Gold-focused royalty and streaming company Franco-Nevada will make a strategic investment in exploration company Skeena Resources, which is focusing on bring the past-producing Eskay Creek mine back into operation.
Franco-Nevada will be the end purchaser of 1 471 739 flow-through common shares that Skeena will issue in a private placement offering at C$21 a share for gross proceeds of C$30.9-million.
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Skeena will also grant to Franco-Nevada a right of first refusal (ROFR) over the sale of a 0.5% net smelter return (NSR) royalty over the Eskay Creek project, matching the portion of the existing Barrick royalty that can be bought back by the company.
Skeena says the ROFR granted to Franco-Nevada will be subject to a competitive auction process, in which Franco-Nevada will participate, prior to October 2, 2023. If Skeena has not sold the royalty to Franco-Nevada or a third party by October 2, 2023, Franco-Nevada will have the right to purchase the royalty for C$22.5-million, for a period of 30 days.
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In addition, upon closing of the offering, Skeena and Franco-Nevada will enter into an amendment to the terms of their existing royalty agreement such that it will cover the same tenures as are covered in the existing Barrick royalty agreement.
Skeena continues to have the right to buy down 0.5% NSR royalty (from a 1.0% NSR royalty) currently held by Barrick, for a payment of C$17.5-million, until October 2, 2022.
Skeena says it to use the net proceeds of the offering to fund exploration activities on Eskay Creek.
The offering will close on or before December 23.
Skeena released a prefeasibility study for Eskay Creek in July, which highlights an openpit average grade of 4.57 g/t gold-equivalent, an after-tax net present value, at a 5% discount, of C$1.4-billion, 56% internal rate of return, and a 1.4-year payback at $1 550/oz gold.
Skeena is currently completing infill and exploration drilling to advance Eskay Creek to full feasibility study in the first quarter of 2022.
