Seabridge Gold and Eskay Mining Corp. have reached a cost sharing agreement for the first nine kilometres of the Coulter Creek Access Road (CCAR), which will provide access to the Kerr-Sulphurets-Mitchell (KSM) advanced mining development project in northwest B.C.
Construction of the road is planned to start in July, at a projected cost of $12 million. Eskay Mining’s share of the costs is to be covered through an agreement in which Seabridge will purchase a $6 million convertible debenture and 1,350,000 warrants from Eskay Mining.
The CCAR is one of two planned access roads for KSM and is designed to connect the project with the Eskay mine road. Just under three kilometres of the CCAR’s first segment is located on mineral tenures held by Eskay Mining.
Rudi Fronk, Seabridge Gold chief executive officer, said that when complete, the road will reduce helicopter costs and provide a lower elevation staging area closer to KSM site.
“We are delighted to be working with Eskay Mining on the first segment of the CCAR,” Fronk said in a media release.
“Constructing this segment now will shorten the time needed to establish early site access to the KSM deposits, enabling more rapid development of the project once we have consummated our anticipated joint venture.”
The road also benefits Eskay Mining, which will have access to the first segment for a minimum of 15 years as it continues exploration at its Consolidated Eskay precious metal-rich volcanogenic massive sulphide project.
The $6 million convertible debenture will be held in a separate account at arms-length to both companies and used to meet cash calls by Eskay Mining payable to contractors and fund Eskay Mining’s share of construction costs.
Within the next year, Eskay Mining has the right to redeem any portion of the convertible debenture or any paid or unpaid interest for cash. After a year has passed, Seabridge can convert any portion of the principal amount into Eskay Mining common shares at a price of $2.81 per share.
On the third anniversary of the deal closing, the convertible debenture will mature and bear interest at 3 per cent each year.
Eskay Mining can force the conversion of the debenture into shares at $2.81 after the first year if the common shares close at a price equal to or greater than $4.22 for 20 consecutive trading days. The warrants are exercisable into Eskay Mining shares for three years at a price per share of $2.82 in the first year, $2.92 in the second year and $3.02 in the third year.
Seabridge Gold calls the KSM deposit one of the largest undeveloped gold projects in the world. The company owns 100 per cent of the project located around 65 kilometres north of Stewart, but is looking to partner with a major mining company due to the project’s large scale.
