. We view our partnership with them as a key to both our projects’ success and to attracting investment.

How do you think the British Columbia government could boost mining activity?

There will always be challenges with regulations, but Skeena Resources is grateful that the British Columbia government is making investments such as the $800 million power line that now goes all the way to Red Chris. Without that power line, our projects would not be going forward. The Liberal party has been extremely supportive of mining projects in the area.

Do you have any plans to expand outside of the Golden Triangle?

Skeena Resources is always open to evaluating new projects, but we are thus far content with our location in the Golden Triangle. Projects that are close in proximity to each other are at an advantage because assets from multiple projects can be consolidated. Snip and Spectrum-GJ are only a 20-minute helicopter ride from each other, so it is also easy to shift people or resources back and forth.



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