Skeena Resources has secured a US$750 million financing package from Orion Resource Partners to develop and construct the Eskay Creek gold-silver project in British Columbia, Canada. 

The Orion package, which includes an equity investment, gold stream, senior secured loan and a cost over-run facility, provides a significant portion of financing before Skeena receives the required permits and will allow the company to put Eskay Creek on what the company said is the most efficient and expedient schedule to production.

Orion will make a $100 million equity investment into Skeena, priced at a meaningful premium; a $200 million gold stream with an option to buy back up to 66.7% during a 12-month period after the start of commercial production; $350 million of committed capital available under a senior secured loan with a 1% standby fee and no break fee; and a $100 million cost over-run facility in the form of an additional gold stream subject to the same standby terms as the loan.

"This complete financing package is a result of a competitive and comprehensive process undertaken to find the best financing solution. The result is the certainty of funding to advance Eskay into production while balancing the attractive cost of capital, flexibility and optionality," Skeena Resources executive chair Walter Coles said.

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Skeena published a feasibility study on Eskay Creek in November 2023, detailing an average annual production of 370,000ozpa at a 4.2gpt head grade over the first 10 years, with a life-of-mine all-in sustaining cost of $684/oz of gold equivalent. Production during the first five years will average 455,000ozpa.

The project will yield an after-tax net present value of C$2 billion at a 5% discount rate and a base case price of $1800/oz gold and $23/oz silver. It will also have an internal rate of return (IRR) of 43% and a 1.2-year payback following an initial capital expenditure of C$713 million. Eskay Creek hosts reserves of 39.8Mt containing 3.3Moz of gold and 88Moz of silver.

Orion will purchase up to $75 million of Skeena stock immediately. Orion was the back-end buyer of a C$100 million development flow-through private placement transaction in which Skeena issued 12 million shares priced at C$8.32 each. It also purchased 3.4 million shares priced at C$6.65 at the same time. The remaining $25 million is to close later this year, with pricing to be set at the time of the investment. Upon completion, Orion will own less than 20% of the issued and outstanding shares of Skeena and will have the right to participate in any future equity offerings to maintain its ownership position.

The $200 million gold stream will be drawn in five tranches, with an initial $5 million anticipated to close on June 26. The second tranche of $45 million will be available after receipt of the technical sample permit. The next three tranches of $50 million are available to support project construction.

Once fully drawn, Orion will be entitled to receive 10.55% of payable gold produced from the mine at a price equal to 10% of the LBMA AM gold fixing price three days before delivery for the life-of-mine. Skeena can reduce the stream percentage for a period of 12 months following the project completion date by repaying Orion the proportional deposit plus an imputed 18% IRR. The area of interest for the stream is constrained to 500m around the existing reserves and resources.

The $350 million senior secured loan will have a 5.75-year term from the first drawdown and can be drawn in four tranches of $87.5 million, with a 1% availability fee due on the undrawn portion. The coupon will be the three-month SOFR plus 7.75%. Skeena may prepay the loan and any accrued unpaid interest in full or in part at any time without any penalty.

Skeena said the financing package, combined with $44 million held at the end of the March quarter, provides the project with about $794 million of available capital. It is now working to finalise the 2024 early works programs and detailed engineering plans. It anticipates signing an Impact Benefit Agreement with the Tahltan Central Government and receiving all remaining permits by the end of 2025. Construction is due to start in 2026, with initial production in the first semester of 2027.

Shares in Skeena Resources are trading at C$6.24, valuing the company at C$564 million.