Seabridge Gold's Rudi Fronk on ministry's tunnel delay, and new mineral resource estimate for KSM

[Music] Severage Gold's resource base of gold copper and silver is one of the world's largest in 2024. Severage Gold's KSM project in Northwest BC was granted substantially started designation. The company said it spent $444 million on early site construction activities to lock in permits for the life of the project. Rudy Frank is CEO Rudy. Welcome to Miningstock Daily. Greetings to be with you Michael. Thank you. Now Rudy I need to start with a Friday news from the BC Mines Ministry. You said that the ministry decided to delay permanent amendments for the construction and operation of the Mitchell Treaty tunnels which would be needed to be built to transport ore from the mine to the processing facility. Your neighbor Cuder Gold is concerned about the location of the tunnel. There has been legal proceedings between both companies. Talk about the decision by the ministry and how that impacts the resolution between you and Tudor. Yeah great great question. Obviously that's the topic of the moment right now. You know we have applied for M245 amendments some time ago and moved that along the process. I think what has to be understood here is we already have a number of authorizations for our tunnel. We have a license of occupation that was granted initially in 2014 and then re-granted in 2024 for another 20 years. Tudor is challenging that decision. We also have a mental reserve from the government from the BC Ministry of Mines. Tudor is challenging that decision from the Ministry of Mines and also we have a M245 permit which gives us authorizations to build the tunnel portals. The tunnel in the first hundred meters of tunnel from each of the portals to the first crosscut. What we were looking to get in this amendment was the ability to build the entire construction line and obviously Tudor is against that. Tudor has challenged these authorizations directly to the government for years and have never gotten the resolution they were looking for which was the government saying that they're no longer valid. The government has continued as he come back and told us that our permit and authorizations are valid and good standing. So Tudor took the next step through a legal process. We understand the hesitation by the government wanting to get these these things resolved and so the decision on the M245 amendment is now delayed until we make progress in terms of the the proceedings that are in the court. So then at this point then it is kicked to legal proceedings at this point right now in terms of actually kind of to some type of resolution. Well we've always been open to the idea of trying to find a resolution with Tudor on the tunnel issues. Obviously the issues are theirs. They have found mineralization on their property where tunnels will cut through and we've told Tudor again and again for years if and when you have an approved mine plan that's permitted we can sit down with you and try and find a way to flex a portion of the tunnels to avoid your mine plans. Now understand that they've been working on their project for 10 years they've yet to put forward a mine plan that yet to put forward a PEA and they're asking us to move our tunnels where we'll remove them to until we know our tunnels might impact their mine plan. Again we are more than willing to sit down with them to try and find a resolution for this point in time it makes no sense until they actually show us something where you might have to move the tunnels. You mentioned the decisions that have gone in your favor in the past Rudy and kind of the way to the work that you've done to date. I'm still trying to understand though what this decision actually means right now. Also was it a bit of surprise? You know you do make a reference to a decision maker in the news release. Yeah look we've been working on these the cement been out for a couple of years we have to support the indigenous people for the amendment and we've advanced to down the you know the approval process line. Were we expecting a decision on this? Yes the delay is unfortunate but I understand the delay that the government is asking for and we're going to do our best to get this resolved so we don't so the government can grant us the permits that we requested. You published a new mineral resource estimate last month Rudy you wrote that the mineral resource model has not changed only the assumed metal prices and costs used to constrain the mineral resources and to calculate great cutoff. Why did you publish the MRE? Well number number one we had to catch up with what other tier one companies are doing in terms of their resource disclosure understand that we've been very clear for number of years that we will require a partner to advance this project to a construction and production decision. When you look at our resource estimates that were out there compared to other tier one companies that might be suitable partners are metal prices are way too low relative to what these companies were using. So we're getting more in line in terms of what partner type companies would be using for metal prices. I mean up to this point in time we were using a $1,300 gold price to quantifying mineral resources at KSM and most of the tier one companies now are using $2,000 or higher. So it was time to actually catch up on that. We have not done that for a long long time. I believe it was 10 years and now we've caught up which obviously at a higher gold price more material becomes economic that was excluded from resource definitions and previous calculations. What is next in terms of the studies that are going to be needed for advancing you know as a feasibility study final investment decision? Yeah so that's the big push now we are getting ready to kickstart our bankable feasibility study. As we've mentioned we've now moved our partnership discussions down to one single company we're calling our preferred company. We are working with them to make sure that when we press the button for the bankable feasibility study that were aligned in terms of what goes into the study what comes out on the back end. So that's the next logical step for the project. In the meantime we continue to advance the project through early site construction activities. This year our plan is to continue road construction from highway 37 along the Treaty Creek Access Road up to where the tunnel portals are we located and also where the mill site relocated. So we have a big program plan this year above and beyond the feasibility regarding narrowing in on that one party. What is what are your top de-risking priorities Rudy? Well we're looking for a partner that number one has the technical capabilities to build a line the scale of KSM and let's face it a project that's going to have the size that we have we need one of the big world class mining companies. We also need a company that has the financial flexibility to this. This is a project a print capital is large. The estimate we did in 2022 pre-fee's ability study was US $6.4 billion. It's likely that the capital costs has gone up since that time. Fortunately metal prices have gone up even more than perhaps what capital might be and then we're also looking for a partner that checks the boxes in terms of the social aspects of the project. We've made tremendous associations and partnerships with the TELTA Nation, the NISC Nation and the GITSAN Nation. We want to make sure that our partner steps in and fulfills the obligations that we have with our first nation partners. And then last but not least we're looking for a partner that's going to move this project forward in a meaningful timeline to get to a production decision as quick as possible. We're also looking for a partner that will fund disproportionate amount of the financing. Our goal is to keep a meaningful interest in the project while minimizing our capital exposure for the project. Metal prices have moved, gold has moved, also copper has moved significantly as well. Is this more of interest in terms of copper or is it more interest in terms of gold than also does that kind of change the people that might be looking at it? Well we have five deposits there. Three of the deposits from our goal focus to the deposits more copper focused. This project has tremendous optionality in how you may choose to develop this whether you go after the copper dominated deposits first or the gold to the nominated deposits. We're fortunate that when you look at the aggregate of mineral resources at KSM, if you just look at our gold, it's the largest undeveloped gold project in the world by far. If you ignore our gold and look at our copper, it's the second largest undeveloped copper project in the world. So this project actually speaks to both gold companies and copper companies and obviously you would expect our dialogue in the joint venture process has been with both gold focus companies and copper based companies. How is your cash position Rudy? You know, you are doing the work in terms of substantially started and all of that and then you're still marching towards it. JV, are you going to be able to get there without a capital raise? Yeah, we are. We you know, we ended the year with about $125 million in our treasury and Q1 has recently announced in our year on financial statements. We raised another batch of cash from our ETM, financing structure in place. I think as of today is the end of March, we still have $125 million cash in the treasury. So we're in a real strong cash position here. We've always been able to fund ourselves the support of our merger shareholders year in and year out and at the same time keeping our share count low. You know, one of our guiding principles from day one is to try and grow ounces in the ground faster than shares of standing. When I look at the industry, one of my big concerns as an investor is the risk of equity delusion. and boydo companies increased their share count very quickly without offsetting that dilution of value. We focus on ounces per share. We will raise money if we have a good use of proceeds that can grow ounces per share. And for 25 plus years now we've been able to do that. - I noticed a thing that you put on social that it's pretty good to be a electrified mind these days. - Yeah, I mean obviously green energy is critical. KSM has been deemed a critical metals project by both Canada and British Columbia and the best interest of Canadians and residents of British Columbia and being able to furnish the power for KSM from hydro sources is a big plus. In fact, now we've invested over $160 million Canadian with BC Hydro and they are now completing the switching station that will allow us to take Hydro power off the Northwest transmission line right to the front door of KSM. - Also with the spike in diesel prices as well too might be looking at changing the economics of what's actually happening with the miners. Now I just bits and pieces Rudy, the courageous like spin out that's still planned for June. - Yeah, we will be having our shareholders meeting for seabridge on May 22nd to get approval from our shareholders for that spin out. And then sometime in June you would expect to be able to deliver the shares of valor gold directly into the hands of our seabridge shareholders. - British Columbia right now is navigating an obligation under the declaration of rights and indigenous peoples act. There has been, how would you say this been a little bit of tumult regarding that as the profits is navigates that. Is any of that trickling down to impact upon your operations or the re-verse sector? - No it hasn't. We've been very uptrend with our indigenous partners at KSM. We're dealing with five of them, the Talitan, the Niska and the Gitsan, all three at which support the project. In fact, we have impact benefit agreements in place with the Talitan, the Niska nation already. And there's two others, the Sawa Tskikamaha and the Gitenyao. The Tsao Tskikamaha did come in and challenge or substantially started designation with a judicial review. We had that court case last fall and expect to have the decision year shortly on that. And the Gitenyao are, they're more of a downstream type thing. We deal with them in terms of environmental studies that we jointly fund year in and year out. So I think we've done a good job in terms of making sure that our indigenous partners that are impacted by the project have a say and a seat of the table during consultation and looking at the project. - Lacy Rudy milestones over the next 12 months. - We have a partnership agreement. I mean, no question about that. Getting a partner named with the terms that we expect to be able to deliver. I think will be a major re-rating of our company in terms of the marketplace. We announced last year that we had success at our Iskid property drilling in New Zone called SNIPNORTH. We will shortly be announcing the Maiden Resource Estimate for SNIPNORTH. And then of course, the spin out of courageous leg is something that I think will be well received by our shareholders in terms of a project that right now that is likely not generating any value in the Seabird share price, but in a separate company on its own with its own management team placed. We'll finally get out of the shadow of KSM and hopefully deliver real value to our Seabird shareholders in terms of that spin out. - Pretty strong. I'd like to speak with Mining Stock Daily. - My pleasure, Michael. Thank you. - The information presented should not be considered investment advice. Mining Stock daily and affiliates are not responsible for any loss arising from any investment decision and connection with the material presented herein. Please do your own research or speak with a license of financial representative before making any investment decisions.