Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) and Pretium Resources Inc. (PVG:TSX; PVG:NYSE) announced the respective acquisition and sale of Pretium's Snowfield property adjacent to Seabridge's KSM project in British Columbia, Canada. Snowfield is located in the same valley as KSM's Mitchell deposit. The transaction is expected to close by year-end.
Seabridge noted in its news release that for Snowfield it will pay a consideration composed of three components: US$100 million in cash for which Seabridge will obtain financing, a 1.5% net smelter returns royalty on Snowfield production and a future contingent payment of US$20 million, US$15 million of which may be credited against future royalty payments. The acquisition is contingent upon Seabridge obtaining financing.
"The acquisition enables exciting new development opportunities for KSM which could have a significant positive impact on project economics," the company stated in the release.
"This acquisition brings Seabridge a number of major benefits. First, it adds appreciably to our ounces of gold per share, our most important measure of shareholder value, at a cost of approximately US$3 per oz," Seabridge Chairman and CEO Rudi Fronk said in the release.
Second, Snowfield's measured and indicated mineral resources have the potential to significantly increase KSM's proven and probable reserves. Snowfield's mineral resource is 25.9 million ounces of gold in the measured and indicated category and a further 9.0 million ounces in the inferred category as well as substantial copper resources," Fronk stated. "The estimated strip ratio for Snowfield deposit is less than one-to-one and previous studies indicate its resources can be successfully blended with Mitchell ore."
"Work is already underway to determine how to integrate Snowfield into a new KSM mine plan," Fronk added.
The future conditional payment of US$20 million is due to Pretium "within six months following the earlier of (i) commencement of commercial production from Snowfield Property or any part thereof; and (ii) announcement by Seabridge of a bankable feasibility study which includes production of reserves from the Snowfield Property," the company noted.
In Pretium's news release, President and CEO Jacques Perron said the transaction, for one, "provides us the opportunity to immediately realize the value of Snowfield, an undeveloped asset that we believe is not reflected in our share price."
Pretium intends to apply the cash proceeds to its revolving credit facility, which amounted to $198 million on Sept. 30, 2020. Along with a boost to its balance sheet and the flexibility to reduce debt, the deal allows Pretium to stay involved in and benefit from Snowfield over the long term through the royalty.
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