Skeena Resources Ltd T.SKE

RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Market cap drops to $300 million after hours..LOL!

[AlwaysLong683]

Angelique01 wrote:

This news release was completely expected.  There was a timeline in place.  Skeena has always had the right to buy down a .5 NSR royalty( from a 1% NSR royalty held by Barrick, for $17.5 M, until October 2 next month. As negotiated when they bought Eskay from Barrick.

Here is the second part of the equation as to why this move was brilliant.  From $17.5M to $22.5M a gain of $5M

In connection with the Offering, Skeena will grant to Franco-Nevada a right of first refusal (the “ROFR”) over the sale of a 0.5% net smelter return (NSR) royalty (the “Royalty”) over the Eskay Creek gold-silver project (“Eskay Creek”) matching the portion of the existing Barrick royalty that can be bought back by the Company. The ROFR granted to Franco-Nevada will be subject to a competitive auction process conducted by Skeena, 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$22.5M, for a period of 30 days. 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.

Good info. I've never owned SKE and thus didn't do a deep dive into its past - the company is just a curiousity to me at this point.

The above text is from an SKE PR dated December 31, 2021.

The next line of the PR after Angel's quote (as also noted by Angel) is:

"As noted, Skeena continues to have the right to buy down a 0.5% NSR royalty (from a 1.0% NSR royalty) currently held by Barrick, for a payment of C$17.5M, until October 2, 2022."

If I understand the PR correctly, there appears to be two 0.5% NSR royalites on any eventual SKE gold / silver production that are in play:

1) A 0.5% NSR royalty currently held by ABX which SKE may purchase for $17.5M on or before October 2, 2022 (in other words, the deadline is about two weeks from now).

2) A 0.5% NSR royality which will be part of a competititve auction process to be conducted by SKE at some point before October 2, 2023 (just over a year from now) in which FNV will have the right of first refusal. If SKE has not sold this royalty to FNV or another party by October 2, 2023, FNV has the right to purchase it for $22.5M.

One other thing I noticed in this PR: In the first paragraph, SKE announced they actually did enter into a non-brokered private placement flow-through share offering at $21.00 a share with FNV, so good for them.

Given the above, I agree it's wise for SKE to purchase ABX's NSR royalty before the October 2 deadline. I guess the only fly in the ointment is that SKE waited until mere weeks before the deadline to do an equity raise to provide the money needed to purchase the royalty. SKE was trading at or above 10.00 a share into May 2022, then dropped to around 6.00 in mid-July, then proceeded to bounce between 6.00 and 8.00 to date. I suspect SKE was looking to do an equity raise to purchase ABX's NSR royalty for quite some time but were up against a deadline of October 2, so they may have waited this long in the hope that their share price would experience a surge so they could cut a financing deal for significantly more than 6.05 per a share, but it didn't come to be, so they were forced to do it now if they wanted to purchase the NSR royalty from ABX.

One other comment:

While it's true SKE's recent Feasibility Study / Technical Report anticipates a 1-year projected payback at US$1,700 per ounce Au and US$19 per ounce Ag, a lot can happen between now and when the mine becomes operational if any unforseen probliems areise during the permitting, financing, contracting, materials purchases, and mine build in what is currently a rising interest rate and inflationary environment. Of course, a big surge in the price of gold and silver from current levels after the first pour takes place could offset upward cost of mine revisions, but I wouldn't assume the 1-year payback period projected as of now will in fact end up being the case.

Will be interesting to see how well SKE's share price performs vs. SBB and ARTG given the latter two are much father ahead in permitting and financing their respective projects.

Time will tell........