Skeena Resources - A Fully Funded Path to High-Grade Gold Production in Canada's Golden Triangle

• Skeena Resources has secured a CAD$1 billion financing package (US$750 million) for developing the Eskay Creek mine in British Columbia.
• The financing includes equity, a gold stream, senior secured debt, and a cost overrun facility with unique terms.
• Eskay Creek is projected to produce nearly 500,000 gold equivalent ounces annually in its first 4-5 years.
• The company has a strong relationship with the Tahltan First Nation and prioritizes local businesses.
• Skeena expects significant growth potential through mine life extensions and inclusion of byproduct metals in future feasibility studies.

About Skeena Resources

Skeena Resources is a prominent gold development company focused on revitalizing two former mines in British Columbia's famed Golden Triangle: the Eskay Creek Gold-Silver Project and the Snip Gold Project. The company has recently secured a comprehensive financing package totaling US$750 million (equivalent to over C$1 billion) with Orion Resource Partners for the development, construction, and working capital needs of its 100%-owned Eskay Creek project. This significant funding package, which substantially exceeds the estimated pre-production capital expenditures of US$528 million, includes a US$100 million equity investment, a US$200 million gold stream, a US$350 million senior secured loan, and a US$100 million cost over-run facility.

Skeena's flagship Eskay Creek project stands out as one of the world's most exceptional open-pit precious metals opportunities, boasting both high-grade deposits and low-cost production potential. In addition to its primary gold focus, Eskay Creek is expected to yield significant silver by-products, rivalling the output of many dedicated silver mines. The financing arrangement provides Skeena with the flexibility and resources to advance Eskay Creek towards production, which is targeted for the first half of 2027, while maintaining optionality and stakeholder alignment.

The company places a strong emphasis on sustainable mining practices and is dedicated to maximizing the value of its mineral resources. Skeena recognizes the importance of fostering positive relationships with Indigenous communities and has established a partnership with the Tahltan First Nation. Skeena aims to create long-term value and sustainable growth for all its stakeholders through this collaboration and its overall approach. With its strategic assets, commitment to responsible development, focus on community engagement, and newly secured financing, Skeena Resources is well-positioned to play a significant role in the future of precious metals mining in British Columbia's Golden Triangle region.

Interview with Executive Chairman, Walter Coles

A Landmark Financing Package

In a challenging market for mining companies, Skeena Resources has secured a comprehensive $1 billion Canadian financing package that fully funds the development of Eskay Creek. Walter Coles, Executive Chairman of Skeena Resources, broke down the components of this financing:

"In US dollar terms of $750 million, there was a commitment for 100 million of equity, and then 200 million gold stream, 350 million US senior secured debt, and then a 100 million cost overrun facility."

This financing package is noteworthy not just for its size, but for its structure. The equity component was raised at a premium to market, avoiding the typical discounts and fees associated with traditional equity raises in the Canadian capital markets. The gold stream, provided by Orion Resource Partners, is available before final permits are received, which is unusual in the industry and speaks to the project's quality and the financier's comfort with the jurisdiction.

The debt facility includes some unique features that provide flexibility for Skeena. As Coles explained:

"We pay a 1% availability fee for the 350 million debt facility and the 100 million cost overrun facility... At any point, we can walk away from that debt facility and the cost overrun facility for zero break fee, zero penalty."

This structure allows Skeena to maintain its "fully funded" status while retaining the flexibility to pursue alternative, potentially cheaper funding sources if they become available.

Interview with Executive Chairman Walter Coles

Project Economics & Production Profile

Eskay Creek stands out among development projects for its combination of scale and grade. The project is expected to produce nearly 500,000 gold equivalent ounces annually in its first 4-5 years of operation. The November 2022 Feasibility Study outlined a project with robust economics:

• After-tax NPV of C$3 billion at spot prices
• All-in sustaining cost (AISC) of US$687 per gold equivalent ounce
• Initial capital cost of C$713 million
• 3.6 g/t gold equivalent grade over the life of mine

These metrics position Eskay Creek as one of the highest-grade open-pit gold projects globally. The low AISC suggests strong profitability and resilience across various gold price environments.

Relationship with First Nations

A critical aspect of Skeena's success has been its relationship with the Tahltan First Nation, on whose traditional territory Eskay Creek is located. Coles emphasized the importance of this relationship:

"I've always said to the Tahltan leadership, I'm only going to operate in your territory as long as you want me here. I'm a guest in your territory, and I recognize that this project has to be something that's very beneficial to your communities up here."

The partnership offers several key advantages to the Tahltan Nation. Firstly, they receive a portion of the British Columbia minerals tax, ensuring direct financial benefits from the mining activities on their traditional lands. Additionally, an impact benefit agreement is currently in the final stages of negotiation, which will further solidify the economic and social benefits for the Tahltan community.

Skeena has also made a commitment to prioritize Tahltan businesses for contract opportunities, provided they are competitively positioned. This approach not only supports economic development within the Tahltan community but also strengthens the local supply chain for the mining operations.

The success of this partnership is further enhanced by the Tahltan Nation's self-identification as a "mining nation" and their commercially-oriented mindset. This alignment of interests and values has fostered a mutually beneficial relationship that goes beyond mere economic transactions. It has created a shared vision for responsible resource development that respects both the land and the people who have called it home for generations.

Importantly, this strong partnership serves a dual purpose. It not only provides Skeena with the crucial social license to operate but also acts as a significant mitigating factor for potential operational risks. By working closely with the Tahltan Nation, Skeena can navigate local challenges more effectively and ensure smoother project development and operations.

Growth Potential

While the current economics of Eskay Creek are impressive, Skeena sees significant potential for growth. Coles outlined several avenues for increasing the project's net present value:

1. Mine life extension through inclusion of satellite deposits like Snip
2. Steepening of pit walls to access deeper ore
3. Inclusion of base metal credits (lead, zinc, antimony, copper) in future economic studies

These factors could potentially drive the after-tax NPV from its current C$3 billion to closer to C$4 billion. As the company progresses through construction and into production, Coles expects a re-rating of the stock:

"When I look two and a half years out, we should be probably around one times NAV. So if today we're trading at 0.25 and at the end of two and a half years we'll be at one times NAV, that's a four multiple on the share price today."

Execution & Risk Mitigation

Skeena Resources has demonstrated a proactive approach to addressing potential challenges that have affected other development projects in Canada. The company has implemented a comprehensive risk mitigation strategy to ensure the smooth progression of the Eskay Creek project.

A key element of this strategy is the decision to over-capitalize the project. By securing funding well beyond the estimated capital requirements, Skeena has created a substantial buffer against potential financial constraints that could arise during development and initial operations. This approach provides a level of financial security that is crucial for maintaining project momentum.

Operationally, Skeena has planned a six-month ore stockpile. This significant inventory safeguards against potential disruptions in mining activities, ensures a steady feed to the processing plant and maintains consistent production levels even in the face of unforeseen challenges.

The company has also prioritized building a strong internal team rather than relying heavily on outside contractors. This focus on in-house expertise and capacity building allows for better control over project execution and fosters a deeper understanding of the project's unique characteristics among the core team.

Furthermore, Skeena has invested considerable time and resources in refining its engineering studies. The company has conducted multiple feasibility studies, demonstrating a commitment to thorough planning and optimization before proceeding with full-scale development. This meticulous approach helps to identify and address potential issues early in the process.

An additional advantage for the Eskay Creek project is its brownfield nature. The existing infrastructure and a permitted tailings facility significantly reduce the execution risk compared to greenfield projects. This head start not only streamlines the development process but also provides a level of operational familiarity that is invaluable in the mining industry.

Through these strategic measures, Skeena has positioned itself to navigate the complex landscape of mine development in Canada with greater confidence and resilience.

The Investment Thesis for Skeena Resources

• High-grade, large-scale gold project in a tier-one jurisdiction
• Fully funded with a flexible financing package
• Strong partnership with local First Nations
• Significant potential for NPV growth through mine life extension and inclusion of byproduct credits
• Trading at a discount to NAV with potential for re-rating as production approaches
• Experienced management team with a focus on risk mitigation and execution

Skeena Resources' Eskay Creek project represents a rare opportunity in the gold mining sector - a high-grade, large-scale project in a safe jurisdiction that is fully funded through to production. The company's strong relationship with the Tahltan First Nation and its focus on risk mitigation set it apart from many peers. While the transition from developer to producer always carries risks, Skeena's approach and the quality of its asset suggest a strong potential for value creation. As the company progresses through construction and towards first gold pour, investors may benefit from a significant re-rating of the stock. However, as with any mining investment, careful due diligence and an understanding of the risks involved are essential.

Macro Thematic Analysis

The global economic landscape is currently characterized by persistent inflation, geopolitical tensions, and concerns about financial stability. These factors have historically been supportive of gold prices, as investors seek safe-haven assets in times of uncertainty. Moreover, the trend of de-dollarization among some nations and central banks' continued gold purchases further underpin the demand for the yellow metal.

In this context, gold mining companies, particularly those with high-grade, low-cost assets in stable jurisdictions, are well-positioned to benefit. Skeena Resources, with its Eskay Creek project, fits this profile perfectly. The project's low all-in sustaining costs of US$687 per gold equivalent ounce provide a significant margin of safety even if gold prices were to decline from current levels.

Furthermore, the increasing focus on ESG (Environmental, Social, and Governance) factors in investment decision-making aligns well with Skeena's approach. The company's strong relationship with the Tahltan First Nation and its emphasis on local economic benefits demonstrate best practices in social license and community engagement.

The current market dynamics also highlight the importance of jurisdiction. With geopolitical tensions rising and resource nationalism becoming a concern in some countries, projects in stable, mining-friendly jurisdictions like British Columbia are increasingly attractive to investors.

Lastly, the scarcity of large, high-grade gold deposits in safe jurisdictions makes Eskay Creek a valuable asset. As major gold producers seek to replenish their reserves, projects like Eskay Creek could become attractive acquisition targets, potentially providing additional upside for investors.

Walter Coles' statement encapsulates the opportunity:

"When I look two and a half years out, we should be probably around one times NAV. So if today we're trading at 0.25 and at the end of two and a half years we'll be at one times NAV, that's a four multiple on the share price today."

This potential for significant value creation, driven by the transition from developer to producer, underscores the compelling investment case for Skeena Resources in the current macro environment.