Seabridge Gold

KSM (Kerr-Sulphurets-Mitchell): EXPLORATION

Overview

KSM has taken its place among the world’s largest gold-copper districts, hosting what we now know as the KSM Porphyry Au-Cu Cluster.

Compilation of Proven and Probable Reserves from some of the World’s largest Copper-Gold Deposits

Compiled from S&P Global Market Intelligence to Dec. 31, 2016, except Batu Hijau to Dec. 31, 2015

When Seabridge acquired the project in 2001, it came with two small historical gold and copper deposits. Growth since then has come on the back of hard work and some extraordinary exploration success. Three key features have contributed to this success: continuity of exploration work by the same key personnel over many years; rigorous questioning of assumptions; and one extremely important observation.

Early Exploration History

Exploration in the KSM camp dates to the late 1890s when placer gold was recognized along Sulphurets Creek. In 1935, Bruce and Jack Johnstone began prospecting for lode occurrences, following the spectacular exposures of altered rock in Sulphurets Creek. Intermittent work between 1935 and 1960 yielded small gold and silver discoveries mostly around Brucejack Lake, but no extensive development. By the early 1980s, exploration in the camp began employing modern technologies with extensive surface geochemical sampling and some diamond drilling. Late in the 1980s and into the 1990s, major mining companies entered the district and began the initial phase of resource delineation work.

In 2001, Seabridge completed the purchase of the Kerr-Sulfurets project from Placer Dome. At that time, the project contained non-compliant gold resources of 3.266M ounces and copper resources of 2,717.5M lbs. Two distinct phases of exploration followed. From 2003 to 2005, the property was under option to Xstrata Canada who funded and performed the work. From 2006 to the present, Seabridge has funded its own work following negotiations to terminate Xstrata’s option.

Xstrata (previously Noranda Inc. and Falconbridge Ltd.) undertook a staged exploration program to systematically evaluate the potential for a large Cu dominated porphyry system in the Sulphurets camp based on the geological similarities to other major deposits around the Pacific Rim. The program advanced through compilation of the existing databases to identification of under-explored targets, confirmation and prioritizing of target models and finally drill testing of numerous, widely-separated prospects. Xstrata concluded from this work that the mineral systems in the Sulphurets camp were gold dominant and would not meet their corporate objectives. Xstrata did not undertake an evaluation of potential gold resources.

Seabridge re-acquired 100% ownership of KSM in 2006. From that year onward, Seabridge has conducted a major drill program every year for more than a decade, which has transformed the Sulphurets camp into one of the world’s largest undeveloped Au-Cu districts.

Kerr Deposit (the "K" in KSM)

When Seabridge purchased the project, Kerr had one of the two original defined resources. A pre-NI43-101 resource estimate for Kerr was constructed by Placer Dome Inc. using a 0.4% Cu cut-off grade:

Resource estimates compiled from Ditson, G, Wells, R and Bridge, D; 1995, CIM Special Volume 46. and Ditson, G; 1996 Placer Dome Canada Inc, internal report.

Seabridge thought that the target had been fully explored at that time and therefore did not prioritize work on Kerr.

Over the course of six years working on various targets at KSM, the accumulated knowledge base suggested a new exploration concept: undiscovered primary core zones beneath the upper levels of porphyry Au-Cu deposits in the district. The key observation was related to the Snowfields deposit on neighboring ground held by Pretium. Snowfields appeared to be floored by a thrust fault, while the top of the Mitchell deposit was also defined by a thrust fault. Reconstructing the displacement along this fault suggested that the Snowfields deposit was originally the top of Mitchell, a dislocation of less than one kilometer. That turned out to be a billion-dollar observation that explained the exposed deposits and predicted expansion potential at depth.

Government regional geological surveys had long proposed that displacements along these main faults were in the tens of kilometers and that the metal from the tops of very old porphyry deposits in the area had been moved substantial distances before being eroded away. If true, that meant that Seabridge was exploring the dregs of what had once been a much larger mineralized system. This narrative didn’t seem fit the story at KSM. Summarizing the technical team’s reasoning: If these are old porphyry systems that have been dismembered by thrusting and eroded away, why is there still so much metal in this camp enclosed in alteration associated with the upper levels of porphyry systems. Are we in fact seeing the tops virtually intact with the higher grade core zones still below us, on KSM ground?

Seabridge decided to test this concept. A deep imaging magnetotulluric (MT) geophysical survey was used to initially test this concept, yielding a very discrete low resistivity anomaly thought to be a possible dip projection of the Kerr deposit. The result, over several drilling seasons, was the discovery of Deep Kerr, the higher temperature, higher grade primary core zone of the Kerr deposit. Our current constrained NI43-101 compliant resource estimate for Kerr is:

Resources constrained within open-pit at C$9/T NSR and block cave at C$16/T NSR. Independent resources reported by RMI and disclosed in this table.

Sulphurets Deposit (the "S" in KSM)

Sulphurets, the district namesake, sits on the upper reaches of a slope that looks down on the Sulphurets Glacier. This ridge is extensively stained, discolored and devoid of tree cover, owing to the intensive hydrothermal alteration cropping out. The Sulphurets zone had been known since the first prospectors entered the area, and in 1992 Placer Dome estimated an initial pre-NI43-101 resource of:

Resource estimate compiled at 0.5g/T Au by Fowler, 1995, Placer Dome Canada Inc, internal report

Seabridge’s exploration efforts proceeded slowly on the Sulphurets deposit. It was clear from the beginning that the limits of this zone had not been defined along strike or down dip. Limited programs each year extended the deposit to the southwest along strike, connecting identified targets into a single deposit. During 2011, in preparation for completing a Preliminary Feasibility Study (PFS), an aggressive 11,480m drill program closed-up the spacing between drill holes, converted inferred to indicated resources and removed internal waste blocks. The driver behind this effort was to establish options for mine scheduling with the Sulphurets deposit. Effectively, 10 years after the original resource estimation for Sulphurets, a compliant NI43-101 resource, constrained within an open pit at C$9/T cut-off, was rendered as:

Independent resources reported by RMI and disclosed in this table.

Mitchell Deposit (the "M" in KSM)

Upon reacquiring 100% interest in the project, Seabridge undertook its first diamond drilling program in the Mitchell valley. As little as 15 years earlier, the entire Mitchell valley had been occupied by a glacier of the same name. By the time we started drilling the Mitchell deposit in 2006, about one kilometer of ice had receded up the valley exposing intense hydrothermal alteration. We were able to set up our drills right on the deposit.

The initial systematic sectional drilling at Mitchell was wildly successful, delivering more than 13 million inferred ounces of gold. The grades from one hole to the next remarkably showed almost no variation. Our conclusion was that these consistent grades at Mitchell came from the upper part of the sericite zone of a porphyry system, indicating that Mitchel had also not suffered significant erosion. Continued drilling proved that a large porphyry copper-gold system was exposed in the Mitchell valley.

Over the course of four years, Seabridge drilled off the Mitchell deposit, establishing the limits of the system and demonstrating its vertical continuity. Ultimately, the scale of this deposit was established at nearly 2km east-west, over 1km north-south and more than 1km vertically, containing more than 2 billion tonnes. As the scale of the deposit became better known, broad metal zoning was defined guiding us to a central core zone of higher gold and copper grades. Eventually, our constrained and compliant NI43-101 Mitchell deposit resource reached:

Resources constrained within open-pit at C$9/T NSR and block cave at C$16/T NSR. Independent resources reported by RMI and disclosed in this table.

Iron Cap Deposit

Iron Cap is the place name for a large, well-exposed iron-stained ridge line containing intensively and extensively quartz-sericite-pyrite altered intrusive and volcanic rock. It stretches roughly 1500m, trending northeast between the Iron Cap Glacier and Mitchell Glacier. Alteration is controlled by northeast trending, near vertical structures and associated stockwork fractures and veins that contain abundant pyrite and locally high-grade gold, silver and zinc assays. The zone attracted many previous explorers and was tested with several shallow trenches, three short drill holes and dozens of surface geochemical samples.

By 2010, our accumulated knowledge of the area and the historical results led us to an idea that the exposed part of Iron Cap could represent an epithermal occurrence overlaying another, deeper porphyry deposit.

Initial drilling confirmed that a deeper porphyry Au-Cu system was preserved below Iron Cap, however results appeared to indicate that the deposit was smaller and of moderate grades. As we continued to learn about the district, we began to think that there could be a higher grade core zone at Iron Cap as we had discovered at Kerr, concealed under the Iron Cap Glacier. In 2017, following up on earlier results and chasing them under the Iron Cap Glacier, we made a remarkable discovery. Our earlier efforts at identifying a deeper porphyry Au-Cu system had in fact been defining the margin of that system. The core of the Iron Cap system was found, under ice, to contain exceptional gold and copper grades, the best yet at KSM. The current constrained and compliant NI43-101 resource estimation for Iron Cap, below, is:

Resources constrained within a block cave at C$16/T NSR cut-off. Independent resources reported by RMI and disclosed in this table.

Other Targets

The work involved in defining four deposits has not provided a lot of time to pursue other ideas. Over the course of the last decade, we were able to test a few other exploration ideas. In most cases, we identified characteristics that we believe could eventually lead to new discoveries. The most important element required to successfully advance these targets is time.

  • Main Copper Zone: This target is hosted in the rocks above the Sulphurets Thrust Fault (STF) and directly above the Sulphurets Deposit. Overall, this zone seems to represent the lower limits of an eroded porphyry system and being above the STF, we believe the potential is limited. There are lower grade, copper dominant zones in Main Copper and these have been incorporated into the material that would be stripped as the Sulphurets deposit is developed.
  • Icefields Zone: The Icefields target is the strike extension to the northeast of the Sulphurets deposit. Disseminated pyrite and chalcopyrite were discovered in silicified breccias that were exposed within an ice field. Four holes were drilled to test the extension of the Sulphurets zone; alteration, copper and gold grades were promising but no follow up has yet been undertaken.
  • North Mitchell Zone: As the name implies, this target is north and above the Mitchell deposit. Three holes have been completed in the target, each showing mineralization in hornfels wallrock, intrusive rock with low grade Au and Cu mineralization and xenoliths of exotic well-mineralized intrusive rocks. Our current idea is that these holes represent the margins of another porphyry Au-Cu system, but we have yet to identify an exploration tool that would permit us to better target this opportunity.
  • McQuillan Zone: The target is below the Sulphurets deposit and exposed along the north side of the Sulphurets Glacier. It is an impressive feature with extensive silica alteration and abundant pyrite and chalcopyrite along a 1km length of the glacier. To date we have completed five holes into the McQuillan Zone and several intervals of good gold and copper grades have been encountered in association with high temperature alteration. Opportunity for a discovery in this zone remains high, but the target appears to plunge north which will require deep drilling.
  • Camp Zone: The strike projection to the southwest of Sulphurets can be traced into the exploration camp, where an MT anomaly was drill tested. The Camp zone is an extensive argillic alteration zone with gold, silver, zinc and lead concentrated in veins and structural zones. We have interpreted the Camp Zone as a preserved portion of a high-level epithermal system in the bottom of Sulphurets Valley.