Hochschild Mining informed Skeena Resources (TSX:SKE) on Friday of its intention to take over operatorship of the Snip gold project and begin spending to earn 60% of Skeena’s interest, as per an agreement signed in September 2018.
The Snip project, located in British Columbia’s Golden Triangle, is a past-producing mine acquired by Skeena from Barrick Gold in 2017. The property consists of one mining lease and eight mineral claims totaling approximately 4,546 hectares in the Liard mining division.
In order to earn the 60% interest, Hochschild will need to incur expenditures of approximately C$100 million over a three-year period, starting October 14, 2021.
Should Hochschild complete a minimum spend of C$22.5 million, it may extend the option period by another year by making a $1 million cash payment to Skeena.
Upon completion of the earn-in, a joint venture would be established between the parties, and Skeena would be entitled to anti-dilution protection of up to C$15 million.
“The Hochschild team has a reputation for being among the best underground miners in the world for narrow, high-grade deposits, and we are fortunate to have them as our formal partner on Snip going forward. Skeena’s shareholders will benefit from Hochschild spending a potential C$115 million at Snip, before the company would be required to contribute,” Skeena’s CEO Walter Coles Jr. commented in a news release.
“We are pleased to exercise our option on the Snip project in Tahltan Territory, Canada. This represents a first step in our strategy to add another high-grade project with strong upside potential into our pipeline,” Hochschild CEO Ignacio Bustamante added.
The former Snip mine produced approximately one million ounces of gold between 1991 and 1999 at an average gold grade of 27.5 g/t. Since then, the project has been improved with the recent construction of nearby infrastructure and substantially higher gold prices.
Recent work by Skeena led to the release an underground constrained mineral resource estimate on the property in July 2020, showing 244,000 ounces of gold hosted within 539,000 tonnes of indicated resources at an average gold grade of 14.0 g/t Au.
With Hochschild on board as the project operator, Skeena said it will now shift focus on “aggressively exploring and advancing” the Eskay Creek, another historical underground mine within the Golden Triangle.
The company is proposing to restart operations at Eskay Creek as an open-pit gold-silver mine and is working towards a feasibility study, which is expected to be released in Q1 2022.