Seabridge Gold

KSM (Kerr-Sulphurets-Mitchell): ENGINEERING STUDIES

2012 Updated Preliminary Feasibility Study

2011 Updated Preliminary Feasibility Study

2010 Preliminary Feasibility Study

2009 Preliminary Assessment

2008 Preliminary Assessment

2012 UPDATED PRELIMINARY FEASIBILITY STUDY

An updated PFS was prepared by Tetra Tech Wardrop ("Tetra Tech") and released on May 14, 2012. The PFS Executive Summary can be found at here.

Since completion of the 2011 PFS, Seabridge had hosted frequent working group sessions with federal and provincial regulators, aboriginal groups and their technical consultants to review the project in detail. In general, public feedback on the project was positive and feedback from this engagement process was used to make the following design changes which were incorporated in the new PFS:

  • A combined open pit and underground block cave mining scenario for the Mitchell deposit and underground panel caving for the Iron Cap deposit. These changes substantially reduce the project's strip ratio from 2.7 to 1.5, eliminating approximately 2.3 billion tonnes of waste rock stripping and storage and significantly reducing environmental impact.
  • Revised project access routes from Highway 37 to reflect feedback from the Nisga'a Nation and First Nations.
  • Relocation of the fine crushing and grinding facilities from the Mitchell plant site to the Teigen site and, therefore, conveying ore through the Mitchell Teigen tunnel instead of via a slurry transport system.
  • Lining a portion of the tailings management facility for carbon-in-leach sulphide tailings which have been processed with cyanide. Although such a lining is not required under existing regulations, Seabridge has chosen to design its tailings management facility to the standards of the International Cyanide Management Code to accommodate feedback from Treaty and First Nations, regulators and stakeholders addressing potential environmental impacts. Most major international gold mining companies voluntarily adhere to this Code.
  • Engineering for the tailings management facility and project water management to a Feasibility level as required by regulators for the Environmental Assessment.

Seabridge's aim from the beginning was to put forward an Environmental Impact Statement that reflects extensive input from aboriginal communities, the public and the coordinated prior involvement of both provincial and federal regulators. This process anticipated and addressed many of the possible concerns about KSM before applying for permits. Analysis of development alternatives is a key component of the Canadian environmental assessment process. Accordingly, based on feedback and dialogue with the regulators, Treaty and First Nations and potential joint venture partners, this updated PFS provides the basis of formal applications for permits which are to be filed in the 4th quarter of 2012.

In addition to the above noted design changes, the 2012 PFS also incorporated updated capital and operating cost estimates and metal price assumptions within the context of the current environment. Although initial capital costs and unit operating costs have increased over the 2011 study (13% and 3% respectively), base case economic projections from this year's PFS are superior to the 2011 study due to increasing throughput by 10,000 tonnes per day to 130,000 and higher three-year average metal prices. Some comparisons are as follows:

  • Net project cash flow (pre-tax) has increased by 25% to $20.3 billion.
  • Net present value at a 5% discount rate (pre-tax) has increased by 74% to $4.5 billion
  • Internal rate of return (pre-tax) has increased by 25% to 11.5%.
  • Payback has been reduced by six months to 6.2 years or 11% of the project's 55 year mine life.
  • Life of mine average cash costs per ounce of gold produced (after by-product credits) are now estimated at US$141, down significantly from last year's estimate of $231 per ounce.

The updated PFS envisages a combined open-pit/underground block caving mining operation that is scheduled to operate for 55 years. During the initial 25 years of mine life, all ore will be mined by open pit methods with the mill scheduled to operate at an average of 130,000 metric tonnes per day (tpd). As mining at the Mitchell deposit switches to block caving in year 26, daily production will decline to an average of approximately 90,000 tpd over the remaining 30 years of mine life. Over the entire 55 year mine life, ore will be fed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck to the nearby deep-water sea port at Stewart, B.C. for shipment to a Pacific Rim smelter. Extensive metallurgical testing confirms that KSM can produce a clean concentrate with an average copper grade of 25%, making it readily saleable. A separate molybdenum concentrate and gold-silver dore would be produced at the KSM processing facility.

Reserves

Updated reserves for the project are based on open pit mining and underground block caving for the Mitchell deposit, open pit mining for the Sulphurets and Kerr deposits and underground block caving for the Iron Cap deposit. Approximately 70% of the stated proven and probable reserves will come from open pit operations and 30% from underground block caving.

Lerchs-Grossman ("LG") pit shell optimizations were used to define open pit mine plans in the updated PFS. Because of the difficulty in predicting relevant metal prices over such a long project life, the ultimate LG pit limits were set at the point where an incremental increase in pit size did not significantly increase the pit resource (an incremental increase in the pit resource results in only marginal economic return). Waste to ore cut-offs were determined using metal prices of US$1,244 per ounce gold, US$3.21 per pound copper, US$22.98 per ounce silver and US$14.14 per pound molybdenum for net smelter return calculations. Net smelter return cut-offs for each pit are Cdn$9.57 per tonne of ore for Mitchell, Cdn$10.17 for Sulphurets and Cdn$9.61 for Kerr. Mineral Reserves for the KSM project are stated as follows:

The underground block caving mine designs for both Mitchell and Iron Cap are based on modeling using Gemcom's Footprint Finder ("FF") and PCBC software. The ramp-up and maximum yearly mine production rates were established based on the rate at which the drawpoints are constructed, and the initial and maximum production rates at which individual drawpoints can be mucked. The values chosen for these inputs were based on industry averages adjusted to suit the anticipated conditions. Mitchell is estimated to have a production ramp-up period of 6 years, steady state production at 20 million tonnes per year for 14 years, and then ramp-down production for another 7 years. Iron Cap is estimated to have a production ramp-up period of 4 years, steady state production at 15 million tonnes for 8 years, and then ramp-down production for another 8 years. The pre-production periods are 7 years at Mitchell and 6 years at Iron Cap with first underground ore production from Mitchell in year 26 and from Iron Cap in year 32. The underground mining NSR cut-offs are Cdn$15.41 per tonne at Mitchell and Cdn$15.57 per tonne at Iron Cap. Mining dilution has been estimated at 9% for Mitchell and 5% at Iron Cap, all at zero grade.

Estimated proven and probable reserves of 38.2 million ounces of gold (2.164 billion tonnes at an average grade of 0.55 grams of gold per tonne) are essentially identical to last year's estimates. Proven and probable reserves are derived from estimated total measured and indicated resources of 49.0 million ounces of gold (2.780 billion tonnes at an average grade of 0.55 grams of gold per tonne) including allowances for mining losses and dilution.

Production

At 130,000 tonnes per day, annual throughput for the mill during the initial 25 years of mine life is estimated at 47.5 million tonnes. KSM's mine life is estimated at approximately 55 years. At Mitchell, open pit production is scheduled from inception through year 23, to be followed by underground block caving operations from years 26 through 55. Open pit production from Sulphurets will augment Mitchell open pit production from start-up through year 6, and then from years 23 through 27. Open pit production from Kerr is scheduled from years 27 through 50. Finally, underground block caving production will come from Iron Cap during years 32 through year 51.

At Mitchell, there is a near-surface higher grade gold zone that would allow for gold production in the first seven years substantially above the mine life average. This higher grade gold zone significantly reduces the project's payback period to approximately 6.2 years for the Base Case or less than 11% of mine life. A payback period representing less than 20% of mine life is considered highly favorable. Metal production for the first seven years compared to life of mine average production is estimated as follows:

Capital Costs

Start-up capital costs (including contingencies of US$666 million) are estimated at US$5.31 billion, approximately 13% (US$0.6 billion) above the start-up capital cost estimate from the 2011 PFS. Approximately half of the increase in start-up capital costs is due to the design changes including: (i) lining a portion of the tailings management facility and additional dam structure; (ii) changing road and power line access from Teigen Creek to Treaty Creek; (iii) additional water management and water treatment facilities; and (iv) additional costs for tunnel conveying and ore stockpiling. The balance of the capital cost increase is due to: (i) a more conservative estimated productivity rate during construction; (ii) higher labor rates compared to last year; and (iii) equipment cost inflation.

Operating Costs

Average mine, process and G&A operating costs over the project's life (including waste mining and on-site power credits) are estimated at US$13.64 per tonne milled (before base metal credits). Estimated unit operating costs are up approximately 3% from the 2011 PFS due primarily to increased labor, consumables and diesel costs. A breakdown of estimated unit operating costs is as follows:

Economic Analysis

A Base Case economic evaluation was undertaken incorporating historical three-year trailing averages for metal prices as of April 15, 2012. This approach is consistent with the guidance of the United States Securities and Exchange Commission, adheres to National Instrument 43-101 and is consistent with industry practice. An Alternate Case was also constructed using more conservative prices for gold, copper and silver at 20% below current levels. Finally, a Spot Price Case was prepared using April 15, 2012 spot metal prices and currency exchange rates. The pre-tax economic results in U.S. dollars for all three cases are as follows:

Note: Operating and total costs per ounce of gold are after copper, silver and molybdenum credits. Total costs per ounce include all start-up capital, sustaining capital and reclamation/closure costs.

It is important to note that even with the increased capital and operating costs, the base case net cash flow, net present value, internal rate of return and payback periods have improved significantly when compared to the 2011 PFS.

National Instrument 43-101 Disclosure

The updated KSM PFS was prepared by Tetra Tech Wardrop, and incorporates the work of a number of industry-leading consulting firms. These firms and their Qualified Persons (as defined under National Instrument 43-101) are independent of Seabridge and have reviewed and approved this disclosure. The consultants and their QPs are listed below with their responsibilities:

  • Tetra Tech, under the direction of John Huang (metallurgical testing review, mineral processing and process operating cost and overall report preparation) and Sabry Abdel Hafez (financial analysis)
  • Moose Mountain Technical Services under the direction of Jim Gray (open pit mining operations, mine capital and mine operating costs)
  • W.N. Brazier Associates Inc. under the direction of W.N. Brazier (power supply, energy recovery plants and associated costs)
  • Rescan Environmental Services Ltd. under the direction of Pierre Pelletier (environment and permitting)
  • Bosche Ventures Ltd. under the direction of Harold Bosche (site infrastructure layouts, tunnel conveyor, rope conveyor, tailing delivery, reclaim pumping and piping systems, and associated capital costs)
  • Klohn Crippen Berger Ltd. under the direction of Graham Parkinson (tunnel geotechnical, water diversion and seepage collection ponds, tailings dams, water storage dam, water treatment and related operating and closure costs)
  • Allnorth Consultants Ltd. under the direction of Mr. Darby Kreitz (capital cost estimates for water storage dam, diversion earthworks and tailings starter dams)
  • Resource Modeling Inc. under the direction of Michael Lechner (mineral resources)
  • McElhanney Consulting Services Ltd. under the direction of Robert Parolin (main and temporary access roads and associated costs)
  • BGC Engineering Inc. under the direction of Warren Newcomen (rock mechanics and mining pit slopes)
  • EBA Engineering Consultants Ltd. (EBA) under the direction of Kevin Jones (winter access roads and associated costs)
  • Golder Associates Inc. under the direction of Ross Hammett (block caving assessments and associated costs)
  • Stantec Consulting Ltd. under the direction of Tony Wachmann (tunnel design, construction procedures and costs)

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2011 UPDATED PRELIMINARY FEASIBILITY STUDY

Results of an updated National Instrument 43-101 compliant Preliminary Feasibility Study ("PFS") for the KSM project were released on May 2, 2011. The updated PFS was prepared by Wardrop, A Tetra Tech Company and one of the world's most respected mining engineering consultants.

The new PFS includes 2010 drilling results and enhanced engineering work to:

  • Increase estimated mineral reserves by 27% for gold, 42% for copper, 61% for silver and 22% for molybdenum.
  • Extend mine life to 52 years from 37 (2.2 billion tonnes of reserves at a throughput of 120,000 tonnes per day).
  • Put in place the potential to expand throughput by 50% in the early years after start-up.
  • Produce gold at an estimated base case cash operating cost of US$105 per ounce during first 7 years of mine life.
  • Reduce base case capital payback to 6.6 years or 13% of mine life.
  • Improve base case total net cash flow by US$4.5 billion.

The comparisons noted above are against the KSM March 31, 2010 PFS also prepared by Wardrop.

Estimated operating costs and total costs per ounce of gold produced are well below the current average of the major gold producers. At current metal prices and currency exchange rates, estimated life of mine cash operating costs are minus US$79 per ounce while total costs including all capital and closure costs are just US$220 per ounce. Projected capital costs are in line with those of comparable, large-scale undeveloped gold-copper projects and at current metal prices and currency exchange rates, capital payback takes only to 4.8 years or 9% of mine life. Furthermore, KSM has the advantage of being located in a low-risk jurisdiction.

The PFS envisages an open-pit mining operation at 120,000 metric tonnes per day (tpd) of ore fed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck to the nearby deep-water sea port at Stewart, B.C. and shipment to a Pacific Rim smelter. Extensive metallurgical testing confirms that KSM can produce a clean concentrate with an average copper grade of 25%, making it readily saleable. A separate molybdenum concentrate and gold-silver dore would be produced at the KSM processing facility.

The designed throughput of 120,000 tpd is the industry standard start-up capacity for large tonnage copper and copper-gold projects (even when reserves are large enough to justify greater rates of production) because it is the practical limit for developing the necessary working space for sufficient ore production to feed the plant in the early years of an open pit mine. Examples include Cerro Verde, Batu Hijau, Boddington, Quebrada Blanca, Las Bambas and Conga, with start-up throughput varying between 100,000 and 140,000 tpd depending on ore hardness. Planned expansion comes later as mining capacity increases, allowing the project economics to be improved with a higher throughput. Examples of projects that were originally built at 100,000 to 140,000 tpd throughput and have gone through or have planned expansions include Escondida, Cerro Verde and Batu Hijau. In the new KSM PFS, the project has been designed to accommodate a 50% expansion in the early years of operation, essentially removing anticipated bottle-necks in advance. Start-up capital costs have been increased accordingly.

Reserves

Lerchs-Grossman ("LG") pit shell optimizations were used to define the mine plans in the updated PFS. Because of the difficulty in predicting relevant metal prices over such a long project life, the ultimate LG pit limits were set at the point where an incremental increase in pit size did not significantly increase the pit resource (an incremental increase in the pit resource results in only marginal economic return). Waste to ore cut-offs were determined using metal prices of US$990 per ounce gold, US$2.91 per pound copper, US$15.40 per ounce silver and US$15.00 per pound molybdenum for net smelter return calculations. Net smelter return cut-offs for each pit are US$7.48 per tonne of ore for Mitchell and Iron Cap, US$7.82 for Sulphurets and US$7.56 for Kerr. Mineral Reserves for the KSM project are stated as follows:

KSM Proven and Probable Reserves

Estimated proven and probable reserves of 38.5 million ounces of gold (2.192 billion tonnes at an average grade of 0.55 grams of gold per tonne) are derived from estimated total measured and indicated resources of 45.3 million ounces of gold (2.549 billion tonnes at an average grade of 0.55 grams of gold per tonne) including allowances for mining losses and dilution.

Production

At 120,000 tonnes per day, annual throughput for the mill is estimated at 43.8 million tonnes. With 2.19 billion tonnes of proven and probable reserves, KSM's mine life is estimated at approximately 52 years. Production is scheduled to commence at the Mitchell deposit (years 1 to 40), to be augmented by Sulphurets (years 6 to 13), Kerr (years 14 to 36) and finally Iron Cap (years 38 to 52). Based on pit availability of ore and operating space, a potentially highly accretive ramp-up in production to 180,000 tonnes per day could be achieved prior to year 10 but this anticipated expansion is not included in cash flows. The economic impact of this expansion will be estimated in the PFS Final Report.

At Mitchell, there is a near-surface higher grade gold zone that would allow for gold production in the first seven years substantially above the mine life average. This higher grade gold zone significantly reduces the project's payback period to approximately 6.6 years for the Base Case or within 13% of mine life. A payback period representing less than 20% of mine life is considered highly favorable. Metal production for the first seven years compared to life of mine average production is estimated as follows:

Average Annual Metal Production

Capital Costs

Start-up capital costs (including contingencies of US$576 million) are estimated at US$4.68 billion, approximately US$1.3 billion above the start-up capital cost estimate from the 2010 PFS. Start-up capital costs are higher due to: (i) the increase in reserves which requires additional mine waste rock placement and storage as well as associated water diversions, storage dams and water treatment facilities; (ii) building into the design the flexibility to be able to increase production by 50% early in the project's life (essentially removing anticipated bottle-necks in advance); (iii) a more conservative estimated productivity rate during construction; (iv) higher labor rates compared to last year; and (v) equipment cost inflation. The design also includes five on-site small energy recovery plants which would provide green power to the site and to the B.C. power grid.

Start-up Capital Costs

Operating Costs

Average mine, process and G&A operating costs over the project's life (including waste mining and on-site power credits) are estimated at US$13.29 per tonne milled (before base metal credits). Estimated unit operating costs are up approximately 14% from the 2010 PFS due primarily to increased labor, consumables and diesel costs. A breakdown of estimated unit operating costs is as follows:

Unit Operating Costs

Economic Analysis

A Base Case economic evaluation was undertaken incorporating historical three-year trailing averages for metal prices as of April 15, 2011. This approach is consistent with the guidance of the United States Securities and Exchange Commission, is accepted by the Ontario Securities Commission and is industry standard. An Alternate Case was also constructed using a more conservative copper price approximately 40% below current market (assumes a significant worldwide recession) and gold and silver prices about 20% below current levels. Finally, a Spot Price Case was prepared using April 15, 2011 spot metal prices and currency exchange rates. The pre-tax economic results in U.S. dollars for all three cases are as follows:

Projected Economic Results

Note: Operating and total costs per ounce of gold are after base metal credits. Total costs per ounce include all start-up capital, sustaining capital and reclamation/closure costs.

It is important to note that even with the increased capital and operating costs, the base case net cash flow and payback periods have improved when compared to the 2010 PFS.

National Instrument 43-101 Disclosure

The updated KSM PFS was prepared by Wardrop, and incorporates the work of a number of industry-leading consulting firms. These firms and their Qualified Persons (as defined under National Instrument 43-101) are independent of Seabridge and have reviewed and approved this disclosure. The consultants and their QPs are listed below with their responsibilities:

  • Wardrop, under the direction of John Huang (overall report preparation, metallurgical testing review, mineral processing and process operating cost) and Hassan Ghaffari (infrastructure capital cost estimate, financial analysis and process related infrastructure)
  • Moose Mountain Technical Services under the direction of Jim Gray (mining, mine capital and mine operating costs)
  • W.N. Brazier Associates Inc. under the direction of W.N. Brazier (power supply, energy recovery plants and associated costs)
  • Rescan Environmental Services Ltd. under the direction of Greg McKillop (environment and permitting)
  • Bosche Ventures Ltd. under the direction of Harold Bosche (rope conveying, slurry pipeline system, tailings delivery, reclaim pumping and piping systems and associated capital costs)
  • Klohn Crippen Berger Ltd. under the direction of Graham Parkinson (water diversion and seepage collection ponds, tailings dam, water treatment dam and related capital, operating and closure costs)
  • Allnorth Consultants Ltd. Under the direction of Mr. Darby Kreitz (storage dam and tailings starter dam construction cost estimates)
  • Resource Modeling Inc. under the direction of Michael Lechner (mineral resources)
  • McElhanney Consulting Services Ltd. under the direction of Robert Parolin (main and temporary access roads and associated costs)
  • BGC Engineering Inc. under the direction of Warren Newcomen (rock mechanics and mining pit slopes)
  • EBA Engineering Consultants Ltd. (EBA) under the direction of Kevin Jones (winter access roads and associated costs)
  • Thyssen Mining Construction of Canada Ltd. under the direction of Adrian Bodolan (tunnel design and costs).

For a more detailed review of the PFS, see the Executive Summary.

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2010 PRELIMINARY FEASIBILITY STUDY

Results of a Preliminary Feasibility Study (PFS) on KSM were released on March 31, 2010. The PFS was prepared by Wardrop Engineering Inc., a Tetra Teck Company and one of the world's most respected mining engineering consultants. The PFS confirms that the KSM project now hosts the largest gold reserve in Canada and one of the largest in the world. KSM is projected to provide an extraordinary mine life of more than 35 years with estimated cash operating costs well below the current average of the major gold producers. Estimated capital costs are in line with those of comparable, large-scale, undeveloped gold-copper projects and KSM has the advantage of being located in a low-risk jurisdiction.

The PFS envisages a large tonnage open-pit mining operation at 120,000 metric tonnes per day of ore fed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck to the nearby deep-water sea port at Stewart, B.C. A separate molybdenum concentrate and gold-silver dore would be produced at the processing facility.

Reserves
Lerchs-Grossman pit shell optimizations were used to define the mine plans in the PFS which were designed to maximize net present value using a 5% discount rate which is the current industry standard. Mineral Reserves for the KSM project were estimated using a gold price of US$850 per ounce, a copper price of US$2.25 per pound and are stated as follows:

Estimated proven and probable reserves of 30.2 million ounces of gold (1.60 billion tonnes at 0.59 grams of gold per tonne) are derived from estimated total measured and indicated resources of 38.9 million ounces of gold (2.1 billion tonnes at 0.57 grams of gold per tonne) including allowances for mining losses and dilution (see Executive Summary for details).

Production
At 120,000 tonnes per day, annual throughput for the mill is estimated at 43.8 million tonnes. With 1.60 billion tonnes of proven and probable reserves, KSM's mine life is estimated at approximately 37 years. Production is scheduled to commence at the Mitchell deposit, to be augmented by Kerr and then Sulphurets. The PFS mining plan is significantly improved over the 2009 KSM Preliminary Assessment; the mill feed is increased by approximately 25% and US$160 million in pre-production stripping expenses have been eliminated.

At Mitchell, there is a near-surface higher grade gold zone that would allow for gold production in the first five years substantially above the mine life average. This higher grade gold zone would significantly reduce the project's payback period to approximately 6.9 years for the Base Case. A payback period representing less than 20% of mine life is considered highly favorable. Metal production for the first five years compared to life of mine average production is estimated as follows:

Capital Costs
Start-up capital costs (including contingencies of US$394 million) are estimated at US$3.37 billion, approximately 9% above the start-up capital cost estimate from the July 2009 KSM Preliminary Assessment. Start-up capital costs are higher due to the increase in mine size which requires additional mine waste rock placement and storage as well as associated water diversions, storage dams and water treatment facilities. Additional capital has also been allocated for on-site energy recovery plants to generate power from planned water diversions, process solutions and slurries. A total of five on-site small energy recovery plants would provide green power to the site and the B.C. Hydro grid. Increased capital has also been allocated for offsite concentrate storage and handling facilities. A breakdown of estimated start-up capital costs is as follows:

Operating Costs
Average mine, process and G&A operating costs over the project's life (including waste mining and on-site power credits) are estimated at US$11.66 per tonne milled (before base metal credits). Estimated unit operating costs are up approximately 10% from the 2009 Preliminary Assessment due primarily to the higher strip ratio required to accommodate the 25% increase in tonnes of ore mined over the project life. A breakdown of estimated unit operating costs is as follows:

Economic Analysis
A Base Case economic evaluation was undertaken incorporating historical three-year trailing averages for metal prices as of March 15, 2010. This approach is consistent with the guidance of the United States Securities and Exchange Commission, is accepted by the Ontario Securities Commission and is industry standard. An Alternate Case was also constructed using more conservative copper and silver metal prices and a slightly higher gold price. Finally, a Spot Price Case was prepared using recent spot metal prices. The pre-tax economic results in U.S. dollars for all three cases are as follows:


Note: Operating and total costs per ounce of gold are after base metal credits. Total costs per ounce include all start-up capital, sustaining capital and reclamation/closure costs.

National Instrument 43-101 Disclosure
The KSM PFS was prepared by Wardrop, and incorporates the work of a number of industry-leading consulting firms. These firms and their Qualified Persons (as defined under National Instrument 43-101) are independent of Seabridge and have reviewed and approved this disclosure. The consultants and their QPs are listed below with their responsibilities:

  • Wardrop, under the direction of Frank Grills (overall report preparation, process and infrastructure capital costs, infrastructure, and financial analysis) and John Huang (metallurgical testing review, mineral processing and process operating costs)
  • Moose Mountain Technical Services under the direction of Jim Gray (mine planning, rock storage facilities, mine capital and mine operating costs)
  • W.N. Brazier Associates Inc. under the direction of W.N. Brazier (power supply, energy recovery plants and associated costs)
  • Rescan Environmental Services Ltd. under the direction of Greg McKillop (environment and permitting)
  • Bosche Ventures Ltd. under the direction of Harold Bosche (rope conveying, slurry, tailings delivery and return water pumping and piping and associated capital costs)
  • Klohn Crippen Berger Ltd. under the direction of Graham Parkinson (diversion and seepage collection ponds, tailings dam, water treatment dam, water treatment plant, water diversions and capital, operating and closure costs)
  • Allnorth Consultants Ltd. Under the direction of Mr. Darby Kreitz (storage dam and tailings starter dam construction cost estimates)
  • Resource Modeling Inc. under the direction of Michael Lechner (mineral resources)
  • McElhanney Consulting Services Ltd. under the direction of Robert Parolin (main and temporary access roads and associated capital costs)
  • BGC Engineering Inc. under the direction of Warren Newcomen (rock mechanics and mining pit slopes)
  • EBA Engineering Consultants Ltd. (EBA) under the direction of Kevin Jones (winter access roads and associated capital costs)
  • Thyssen Mining Construction of Canada Ltd. under the direction of Adrian Bodolan (tunnel design and capital costs).

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2009 PRELIMINARY ASSESSMENT

In July, 2009 Seabridge announced an updated National Instrument 43-101 Preliminary Assessment (PA) for its KSM project. The Executive Summary can be found at here.

The updated PA improved the economics of the project. Changes in design and a reduction in the strip ratio materially reduced capital and operating costs compared to the 2008 study. The updated PA confirms that KSM can be a significant gold producer at a total cost per ounce well below the gold industry average with the added benefits of a very long mine life within a stable political environment.

Similar to the 2008 study, the updated PA envisages a large tonnage open-pit mining operation at 120,000 metric tonnes per day of mill feed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck or pipeline to the nearby deep-sea port at Stewart, B.C. A separate molybdenum concentrate and gold-silver dore will also be produced at the processing facility.

Two mine plans are considered in the updated PA: (i) a 30 year mine life designed to maximize a 5% net present value discounted mining schedule; and (ii) an extended 45+ year mine life based on larger pits designed to maximize total undiscounted net cash flow for the project. Both the 30 Year and the extended mine life scenarios would follow a similar development path and capital payback would occur in the same time frame for both scenarios. Although the extended mine life scenario provides useful information, the updated PA concentrated on the 30 Year scenario which will be used in the preparation of a Preliminary Feasibility Study and in Seabridge's ongoing permitting program. Production highlights for the updated 30 year mine life are as follows (note the higher gold production in the earlier years):

Initial capital costs for KSM are now estimated at US$3.08 billion, compared to US$3.43 billion in the 2008 study, a reduction of approximately US$350 million, or about 10%. Reduced mine equipment requirements and several project design changes contributed to the reduced capital costs. A revised mining schedule optimized the mining operation by reducing waste-to-ore stripping ratio. The primary grinding plant is now located at the Mitchell mine site allowing ore to be transported by slurry pipelines and pumping stations (rather than conveyors) through a tunnel to a further processing site near the tailings management area with access to Highway 37. A high pressure grinding roll (HPGR) circuit now replaces the SAG mill circuit used in the 2008 study. The HPGR circuit will be refined subject to future test work. Rather than using a single large tunnel for ore transport and delivery of supplies to Mitchell, two smaller tunnels have been shown to be more cost effective, facilitating construction, ventilation and operational efficiencies. One of the tunnels will be used to transport ore slurry from Mitchell while returning water, diesel fuel and electrical power to the KSM mine site. The other tunnel will be used for transport of personnel and supplies to the Mitchell mine site from the plant location near Highway 37. After delivery of the slurry to the process plant, further primary grinding prior to flotation will be accomplished with efficient tower mills rather than ball mills.

Average mine, process and G&A operating costs over the project's life (including pre-stripping and waste handling) are now estimated at US$10.57 per tonne milled (before base metal credits) compared to US$11.89 per tonne milled in the 2008 study, a reduction of about 11%. Operating costs have been improved from the 2008 study by a new mine schedule which reduced waste-to-ore strip ratios, resulting in lower equipment and manpower requirements. Additionally, the use of the HPGR grinding and further regrinding with tower mills reduced operating costs for grinding media and electrical power.

A base case economic evaluation was undertaken incorporating historical three-year trailing averages for metal prices as of June 30, 2009. This approach is consistent with the guidance of the United States Securities and Exchange Commission, is accepted by the Ontario Securities Commission and is industry standard. An alternate case was also constructed using more conservative metal prices. Finally, a case was prepared using recent spot metal prices. The pre-tax economic results in U.S. dollars for all three cases are as follows:

Note: Operating and total costs per ounce of gold are after base metal credits. In the Base Case, using 3 year average base metal price assumptions results in a negative estimated cash operating cost for gold.

Seabridge notes that the updated PA incorporates inferred mineral resources which are considered too geologically speculative to be categorized as mineral reserves. Therefore, Seabridge advises that there can be no certainty that the estimates contained in the updated PA will be realized. To address this issue, drilling is now underway designed to upgrade the 277 million tonnes of inferred resource contained in the 30 year mine plan to the measured and indicated categories.

The updated KSM PA was prepared by leading industry consultants, all of whom are independent of Seabridge and are Qualified Persons under National Instrument 43-101. The QPs have reviewed and approved this disclosure. The consultants (QPs) with their responsibilities are as follows:

  • Wardrop, A Tetra Tech Company, under the direction of Frank Grills and John Huang (overall report preparation, metallurgical testing, mineral processing, process operating, ore slurry tunnel and capital costs, and infrastructure)
  • Moose Mountain Technical Services under the direction of Jim Gray (mine planning, mine capital and mine operating costs)
  • W.N. Brazier Associates Inc. under the direction of W.N. Brazier (power supply and related costs)
  • Rescan Environmental Services Ltd. under the direction of Greg McKillop (environment and permitting)
  • Bosche Ventures Ltd. under the direction of Harold Bosche (conveyors, pipeline, pumping, infrastructure, tailings delivery and reclaim)
  • Klohn Crippen Berger Ltd. under the direction of Graham Parkinson (diversion and seepage collection ponds, tailings dam, tailings access roads, pipeline, haulage and diversion tunnels, hydro plant and dumps)
  • Resource Modeling Inc. under the direction of Michael Lechner (mineral resources)
  • McElhanney Consulting Services Ltd. under the direction of Robert Parolin (main and temporary access roads)
  • BGC Engineering Inc. under the direction of Warren Newcomen (rock mechanics and mining pit slopes)

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2008 PRELIMINARY ASSESSMENT

In December, 2008, Seabridge announced the results of a National Instrument 43-101 Preliminary Assessment (PA) for its 100% owned KSM project. The base case estimated a 30 year mine life recovering more than 19 million ounces of gold at an average cash operating cos of negative US$11 per ounce and total costs of US$233 per ounce after base metal credits.

The PA clearly demonstrates that KSM has the potential to be a significant gold mine with compelling economics. There are very few undeveloped gold projects in the world today with the attributes of KSM ­ long mine life, significant annual production, cash operating costs per ounce well below the gold industry average and substantial exploration upside all within a stable political environment. The PA is a benchmark to build on. The 2008 drilling should improve the size and grade of the Mitchell and Sulphurets zones. The PA identified enhancements which could reduce capital and operating costs, both of which could also benefit from the changing economic environment. The next iteration of the PA is scheduled for Q2 2009 which will include an updated resource, new mine plans and revised cost estimates. Exploration, engineering and environmental initiatives planned for 2009 would culminate in a Preliminary Feasibility Study in early 2010.

The PA envisages a large tonnage open-pit mining operation at 120,000 metric tonnes per day of mill feed to a flotation mill which would produce a combined gold/copper/silver concentrate for transport by truck or pipeline to the nearby deep-sea port at Stewart, B.C. A separate molybdenum concentrate and gold-silver dore will also be produced at the processing facility. A mine plan combining production from the Kerr, Sulphurets and Mitchell zones would sustain a mine life of approximately 30 years with the following production highlights:

Seabridge notes that the PA incorporates inferred mineral resources. They are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Therefore, Seabridge advises that there can be no certainty that the estimates contained in the PA will be realized. To address this issue, Seabridge designed its 2008 KSM drill program with the aim of upgrading inferred resources in the mine plan to the indicated category. The KSM resource model will be updated to include 2008 drill results in the first quarter of 2009.

Initial capital costs, including contingencies, for the proposed operation total US$3.4 billion, or approximately US$180 per ounce of gold produced over the projected life of the mine. Sustaining capital, closure and reclamation costs are estimated at US$943 million, or approximately $50 per ounce of gold produced. Average mine, process and G & A operating costs (including pre-stripping and waste handling) over the project's life are estimated at US$11.89 per tonne before base metal credits. These capital and operating costs use 2008 third quarter input prices which are above current levels.

A base case economic evaluation was undertaken incorporating historical three-year trailing averages for metal prices as of October 31, 2008. This approach is consistent with the guidance of the United States Securities and Exchange Commission, is accepted by the Ontario Securities Commission and is industry standard. Cases were also constructed using historic average metal prices for one and two years. Finally, a case was prepared using recent spot prices. The pre-tax economic results in U.S. dollars for all four cases are as follows:

Note: Operating and total costs per ounce of gold are after base metal credits. High base metal price assumptions can result in a negative estimated cash operating cost for gold.

The KSM PA was prepared by leading industry consultants, all of whom are independent of Seabridge and are Qualified Persons under National Instrument 43-101. The consultants with their responsibilities are as follows:

  • Wardrop Engineering Inc. under the direction of Frank Grills and John Huang (overall report preparation, metallurgical testing, mineral processing, process operating and capital costs and infrastructure)
  • Moose Mountain Technical Services under the direction of Jim Gray (mine planning, mine capital and mine operating costs)
  • W.N. Brazier Associates Inc. under the direction of W.N. Brazier (power supply and related costs)
  • Rescan Environmental Services Ltd. under the direction of Greg McKillop (environment and permitting)
  • Bosche Ventures Ltd. under the direction of Harold Bosche (ore haulage tunnel infrastructure, tailings delivery and reclaim)
  • Klohn Crippen Berger Ltd. under the direction of Graham Parkinson (diversion and seepage collection ponds, tailings dam, tailings access roads, pipeline, haulage and diversion tunnels, hydro plant and dumps)
  • Resource Modeling Inc. under the direction of Michael Lechner (mineral resources)
  • McElhanney Consulting Services Ltd. under the direction of Robert Parolin (main and temporary access roads)
  • BGC Engineering Inc. under the direction of Warren Newcomen (rock mechanics and mining pit slopes)

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