(Kitco News) - Precious metal miners are in a great bargaining position with the smelters, said Walter Coles, executive chairman of @skeenaresources6013.
Last week Coles spoke to Kitco Mining in Vancouver, B.C.
Skeena Gold + Silver (TSX: SKE) is advancing its Eskay Creek project, a high-grade volcanogenic massive sulphide deposit that previously operated as an underground mine.
“When Eskay Creek was operational in the 1990s and early 2000s, it produced 3.3 million ounces of gold and an astonishing 160 million ounces of silver," said Coles. "That was from an underground mine. We're revitalizing it as an open-pit operation, and we changed the name to highlight the silver still present."
In November 2023, Skeena completed a definitive feasibility study on Eskay Creek, revealing reserves of 4.6 million ounces (Moz) of gold equivalent (AuEq) at an average grade of 3.6 g/t AuEq. The study projects an after-tax NPV5% of C$2 billion, a 43% IRR, and a 1.2-year payback period, based on US$1,800/oz gold and US$23/oz silver. Recently, the company changed its name to Skeena Gold & Silver to emphasize the significant silver reserves remaining at Eskay Creek.
"Exploration is tough," Coles admitted. "There’s an old saying: 'The best place to find a mine is in the shadow of a headframe.' Our strategy was to acquire past-producing mines that were shut down during low points in the commodity cycle, hoping to find untapped resources."
The company plans to reopen it as an open-pit mine, with estimated annual production of 450,000 AuEq ounces in the first five years. Coles highlighted that current precious metal prices are favorable for miners, and that there are downstream benefits as well.
"I believe we're in a good position to negotiate better terms with smelters," said Coles. "With excess global smelter capacity, mines can push for higher payables."
Supply constraints are expected to sustain high precious metal prices for years.
“One thing that's certain is that commodities are cyclical," said Coles. "During downturns, companies reduce exploration and capital expenditures, which eventually leads to lower future supply. Now, we’re seeing the boomerang effect. Even with capital flowing back into the sector, supply won't rebound for years, creating favorable conditions for miners in the meantime."
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