How has the licensing and permitting process been for Seabridge’s KSM project?

The B.C. permitting process is well defined and well managed. There is ample back and forth between regulators, the proponents and indigenous populations.

We started the permitting process at KSM in 2008, when we filed the project description document. Then, we went forward with engineering studies culminating in a pre-feasibility study in 2012, which was used as a basis for applying for environmental approvals. We received approval in mid-2014 from the provincial government and in late 2014 from the federal government.

The process takes a long time, considering that we spent almost seven years on it, but it works. One has to recognize that, in our case, there were a lot of different parties involved: federal and provincial regulators, U.S. regulators, four first nations and one treaty nation. Also, KSM is an unusually large and complex project. If one is willing to listen, make the necessary changes and accommodate the regulators’ and the indigenous populations’ concerns where appropriate, your project will get approved.

How would you describe your relationship with First Nations over the course of development of the project?

Our relationship has been good, culminating in all groups supporting the project by the end of the process. We embarked on a long process of education back and forth in terms of Seabridge understanding their concerns and them understanding the magnitude of the KSM project. It is also important to recognize that even though we now have an approved project, the interaction with Treaty and First Nations continues. Earning your social license is an ongoing exercise.

Can you elaborate further on changes that had to be made to the design in order to accommodate to regulators’ and First Nations’ demands?

We made significant changes to road access and our tailings management facility. Originally, we had planned to have our main access road at Teigen Creek but after performing fish studies we agreed with the regulators and Treaty and First Nations to move the road to Treaty Creek, which is not as populated with fish species. We also made a number of changes to the design of our tailings facility. We now have a central lined facility where any of the tailings that interact with cyanide in our processing plant will now be deposited into a completely lined cell. This is not required under B.C. regulations, but it was the right thing to do. If one adds it all together, the design changes we agreed to in the environmental process totaled about $300 million in additional capital costs.

New resource estimates at KSM seem to yield better results every year, what are Seabridge’s drilling plans for this year?

People forget that we already have reserves of almost 39 million oz. of gold and just over 10 billion tones of copper. But above and beyond those reserves, we have added two billion tones of material at better grades than our reserves. In 2016, in an updated National Instrument 43-101 Technical Report, we put forward an alternative mine plan that captures these higher grade resource additions.  Instead of mining 70% of the material from open pits as envisaged in the Pre-Feasibility mine plan, the alternate case mines 70% of the material from underground. As a result of this shift to underground mining versus open pit, we eliminate approximately 2.4 billion tones of waste that does not need to be mined, stored and treated. That’s the environmental benefit. The alternate mine plan also has major economic benefits, reducing total costs of gold production by about $300 per ounce.

Since completing our Technical Report, we have made further substantial additions to higher grade resources. And we expect to see further additions to resources this year focusing on the Iron Cap zone. Last year, drilling results at Iron Cap showed grades above 0.8 g/t gold and 0.24% copper. That gold grade is about 60% higher than our gold reserve grade and the copper grade is 20% higher than our copper reserve grade. This year, we plan to expand this zone. The beauty about Iron Cap is that it is located very close to proposed infrastructure. The twin tunnel system that we have approved is within one kilometer of the Iron Cap deposit. Being able to generate higher grade material from Iron Cap would have a further positive impact on the project’s economics.

In addition, we also found a new zone above Iron Cap that yielded a 60 meter intercept of 1.2 grams of gold per tone and 0.95% copper. For projects like KSM, these grades are the holy grail, being similar to the Grasberg Mine in Indonesia that is probably the best gold-copper project in the world. It is impressive to me that although we have been drilling this project every year since 2006, we continue to find new zones.

I am very proud of our exploration team in terms of what they have been able to find over the last decade. Our team has found more ounces of gold than any other company in the world.

How is your relationship with shareholders and what are your market expectations?

RF: Our strategy is designed to provide maximum leverage to the gold price. We do that through the concept of increasing our gold resource ounces on a per share basis. If we raise funds for drilling or acquisitions, we expect to offset the equity dilution with accretion to ounces. We have been successful on this objective for almost 18 consecutive years. Our shareholders know that we will only issue shares if we believe we can add value by growing our gold ounces on a per share basis. As a result, we have a very loyal and long-standing group of shareholders.

What are Seabridge’s plans in the longer term for KSM?

KSM is the largest undeveloped gold project in the world measured by reserves. There is no doubt that this project will require the involvement of a major mining company. Our goal is to joint venture KSM with a suitable partner. We have many of the large gold and base metal companies under confidentiality agreements looking at KSM as a joint venture possibility.

KSM’s size and location are unique so we are not going to jump into a partnership easily.  Deal terms trump timing. We have turned down proposals over the past several years as the offered terms did not meet our expectations. I should note that while we patiently work towards the right deal, we are also adding substantial value to the project for our shareholders.

Clearly the last several years have been challenging to the major mining companies. They have been more focused on selling non-core assets to pay down debt than taking on new big ticket projects.  The recent improvement in metal prices will help. In fact, now for the first time in many years, the major gold companies are talking about the need to find and build new projects to offset their projected production declines over the next 5-7 years. We believe that KSM represents one of the best gold development opportunities in the world today.

What have proved to be B.C.’s major strengths as a mining jurisdiction?  

The B.C. government has invested wisely in the energy and transportation infrastructure our industry needs to proceed with major projects. There are firm guidelines that the proponents, regulators and the First Nations can rely on in the environmental approval process. There are marvelous human resources of technical capacity and skilled labour immediately available. Moreover, B.C. is viewed as one of the safest political environments in the world. As a result, funding is readily available for worthwhile projects.

Can you provide some closing remarks for our international readership?

Seabridge is designed and operated as a vehicle for shareholders to participate in the gold market. If you look at long-term track records of gold companies, the stock values of the major gold companies have actually underperformed the price of gold. But if you look at Seabridge, over the long-term, our share price has actually outperformed the price of gold by more than 500%. If you are looking for leverage to the price of gold, in my opinion, Seabridge is the best gold stock to own. That is why I have over 90% of my net worth tied up in our common shares.