1 . 0 s u m m a r ysulphurets, and mitchell zones, using minesight® software. there were 128...

Seabridge Gold Inc. 1-1 0952880200-REP-R0001-00Kerr-Sulphurets-Mitchell (KSM) Prefeasibility Study

1 . 0 S U M M A R Y

1 . 1 I N T R O D U C T I O N

Seabridge Gold Inc.'s (Seabridge) Kerr, Sulphurets, and Mitchell (KSM) Project

involves the development of a major gold-copper deposit located in northwest British

Columbia (BC), approximately 40 km southwest of Bell II on Highway 37.

This National Instrument 43-101 (NI 43-101) compliant report on the KSM property

has been prepared by Wardrop Engineering Inc. (Wardrop) for Seabridge, and has

been based on work produced by the following independent consultants:

Resource Modeling Inc. (RMI)

Moose Mountain Technical Services (MMTS)

WN Brazier Associates Inc. (Brazier)

Klohn Crippen Berger Ltd. (KCBL)

Bosche Ventures Ltd. (BVL)

McElhanney Consulting Services Ltd. (McElhanney)

BGC Engineering Inc. (BGC)

EBA Engineering Consultants Ltd. (EBA)

Thyssen Mining Construction of Canada Ltd. (Thyssen)

Allnorth Consultants Ltd. (Allnorth)

Rescan Environmental Services Ltd. (Rescan).

Mr. Michael J. Lechner (P.Geo., RPG, CPG) of RMI visited the property most

recently from July 29 to August 1, 2009, and is the Qualified Person (QP) for all

matters relating to the mineral resource estimate.

Mr. Jim Gray (P.Eng.) of MMTS visited the property on September 25, 2008, and

September 10, 2009. He is the QP for matters relating to mining, mining capital, and

mine operating costs.

Mr. John Huang (Ph.D, P.Eng.) of Wardrop visited the property on September 16,

2008, and is the QP for matters relating to the metallurgical testing review, mineral

processing, and process operating costs.


Mr. Frank Grills (P.Eng.) of Wardrop visited the property on September 16, 2008, and

is the QP for matters relating to the overall report preparation, process and

infrastructure capital cost estimate, financial analysis and process related

infrastructure.

Mr. Harold Bosche (P.Eng.) of BVL visited the property on September 16, 2008 and

is the QP for matters relating to the rope conveyor, slurry pipeline system, tailing

delivery, reclaim pumping and piping systems, and associated capital costs.

Mr. Neil Brazier (P.Eng.) of Brazier visited the property on September 16, 2008 is the

QP for matters relating to power supply, energy recovery plants, and associated

costs.

Mr. Graham Parkinson (P.Geo.) of KCBL visited the property on October 23 to 25,

June 9 and 10, as well as June 24 to 29, 2008, and is the QP for matters relating to

water diversions and seepage collection ponds, tailing dams, water treatment dam,

and related capital, operating and closure costs.

Mr. R.W. (Bob) Parolin (P.Eng.) of McElhanney visited the property on June 21, 2008

and is the QP for matters relating to main and temporary access roads and

associated costs.

Mr. Kevin Jones (P.Eng.) of EBA visited the property on September 24 to 26, 2009

and is the QP for matters relating to winter access road and associated costs.

Mr. Greg McKillop (P.Geo.) of Rescan visited the property on June 9-10 and July 29,

2008, and August 26, 2009. Greg is the QP for matters relating to environmental

considerations.

Mr. Warren Newcomen (P.Eng) of BGC visited the property on June 1 to 5, 2009,

and is the QP for matters relating to the open pit slopes and pit wall dewatering.

Mr. Adrian Bodolan (P.Eng) of Thyssen visited the property from September 9 to 10,

2009, and is the QP for matters relating to all tunnel design and costs.

Mr. Darby Kreitz (P.Eng) of Allnorth is the QP for matters relating to storage dam and

tailing starter dam construction cost estimates.

The capital and operating costs for this Prefeasibility Study (PFS) have been

estimated to a +25/-10% level of accuracy. All dollar figures presented in this section

are stated in US dollars, unless otherwise specified. An exchange rate of Cdn$1.00

to US$0.92 has been used.

1 . 2 G E O L O G Y

The KSM property is located in northwest British Columbia (BC) at a latitude and

longitude of approximately 56.52°N and 130.25°W, respectively. The property is


situated about 950 km northwest of Vancouver, 65 km north-northwest of Stewart,

BC and 21 km south-southeast of the Eskay Creek Mine.

The property lies within an area known as “Stikinia”, which is a terrain consisting of

Triassic and Jurassic volcanic arcs that were accreted onto the Paleozoic basement.

Early Jurassic sub-volcanic intrusive complexes are scattered through the Stikinia

terrain and are host to numerous precious and base metal rich hydrothermal

systems. These include several well known copper-gold porphyry systems such as

Galore Creek, Red Chris, Kemess, and Mt. Milligan.

Seabridge entered into the district to secure the previously identified resources of the

Kerr and Sulphurets zones. After having been granted an option by Seabridge to

earn an interest at KSM, between 2002 and 2005, Falconbridge/Noranda conducted

target evaluation and testing of several occurrences on the property. That work

focused on exploration concepts deemed to be appropriate for copper-rich porphyry

targets. In 2006, Falconbridge/Noranda agreed to sell its option back to Seabridge

having recognized that the district’s potential favoured gold-rich copper porphyry

targets. Seabridge followed-up on this previous work delineating the Mitchell Zone,

expanding the Sulphurets Zone, and re-evaluating the Kerr Zone.

The Mitchell Zone is underlain by foliated, schistose, intrusive, volcanic, and clastic

rocks that are exposed in an erosional window below the shallow north dipping

Mitchell Thrust Fault. These rocks tend to be intensely altered and characterized by

abundant sericite and pyrite with numerous quartz stockwork veins and sheeted

quartz veins (phyllic alteration) that are often deformed and flattened. Towards the

west end of the zone, the extent and intensity of phyllic alteration diminishes and

chlorite-magnetite alteration becomes more dominant along with lower contained

metal grades. In the core of the zone, pyrite content ranges between 1 to 20%,

averages 5%, and typically occurs as fine disseminations. Gold and copper tends to

be relatively low-grade but is dispersed over a very large area and related to

hydrothermal activity associated with Early Jurassic hypabyssal porphyritic

intrusions. In general, within the currently drilled limits of the Mitchell Zone, gold and

copper grades are remarkably consistent between drill holes, which is consistent with

a large, stable, and long-lived hydrothermal system.

RMI created a three-dimensional computerized block models for the Kerr,

Sulphurets, and Mitchell zones, using MineSight® software. There were 128

diamond core holes used for the Mitchell block model that were spaced at

approximately 100 m intervals, totalling 48,229 m of data. Gold and copper grades

were estimated with 15-m-long drill hole composites using inverse distance and

nearest neighbour methods. RMI validated the estimated block grades using visual

and statistical methods. It is RMI’s opinion that the Mitchell grade model is globally

unbiased and represents a reasonable estimate of in-situ resources. Measured,

Indicated and Inferred Mineral Resources were classified for a portion of the

estimated blocks based on mineralized continuity and the distance to drilling data

coupled with the number of holes that were used in the estimate. A gold equivalent

grade (AuEQ) was calculated for the estimated blocks using a gold price of


US$650/oz at 70% recovery and a copper price of US$2.00/lb, at 85% recovery.

These results are summarized at a 0.50 g/t AuEQ cut-off grade in Table 1.1.

The Sulphurets Zone has been delineated by about 18,742 m of core drilling from 76

drill holes that are spaced at intervals ranging between 50 to 100 m. Seabridge and

Placer Dome Inc. (Placer Dome) collected about 37% and 30% of the drilling,

respectively; the remaining data were collected by previous operators. The

mineralized zone, as currently recognized, consists of two distinct systems referred

to as the Raewyn Copper-Gold and Breccia Gold zones which are exposed within

the lower plate of the Sulphurets Thrust Fault. The Raewyn Copper Zone hosts

porphyry style disseminated chalcopyrite and associated gold in altered sill-like

intrusions and volcanic rocks. Hydrothermal alteration in these rocks is

characterized by sericite-pyrite-quartz introduction associated with stockwork veins.

Gold and copper are concentrated in the stockwork veins and disseminated in the

wallrock. The Breccia Gold Zone hosts mostly gold bearing pyrite with minor

chalcopyrite and sulfosalts in the matrix to a breccia that cross cuts the intrusions of

the Raewyn Zone. Block gold and copper grades were estimated using inverse

distance and nearest neighbour methods.

The Kerr Zone has been delineated by 27,567 m of core drilling from 151 holes that

are spaced between 50 to 100 m apart. The majority of the drilling data were

collected by Placer Dome and previous operators. The Kerr mineralized zone is

characterized by finely disseminated, fracture and veinlet controlled chalcopyrite with

minor bornite and tennanite associated with an early Jurassic porphyritic monzonite

that was intruded into Triassic sedimentary and volcanic rocks. Extensive and

intensive hydrothermal alteration of the intrusive rocks and surrounding rocks

produced a north-south trending zone of sericite-quartz-pyrite rocks. This

hydrothermal alteration trend defines the limits of the copper-gold mineral system.

Block gold and copper grades were estimated using inverse distance and nearest

neighbour methods.

1 . 3 P R O P E R T Y D E S C R I P T I O N A N D L O C A T I O N

The KSM Project area is located in the coastal mountains of northwestern BC. The

proposed pit areas lie within the headwaters of Sulphurets Creek, which is a main

tributary of the Unuk River. The proposed Tailing Management Facility (TMF) will be

located primarily within a tributary of Teigen Creek. Teigen and Treaty Creeks are

tributaries of the Bell-Irving River, which is itself a major tributary of the Nass River.

Both the Nass and Unuk rivers flow to the Pacific Ocean. Figure 1.1 is a general

location map of the project area.

The KSM Project consists of 30 contiguous mineral cell claims covering an area of

6,726.42 ha and an adjacent 16 mineral legacy claims (the BJ claims) covering

approximately 6,225 ha. Both the cell claims and the legacy claims are under

application for two mining leases. Twenty-one Placer cell claims covering an area of

5,749.2 ha are coincident in land area with most of the KSM mineral claims.


Seabridge also holds 47 mineral cell claims (Seabee property) and six mineral legacy

claims (Tina property), covering approximately 21,478 ha, that are located about

19 km northeast of the KSM property where the KSM Project’s proposed plants and

tailing storage would be located.

The KSM mineral cell claims were converted from 58 legacy claims to BC’s new

Mineral Titles Online (MTO) system in 2005. Eleven legacy Placer claims were

converted in 2005 to nine cell Placer claims. Ten cell Placer claims have been

added to the property and are contiguous with the converted legacy Placer claims.

In the MTO system, claims are located digitally using a fixed grid on lines of latitude

and longitude with cells measuring 15 seconds north-south and 22.5 seconds east-

west (approximately 460 m by 380 m at KSM). The legacy claims were located by

previous owners by placing tagged posts along the boundaries; however, the survey

method employed in locating the legacy claims is not known. With the MTO system

no markings are required on the ground and the potential for gaps and/or overlapping

claims inherent in the old system is eliminated.

The claims are 100% owned by Seabridge. Barrick Gold Corporation retains a 1%

net smelter royalty on the mineral cell claims that is capped at $4.5 M. Two of the

pre-converted claims (Xray 2 and 6) are subject to a contractual royalty obligation in

accordance with terms in the underlying Dawson Agreement. The lands covered by

these claims are now contained within the converted Xray 1 claim (Tenure No.

516245). There is an additional underlying agreement whereby advance annual

royalties payable to Dawson are being paid by Seabridge. The BJ claims, which do

not contain any of the estimated resources at the KSM Project, are subject to a 2.5%

net smelter royalty and a 2% net smelter royalty and Seabridge is obligated to pay an

advance royalty in respect of the 2% net smelter royalty of 10 annual payment of

$100,000.

Annual holding costs for all of the cell claims (mineral and Placer) are approximately

$172,988. In 2007, assessment work was filed to advance the year of expiry to

2018. Assessment work was completed on most of the Seabee property claims in

2008 with that work filed in February 2009, which advanced expiry dates to 2012.


Figure 1.1 General Location Map

1 . 4 A C C E S S I B I L I T Y , C L I M A T E , L O C A L R E S O U R C E S ,I N F R A S T R U C T U R E , A N D P H Y S I O G R A P H Y

The property lies in the rugged Coastal Mountains of northwest BC, with elevations

ranging from 520 m in Sulphurets Creek Valley, to over 2,300 m at the highest

peaks. Valley glaciers fill the upper portions of the larger valleys from just below tree

line and upwards. The glaciers have been retreating for at least the last several

decades. Aerial photos indicate that the Mitchell Glacier has retreated almost one

kilometre laterally and perhaps several hundred metres vertically since 1991.


The deposit portion of the property is drained by Sulphurets and Mitchell watersheds

that empty into the Unuk River, which flows westward to the Pacific Ocean through

Alaska. The plant side and the TMF drain into the Bell-Irving watershed, which is a

tributary to the Naas River. The tree line lies at about 1,240 metres above sea level

(masl), below which a mature forest of mostly hemlock and balsam fir abruptly

develops. Fish are not known to inhabit the Sulphurets and Mitchell watersheds.

Large wildlife such as deer, moose, and caribou are rare due to the rugged

topography and restricted access; however, bears and mountain goats are relatively

common.

The climate is generally typical of a temperate or northern coastal rainforest, with

sub-arctic conditions at high elevations. Precipitation is high, with an annual total

precipitation (rainfall and snow equivalents) estimated to be between the historical

averages for the Eskay Creek Mine and Stewart, BC. This range extends from 1,373

to 2,393 mm (data to 2005). The length of the snow-free season varies from about

May through November at lower elevations, and from July through September at

higher elevations. The property can be accessed only via helicopter.

There are deep water loading facilities for shipping bulk mineral concentrates located

in Stewart. The facilities are currently used by the Huckleberry mine. The nearest

railway is the Canadian National Railroad (CNR) Yellowhead route, which is located

approximately 220 km southeast of the property. This line runs east-west and

terminates at the deep water port of Prince Rupert on the west coast of BC.

The property is located on Crown land; therefore, all surface and access rights are

granted by the Mineral Tenure Act and the Mining Right of Way Act. There are no

settlements or privately owned land in the area; there is limited commercial

recreational activity in the form of helicopter skiing and guided fishing adventures.

The closest power transmission lines run along the Highway 37A corridor to Stewart,

approximately 50 km southeast of the property. The Eskay Creek mine produced its

own diesel-generated power. There are proposals to develop local hydroelectric

power sources and expand electrical transmission service from Terrace, BC, along

Highway 37, which will provide electrical power to the project.

1 . 5 H I S T O R Y

The modern exploration history of the area began in the 1960s, with brief programs

conducted by Newmont, Granduc, Phelps Dodge, and the Meridian Syndicate. All of

these programs were focused on gold exploration. Various explorers were attracted

to this area due to the numerous large, prominent pyritic gossans that are exposed in

alpine areas. There is evidence that prospectors were active in the area prior to

1935. The Sulphurets Zone was first drilled by Esso Minerals Canada Ltd. (Esso

Minerals) in 1969; Kerr was first drilled by Brinco in 1985, and Mitchell was first

drilled by Newhawk Gold Mines Ltd. (Newhawk Gold) in 1991.


In 1989, Placer Dome acquired a 100% interest in the Kerr Zone from Western

Canadian Mines; in 1990, Placer Dome acquired the adjacent Sulphurets property

from Newhawk Gold. The Sulphurets property also hosts the Mitchell Zone and

other mineral occurrences. In 2000, Seabridge acquired a 100% interest from Placer

Dome in both the Kerr and Sulphurets properties, subject to capped royalties.

There is no recorded mineral production, nor evidence of it, from the property.

Immediately west of the property, small-scale Placer gold mining has occurred below

the Sulphurets and Mitchell zones. On the Bruceside property, immediately to the

east and currently owned by Silver Standard Resources Inc., limited underground

development and test mining was undertaken in the 1990s on narrow, gold-silver

bearing quartz veins at the West Zone.

1 . 6 G E O L O G I C A L S E T T I N G

The region lies within “Stikinia”, a terrain of Triassic and Jurassic volcanic arcs that

were accreted onto the Paleozoic basement of the North American continental

margin in the Middle Jurassic. Stikinia is the largest of several fault bounded,

allochthonous terrains within the Intermontane belt, which lies between the post-

accretionary, Tertiary intrusives of the Coast belt and continental margin sedimentary

prisms of the Foreland (Rocky Mountain) belt. In the Kerr-Sulphurets area, Stikinia is

dominated by variably deformed oceanic island arc complexes of the Triassic Stuhini

and Jurassic Hazelton groups. An extensive basin formed eastward of the property

in the Late Jurassic and Cretaceous that filled with thick accumulations of clastic

sedimentary rocks of the Bowser Group. Folding and thrusting due to compressional

tectonics in the late Cretaceous generated the area’s current structural features.

Remnants of Quaternary basaltic eruptions occur throughout the region.

Early Jurassic sub-volcanic intrusive complexes are common in the Stikinia terrain,

and several host well-known precious and base metal rich hydrothermal systems.

These include copper-gold porphyry zones such as Galore Creek, Red Chris,

Kemess, Mt. Milligan, and Kerr-Sulphurets. In addition, there are a number of related

polymetallic zones including skarns at Premier, subaerial to subaqueous epithermal

veins and volcanogenic massive sulfide zones at Eskay Creek, Snip, Bruceside, and

Granduc.

1 . 7 O V E R A L L G E N E R A L A R R A N G E M E N T

Figure 1.2 presents an overview of the general arrangement of the project.


Figure 1.2 KSM Overall Site Plan


1 . 8 R E S O U R C E S

RMI constructed three-dimensional block models for the Kerr, Sulphurets, and

Mitchell zones. Independent gold and copper grade wireframes were constructed

from cross-sectional polygons, which were then reconciled in bench plan. These

wireframes were used by RMI in a multi-pass inverse distance grade interpolation

plan. The estimated block grades were validated using visual and statistical

methods. Based on those results, RMI believes that the grade models are globally

unbiased and suitable for subsequent pit optimization studies. The estimated block

grades were classified into Measured (Mitchell only), Indicated, and Inferred Mineral

Resource categories based on mineralized continuity, along with distance to data in

conjunction with the number of drill holes that were used to estimate block grades.

The resource information by RMI was reported in a Technical Report filed on SEDAR

January 25, 2010.

Table 1.1 summarizes the estimated Measured, Indicated, and Inferred Mineral

Resources for each zone. The Mineral Resources tabulated in Table 1.1 were not

constrained by conceptual pits, although RMI did generate a series of conceptual pits

for each zone to test the robustness of the deposits.

Table 1.1 Measured, Indicated and Inferred Mineral Resources for KSM

Zone t (000)

Au

(g/t)

Cu

(%)

Au oz

(000)

Cu lb

(millions)

Measured Mineral Resources

Kerr No Measured Resources

Sulphurets No Measured Resources

Mitchell 659,700 0.64 0.17 13,574 2,472

Total 659,700 0.64 0.17 13,574 2,472

Indicated Mineral Resources

Kerr 237,500 0.26 0.48 1,985 2,513

Sulphurets 159,000 0.63 0.28 3,221 981

Mitchell 1,080,900 0.58 0.17 20,156 4,050

Total 1,477,400 0.53 0.23 25,362 7,544

Measured + Indicated Mineral Resources

Kerr 237,500 0.26 0.48 1,985 2,513

Sulphurets 159,000 0.63 0.28 3,221 981

Mitchell 1,740,600 0.60 0.17 33,730 6,522

Total 2,137,100 0.57 0.21 38,936 10,015

Inferred Mineral Resources

Kerr 76,100 0.20 0.30 489 503

Sulphurets 144,000 0.50 0.16 2,317 511

Mitchell 537,000 0.44 0.14 7,597 1,657

Total 757,100 0.43 0.16 10,403 2,671


1 . 9 M I N E P L A N N I N G

MMTS produced a series of Lerchs-Grossman (LG) pit shell optimizations using the

resource models provided by RMI. The pit optimizations use mining, processing,

general and administrative (G&A) costs, and metal recoveries from the "KSM

Preliminary Economic Assessment Addendum 2009", as well as subsequent

optimization studies. These are derived for each of the three separate pit areas –

Mitchell, Sulphurets, and Kerr. The RMI resource models classify the mineralization

as Measured, Indicated, and Inferred; only Measured and Indicated categories are

used in the pit optimization. The LG delineated resources are in-situ and use a net

smelter return (NSR) cut-off specific to each mining area but do not include any

mining dilution or mining loss.

MMTS notes that the economic pit limits are based on mining unit costs derived to

meet the local conditions for the project as well as certain input parameters, such as

pit slope angles, process recoveries, environmental considerations, and reclamation

requirements. All of these components affect the mining quantities and activities to

release the specified ore and, as such, affect the economic pit limits. These

elements of the study require more sampling and evaluation for future feasibility-level

work. Changes to these parameters will not only affect the cost estimates within the

plan but will also impact the economic pit limits of future studies.

Accordingly, the cost estimates in future studies will change; the ore reserve and

waste release quantities may also change.

The LG analysis examined the incremental breakeven economic pit limit on an

undiscounted and discounted basis, where the discounted basis uses approximate

mineable pit phases, a preliminary production schedule, and a 5% discount rate.

Table 1.2 indicates that, due to the time value of money, the discounted LG pit limit

has 17% less ore than the undiscounted LG pit limit, with slightly higher grades but

14% less gold mined and 16% less copper mined.

Table 1.2 Comparison of the Discounted vs. Undiscounted LG Resources

In-situ

Ore

(Mt)

NSR

($/t)

In-situ Grades

Waste

(Mt)

S/R

(t:t)

Cu

(Mlb)

Au

(Moz)

Cu

(%)

Au

(g/t)

Ag

(g/t)

Mo

(ppb)

Undiscounted 2,001 20.87 0.208 0.570 2.630 56.91 6,598 3.30 9,193 36.6

Discounted (5%) 1,653 21.53 0.210 0.590 2.580 58.89 3,744 2.26 7,695 31.3

Difference -348 0.66 0.002 -0.020 -0.050 1.98 -2,854 -1.03 -1,498 -5.3

% Difference -17% 3% 1% 3% -2% 3% -43% -32% -16% -14%

Note: NSR cut-offs for each area are: Mitchell $7.07, Sulphurets $7.83, Kerr $6.88.

The starter pit phases are identical for both undiscounted and discounted cases;

accordingly, the capital payback will be approximately the same time frame for both


cases. This PFS is based on the discounted economic pit limit to justify the

investment at the input base case economic parameters.

The Inferred Resources within these pits are included in the waste tonnages in Table

1.3. These have the potential to be upgraded to Reserves with future exploration

drilling or when the pit grade control and blast hole assaying system is in place.


Table 1.3 Pit Resources for KSM from LG Analysis

Pit Case Category

NSR

Cut-off

($/t)

In-situ

Ore

(Mt)

NSR

($/t)

In Situ Grades

Waste

(Mt)

Strip

Ratio

(t:t)

Cu

(M lb)

Au

(M oz)Cu (%) Au (g/t) Ag (g/t) Mo (ppb)

Mitchell 90% Measured 7.07 579 21.2 0.170 0.651 3.00 59.0

Indicated 764 19.9 0.165 0.601 2.96 63.0

Subtotal 1,343 20.4 0.167 0.623 2.98 61.2 3,082 2.30 4,949 26.9

Sulphurets 105% Indicated 7.83 145 25.9 0.290 0.637 0.45 104.0 418 2.88 928 3.0

Kerr 65% Indicated 6.88 166 26.5 0.498 0.280 1.23 0.0 244 1.47 1,818 1.5

ALL n/a Measured n/a 579 21.2 0.170 0.651 3.00 59.0

Indicated 1,075 21.7 0.233 0.556 2.35 69.5

Total/Average 1,653 21.5 0.211 0.590 2.58 58.9 3,744 2.26 7,695 31.3

Table 1.4 Inferred Resources within the Economic Pit Limits (Not Used for Profitability)

Pit Case

NSR

Cut-off

($/t)

In-situ

Inferred

Material (Mt)

NSR

($/t)

In Situ Grades

Cu

(M lb)

Au

(M oz)

Cu

(%)

Au

(g/t)

Ag

(g/t)

Mo

(ppb)

Mitchell 90% 7.07 320 11.7 0.108 0.352 2.74 58.9 759 3.6

Sulphurets 105% 7.83 68 15.1 0.192 0.361 0.83 59.6 288 0.8

Kerr 65% 6.88 34 14.5 0.240 0.263 0.95 0.0 181 0.3

Total 422 12.5 0.132 0.346 2.29 54.2 1,228 4.7


1 . 1 0 G E O T E C H N I C A L I S S U E S F O R T H E M I N E P L A N

The high topographic relief in the areas of the pits and the Rock Storage Facilities

(RSFs) requires extra consideration. At this PFS-level of design, conservative

designs, risk assessment, alternative/mitigating scenarios, and extra data and

analysis are being included. These factors are also defining engineering

requirements for future feasibility-level design work. The mine plan calls for

development of three open pits - Kerr, Sulphurets, and Mitchell. The RSFs are all

confined to the lower Mitchell and the McTagg valleys plus the Sulphurets RSF

situated on the north side of the Sulphurets valley.

Potential geohazards were identified for further study in the area of the proposed

open pits, waste dumps, and other various infrastructure. Slope design criteria for

the proposed open pits were also provided for various cases defined by different

blasting methods and their assumed achievable bench configurations.

1.10.1 M ITCH ELL P IT

The proposed ultimate (final) Mitchell pit slopes may be greater than 1,200 m high,

resulting in pit slope heights which exceed those achieved to date in the mining

industry. To address this, a multi-component site investigation and design study

focused on the Mitchell pit was carried out to support the pit slope angle designs.

Site investigations included geotechnical drilling, borehole televiewer surveys,

photogrammetric mapping, packer testing, and field and laboratory testing of core

samples. A hydrogeological study was also undertaken to support the design of the

open pit slopes. A three-dimensional hydrogeological model was developed for the

proposed open pit and pit dewatering/pit slope depressurization simulations were

carried out.

The recommended overall pit slope angles for the Mitchell Pit vary from 33° to 51°,

based on wall orientation, overall wall height, geotechnical domain, and the dominant

controls on slope stability in that domain. Achieving the proposed design criteria will

require important considerations during mine operations. In addition to dewatering

the proposed pit to reduce seepage from the pit walls, enhanced depressurization of

the pit walls will be required. Deformation monitoring of the interramp and overall pit

slopes will also be required to monitor slope performance and confirm design

assumptions. Future investigation and design work has been recommended to

address uncertainties and risks identified at the current level of study.

1.10.2 SULPH URET S AN D KERR

Priorities for geotechnical data collection in 2009 concentrated on the Mitchell pit

area. Guidelines outlining suggested geotechnical investigation efforts published in

November 2009 (after the field season) indicate that additional investigations and

analysis for the Sulphurets and Kerr pits are warranted. These will be included in


future studies planned for 2010. For the purposes of this PFS, conservative pit slope

angles have been developed from the exploration/environmental drilling and mapping

data available. In addition, possible mitigation/contingency designs have been

evaluated economically to demonstrate that, should slope design angles for these

pits need to be reduced, the reserves being stated in this report can still be included

as reserves in future studies.

1.10.3 M IN E ROCK ST OR AGE FACIL IT IES

At this PFS-level, there are three important primary RSF design considerations that

will be optimized in the feasibility design stage. The considerations are:

foundations preparation

maximum lift height

post-mining closure requirements.

Allowances have been made in this study to accommodate conservative but

reasonable designs in these respects.

Design work assumes that all foundation material is confined and consolidated.

Dumping directions reduce the operational and downslope risks using typical

operating practices from experience at other western Canadian open pit operations

on mountainous terrain. A cost allowance has been included to place tills from the

foundations areas for reclamation cover where possible, which will be detailed in the

Feasibility Study.

The mine dumping progression was designed to build dumps in lifts (bottom-up

construction) to consolidate foundations and reduce downslope risks. Top-down

dumps have been limited to 400 m maximum lifts, which is the current lift height in

practice at other mines.

Final dump configurations were designed with maximum 105 m terraces at “as

dumped” angle of repose, with flat benches between terraces. The overall slope

angle is between 26° and 30° to leave allowance for re-sloping.

The details of post closure, end land use objectives, and reclamation requirements

are being optimized in ongoing engineering and planning work. A cost allowance for

re-sloping all final dump faces and covering with material to limit surface water

infiltration and for re-vegetation is included in the prefeasibility mine planning. This

will be refined and optimized in the Feasibility Study.

An opportunity case has been included which places a layer of tailing beneath the till

reclamation cover on the McTagg dump at closure to further lower infiltration and

reduce water treatment costs. Cost effectiveness of this closure layer of tailing will

be further investigated during feasibility-level design.


1 . 1 1 R O C K S T O R A G E F A C I L I T I E S

The mine rock storage for Kerr, Sulphurets, and Mitchell is all confined to the lower

Mitchell, Sulphurets, and McTagg areas. This will increase the costs of waste

haulage from the further mining areas, but will reduce the areas of disturbance, and

the post mining reclamation and waste treatment requirements. The safe operation

of high-relief dumps in mountain terrain has been successfully demonstrated at other

operations in western Canada; these approaches are being considered in this

planning work. Allowances have been made in the current prefeasibility engineering

work that adopt reasonable requirements for reclamation and post closure issues.

The details of the mine rock management plan and RSFs will be refined and

optimized in the subsequent Feasibility Study.

1 . 1 2 M I N I N G O P E R A T I O N S

Detailed pit phases were developed from the results of the LG sensitivity analysis,

using the discounted economic limit case and integrating detailed pit slope criteria

and highwall roads. The ultimate pits were divided into smaller mining phases, or

pushbacks, to allow for more even waste striping in the optimized scheduling stage

of the project design.

Pit Reserves are tabulated in Table 1.5, which includes an estimated mining loss and

dilution and NSR cut-offs as indicated for each area. Dilution grades represent the

average grade of material below the incremental cut-off grade for each pit area.

Grades used in the mining section of this report have been interpolated by Inverse

Distance Weighting (IDW) as described in the resource section of this report. The

grade items used are copper (CUIDW), gold (AUIDW), silver (AGIDW), and

molybdenum (MOIDW).


Table 1.5 Summary – Pit Phase Reserves

Pit Ore (kt)

Diluted Grades

Waste

(kt)

Strip

Ratio

(t:t)

NSR

(Cdn$/t)

Au

(g/t)

Cu

(%)

Ag

(g/t)

Mo

(ppm)

Mitchell

M661 49,252 21.6 0.712 0.148 2.52 61.5 2,649 0.05

M662i 194,819 24.7 0.781 0.185 2.55 58.6 247,736 1.27

M663i 162,302 20.5 0.622 0.167 2.67 64.4 452,353 2.79

M664i 117,749 19.7 0.631 0.144 2.90 60.2 214,636 1.82

M665i 210,470 18.2 0.543 0.155 2.40 64.2 874,878 4.16

M666i 379,198 19.8 0.588 0.166 3.37 60.7 906,656 2.39

M667i 221,658 18.3 0.530 0.162 3.34 54.9 732,904 3.31

Subtotal 1,335,448 20.2 0.612 0.164 2.93 60.4 3,431,812 2.57

Kerr

K611 125,078 26.0 0.276 0.478 1.26 0 207,822 1.66

Sulphurets

S611 142,182 25.6 0.612 0.282 0.44 101.8 580,352 4.08

Total 1,602,708 21.1 0.586 0.199 2.58 59.4 4,219,986 2.63

Notes: NSR cut-offs for each area are: Mitchell $7.07, Sulphurets $7.83, Kerr $6.88.

Table 1.5 includes mining loss and dilution specific to each mining area, as follows:

mining loss:

Mitchell – 2.06%

Sulphurets – 4.25%

Kerr – 6.2%

mining dilution:

Mitchell – 0.68%

Sulphurets – 2.87%

Kerr – 4.82%.

The schedule was developed using MineSight® schedule optimization. The

schedule is based on the detailed pit phases above; it varies production annually

from the three areas to maximize the NPV returns for the project. Because of the

limited room available for rock storage, the production schedule is balanced to

account for life-of-mine (LOM) waste storage limitations and long-term haulage

requirements. Large-scale shovels, trucks, and mobile equipment are utilized in the

mine planning schedules, which are then used for the operating cost estimates.

Mineral Reserves for KSM are summarized in Table 1.6.


Table 1.6 KSM Proven and Probable Reserves

Zone

Reserve

Category Mt

In-situ Average Grades Contained Metal

Au

(g/t)

Cu

(%)

Ag

(g/t)

Mo

(ppm)

Au

(Moz)

Cu

(Mlb)

Ag

(Moz)

Mo

(Mlb)

Mitchell

Proven 570.6 0.64 0.17 2.95 58.0 11.7 2,101 54.1 73.0

Probable 764.8 0.59 0.16 2.93 62.3 14.5 2,722 72.0 105.0

Total 1,335.4 0.61 0.16 2.93 60.4 26.3 4,823 126.1 178.0

Sulphurets Probable 142.2 0.61 0.28 0.44 101.8 2.8 883 2.0 31.9

Kerr Probable 125.1 0.28 0.48 1.26 Nil 1.1 1,319 5.1 Nil

Totals

Proven 570.6 0.64 0.17 2.95 58.0 11.7 2,101 54.1 73.0

Probable 1,032.1 0.56 0.22 2.38 60.2 18.4 4,924 79.1 137.0

Total 1,602.7 0.59 0.20 2.58 59.4 30.2 7,024 133.1 209.9

The proven and probable reserves of 30.2 M oz of gold (1.60 Bt at 0.59 g of gold per

tonne) are derived from total Measured and Indicated Resources of 38.9 M oz of gold

(2.1 Bt at 0.57 g of gold per tonne) and include allowances for mining losses and

dilution.

A summary of the production schedule is provided in Table 1.7.


Table 1.7 Summarized Production Schedule

Production Schedule Units

Year

LOM-1 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-37

Ore to Mill kt 43,831 43,800 37,120 43,800 40,907 195,428 183,550 182,687 213,652 212,817 166,920 - 1,364,513

AUIDW g/t 0.737 0.771 0.848 0.854 0.868 0.592 0.535 0.572 0.596 0.618 0.634 0 0.626

CUIDW % 0.150 0.190 0.218 0.197 0.204 0.220 0.265 0.261 0.194 0.199 0.194 0 0.217

AGIDW g/t 2.493 2.128 2.337 2.736 3.626 2.625 2.195 1.959 2.176 3.283 4.258 0 2.72

MOIDW ppm 62.0 48.3 47.3 61.1 47.2 53.264 47.417 49.593 86.863 54.540 40.006 0 55.9

Ore to Stockpile kt 19 2,369 5,312 18,769 6,317 759 42,985 36,694 28,676 53,086 18,765 24,066 - 237,817

AUIDW g/t 0.981 0.391 0.330 0.487 0.522 0.518 0.320 0.333 0.415 0.343 0.287 0.331 0 0.357

CUIDW % 0.050 0.022 0.070 0.011 0.009 0.000 0.062 0.045 0.176 0.040 0.081 0.035 0 0.061

AGIDW g/t 0.010 0.672 1.060 0.250 0.250 0.000 1.769 0.759 0.417 1.687 1.401 0.586 0 1.09

MOIDW ppm 0.1 23.9 28.2 11.3 24.4 0.0 57.027 37.959 62.007 62.034 83.298 31.944 0 49.7

Stockpile Reclaim kt 19 - 6,680 - 2,893 23,867 35,428 36,110 5,348 6,183 52,080 69,210 237,817

AUIDW g/t 0.981 - 0.357 - 0.524 0.477 0.366 0.397 0.345 0.381 0.328 0.304 0.357

CUIDW % 0.194 - 0.094 - 0.098 0.098 0.092 0.171 0.058 0.075 0.085 0.072 0.096

AGIDW g/t 1.813 - 1.690 - 1.762 1.994 2.256 0.949 0.284 2.875 2.030 1.892 1.83

MOIDW ppm 37.8 - 52.8 - 110.6 99.734 78.339 74.283 59.505 85.995 78.239 79.871 79.7

Stockpile Inventory kt 19 2,369 7,681 19,770 26,087 23,953 43,071 44,337 36,904 84,642 97,223 69,210 0

Plant Feed kt - 43,850 43,800 43,800 43,800 43,800 219,295 218,978 218,797 219,000 219,000 219,000 69,210 1,602,330

AUIDW g/t - 0.737 0.771 0.773 0.854 0.845 0.580 0.507 0.543 0.590 0.611 0.561 0.304 0.586

CUIDW % - 0.150 0.190 0.199 0.197 0.197 0.207 0.237 0.246 0.191 0.196 0.168 0.072 0.199

AGIDW g/t - 2.49 2.13 2.24 2.74 3.50 2.56 2.21 1.79 2.13 3.27 3.73 1.89 2.58

MOIDW ppm - 62.0 48.3 48.2 61.1 51.4 58.3 52.4 53.7 86.2 55.4 49.1 79.9 59.4

Metal to the Mill

AUIDW M oz - 1.04 1.09 1.09 1.20 1.19 4.09 3.57 3.82 4.15 4.30 3.95 0.68 30.17

CUIDW M lb - 145 183 192 191 191 1000 1143 1189 922 944 810 110 7020

AGIDW M oz - 3.51 3.00 3.15 3.85 4.93 18.03 15.53 12.61 14.99 23.04 26.25 4.21 133.10

MOIDW M lb - 5.99 4.66 4.65 5.90 4.96 28.20 25.31 25.89 41.62 26.76 23.71 12.19 209.83

Waste Mined

NAG kt 163 7,271 19,117 73,035 28,507 8,260 226,593 144,934 409,959 259,948 196 4 - 1,177,987

PAG kt 837 82,729 128,379 46,973 91,729 111,957 490,741 692,783 653,342 423,259 311,354 7,889 - 3,041,972

Total Waste Mined kt 1,000 90,000 147,496 120,008 120,236 120,217 717,334 837,717 1,063,301 683,207 311,551 7,893 - 4,219,960

Strip Ratio (waste mined/ore mined) t/t 52.0 1.9 3.0 2.1 2.4 2.9 3.0 3.8 5.0 2.6 1.3 0.0 - 2.6

Cumulative Strip Ratio (waste mined/ore mined) t/t 52.0 2.0 2.5 2.4 2.4 2.5 2.7 3.1 3.5 3.3 3.0 2.6 2.6

Total Material Mined 1,019 136,200 196,608 175,896 170,353 161,883 955,747 1,057,961 1,274,665 949,944 543,133 198,880 - 5,822,290

Total Material Moved 1,019 136,219 196,608 182,577 170,353 164,776 979,614 1,093,388 1,310,774 955,292 549,316 250,960 69,210 6,060,107


The mining operations will be typical of open-pit operations in mountainous terrain in

western Canada, and will employ typical open pit mining methods and equipment.

There is considerable operating and technical expertise, services, and support for the

proposed operations both in western Canada and in the local area. The project is a

large-capacity operation that utilizes large-scale equipment for the major operating

areas in order to generate high productivities, reduce unit and overall mining costs.

Large-scale equipment will also reduce the labour requirement on site and will dilute

the fixed overhead costs for the mine operations. Much of the general overhead for

the mine operations can be minimized if the number of production fleets and the

labour requirements are minimized.

The mine plan and production schedule will undergo further refinement during the

Feasibility Study. Additional geotechnical information on high wall capabilities should

confirm the pit slopes and optimization results. Further details on the rock storage

management, water management, and final land use will be developed for the EA

application.

1 . 1 3 M E T A L L U R G I C A L T E S T R E V I E W

Several wide-ranging metallurgical test programs were carried out between 2007 and

early 2010. These programs assessed the metallurgical responses of Mitchell,

Sulphurets, and Kerr mineralization.

The mineralogy, flotation, cyanidation, and grindability testwork was carried out by

G&T Metallurgical Services Ltd. (G&T) and SGS Minerals Services (SGS). Hazen

Research Inc. (Hazen) conducted the semi-autogenous grinding (SAG) mill

comminution (SMC) grindability tests to determine the grinding resistance to

SAG/ball milling. SGS determined the crushing resistance parameters to high

pressure grinding rolls (HPGR) crushing of Mitchell and Sulphurets ore samples and

Koeppern Machinery Australia Pty Ltd.'s (Koeppern) HPGR pilot plant at the

University of British Columbia conducted pilot plant scale HPGR testing on Mitchell

ore sample. Dewatering tests were performed by Pocock Industrial Inc. on samples

of ore heads, copper concentrates, sulphide leach products, and tailing pulps.

The flotation and cyanidation metallurgical testing established optimum grind

conditions, flowsheet development parameters, ore variability responses, and

copper-molybdenum separation techniques. Locked cycle flotation tests were

performed on Mitchell, Sulphurets, and Kerr ore composites. The test results

indicated that the KSM mineralization responded well to conventional flotation and

cyanidation processes although there was some variation in the metallurgical

performance between the samples tested. The testing programs have assisted in

developing a conventional grinding and flotation circuit to produce:

a copper-gold concentrate

a molybdenum concentrate.


A separate gold-silver extraction circuit will recover gold and silver from gold-bearing

pyrite products.

1 . 1 4 M I N E R A L P R O C E S S I N G

The proposed flotation process is projected to produce a copper-gold concentrate at

24% copper. This concentrate should recover between 77% and 87% of the copper

and 51% and 61% of the gold from the mill feed, except in the last two years of

operation. Copper and gold flotation recovery will vary with changes in head grade

and mineralogy. The LOM average copper and gold recoveries to the concentrate

would be 82.2% and 55.9% respectively. As projected from the testwork, the

cyanidation circuit (carbon-in-leach) will increase the overall gold recovery to a range

of 74% to 79%, averaging 76.9% on mine life, depending upon gold and copper head

grades. Silver recovery from the flotation and leaching circuit is expected to average

72%. A separate flotation circuit will recover molybdenite from copper-gold-

molybdenum bulk concentrate when high-grade molybdenite mineralization is

processed.

The mill feed from the Mitchell, Sulphurets, and Kerr deposits will be processed at an

average rate of 120,000 t/d. The Mitchell deposit will be the dominant source of mill

feed for the process plant. The mineralization from Kerr deposit will be processed

together with Mitchell ore between Years 6 and 18 and Sulphurets ore will be mined

and blended with Mitchell mineralization between Years 19 and 24.

The process plant will consist of three separate facilities: an ore crushing/grinding

and handling facility at the mine site, a Mitchell-Teigen ore slurry tunnel

transportation system, and a main process facility at the Teigen area site, adjacent to

the TMF. Processing at the Teigen area plant site will include secondary grinding,

flotation, regrinding, leaching, and dewatering.

The comminution plant at the Mitchell valley mine site will reduce the mill feed from

80% passing 1,200 mm to 80% passing 180 µm by three stages of crushing and one

stage of grinding. The crushing will include primary crushing by gyratory crushers,

secondary crushing by cone crushers, and tertiary crushing by HPGR. The primary

grinding circuit, consisting of four conventional ball mills, will grind the crushed

materials to a particle size of 80% passing 180 µm.

The ground mill feed will be transported through one of the Mitchell-Teigen twin

tunnels (MTT) by two stages of pumping to the Teigen plant site, located near the

TMF northeast of the KSM mine. This tunnel will also be used for electrical power

transmission, diesel fuel delivery by pipeline, and return of reclaim process water

from the Teigen plant site to the primary grinding plant at Mitchell. The adjacent

tunnel will be used for the transport of personnel and supplies for the mines

operating and water management activities.


The plant site will consist of secondary grinding, flotation, concentrate dewatering,

cyanide leaching, gold recovery, and tailing management facilities. The ore solids

from the primary comminution circuit will be ground to a product size of 80% passing

125 µm. The grinding circuits will consist of eight energy efficient tower mills in

closed circuit with hydrocyclones. The ground ore will then have

copper/gold/molybdenum minerals concentrated by conventional flotation to produce

a copper-gold-molybdenum concentrate and a gold-bearing pyrite concentrate for

gold leaching. Depending on molybdenum content in the copper-gold-molybdenum

concentrate, the concentrate may be further treated to produce a copper-gold

concentrate and a molybdenum concentrate. The concentrates will be dewatered

and shipped to copper and molybdenum smelters.

The gold-bearing pyrite flotation concentrate together with the cleaner flotation tailing

from the copper-gold-molybdenum cleaner circuit will be leached with cyanide for

additional gold and silver recovery. Prior to storage in the TMF, the pulps from the

cyanide leaching circuit will be washed, and subjected to cyanide recovery and

destruction.

The flotation tailing and the washed leach residues will be sent to the TMF for

storage.

1 . 1 5 T A I L I N G , W A T E R M A N A G E M E N T , A N D R O C K S T O R A G E F A C I L I T I E S

1.15.1 TAIL IN G MAN AGEMENT FACIL IT Y

The TMF is designed to store 1.62 Bt of tailing produced over a 37-year mine life.

Earth fill starter dams will be constructed over a two-year period to provide initial

tailing storage for two years. The tailing will flow by gravity to the TMF in slurry

pipelines. The tailing dams will be further raised by two compacted cyclone tailing

dams built by the centreline construction method, with a vertical till core to restrict

seepage. Cyclone sand raises will be constructed April through October each year.

An ultimate dam crest elevation of 1095 m is required to meet the 37-year mine life

storage requirements based on laboratory tests of tailing samples and modelling of

in situ tailing consolidation.

Free water collected in the centre of the TMF will be reclaimed from a floating pump

barge and returned to the plant in a pipeline. Diversions will be constructed to route

non-contact runoff from the surrounding valley slopes around the TMF. Diversion

channels consist of ditches with buried pipes in areas of several avalanche paths and

are sized to allow passage of snow removal machinery.

Seepage and runoff water from each tailing dam will be collected at small

downstream collection dams and pumped back to the TMF. The dams will also

serve to settle solids transported by runoff or produced by dam construction

activities. Seepage from the impoundment has been modelled to be substantially

lower than acceptable environmental limits as determined by Rescan. The dam has


been designed to resist earthquake loads. A site specific seismic hazard

assessment has shown that seismic activity in the area is relatively quiet, with a peak

ground acceleration at a 10,000-year return period of 0.14 g. Foundation conditions

at the dams are good; the foundation consists of either strong metasediments or

dense tills, with some areas of alluvial material that will require removal.

Water balance calculations based on data taken between 2007 and 2009, combined

with regional long term records and new data on tailing consolidation behaviour,

indicate that the TMF will have an average surplus of 0.23 m3/s of water during its

operating life. Surplus water may be managed through a combination of storage,

discharge during freshet, or treatment and discharge.

1.15.2 M IN E AR EA WAT ER MAN AGEMENT

Two diversion tunnels have been included to route water around the mine area. The

tunnels are designed to accommodate a 1-in-200 year storm.

The Mitchell Diversion Tunnel (MDT) is 4 km long and has a 27.5 m2 cross section.

The MDT routes water from the Mitchell Glacier to the Sulphurets valley, away from

the open pit, process plant, open pit area, and Mitchell Rock Storage Facility

(MRSF). The diversion will also generate hydroelectric power, as Sulphurets valley

is lower than Mitchell valley. The Mitchell Diversion will collect melt water from

beneath the base and toe of the Mitchell Glacier via two separate inlet structures, to

improve redundancy and protect the inlet of the diversion from avalanches. A third

emergency spillway will be maintained to route water that bypasses the Mitchell

Diversion intakes in upset or extreme storm conditions around the pit within a

channel constructed on a south bench of the pit. In upset conditions, this water can

discharge to water treatment under the MRSF, or in later years out the Kerr conveyor

tunnel once it is constructed.

A second 4 km diversion tunnel, with dimensions slightly smaller than the Mitchell

Diversion, routes flows from the McTagg valley around the McTagg Rock Storage

Facility (MTRSF). This flow will also generate hydroelectric power. The inlet to the

McTagg tunnel will be first established at a low level to deal with initial flows. As the

mine life progresses, additional branch inlets will be constructed at higher levels to

divert water into the diversion tunnel as the MTRSF is raised in elevation.

During operations, rock will be placed on the surface of the MTRSF to define

extreme flood channels on the north and west margins that will be available to route

storm flows in excess of the 1-in-200 year event capacity of the McTagg Diversion

Tunnel (MTDT). A spillway will be constructed in rock at the southwest corner of the

McTagg dump to convey storm waters down to diversion channels on the west and

east sides of the Water Storage Facility (WSF).

Seepage requiring treatment from the Mitchell, McTagg, and Sulphurets RSFs will be

collected in the lower Mitchell area by a water-retaining dam. An ultimately 150 m-

high rockfill earth core dam with protective internal synthetic liner will create the WSF


pond, which will be large enough to handle seasonal freshet flows as well as flows

from 1-in-200 year wet year. This dam will be raised in two stages over the mine life.

The dam will be located in the lower Mitchell area where competent rock foundation

conditions are evident. To control seepage, the dam foundation will be grouted. A

seepage collection pond has been provided. Avalanche hazards have been

assessed for the area and the wave modelled from the maximum predicted

avalanche in the area can be contained within designed dam freeboard.

To treat contact water and drainage from the mine area, tunnels, open pits, and

RSFs, a high density sludge lime water treatment plant with capacity of 2.5 m3/s will

be constructed. Based on data taken between 2007 and 2009, water balance

calculations, combined with regional long term records, indicate that during the

stages of mine life, the treatment plant will operate year-round at a constant rate of

between 1.3 m3/s and 2 m3/s to treat water stored from each years freshet. The

treatment plant is sized to deal with additional flows from the 1-in-200 year wet year.

Sludge from the treatment process can be pumped to the ore slurry pipeline and

passed through the ore milling process for eventual disposal in the tailing pond

during operations, or in cells in the RSF after closure. Additional hydropower will be

generated from the flow of treatment water from the storage pond to the treatment

plant.

During operations, secondary diversion ditches and pipelines will be implemented

within the mine area to reduce water treatment requirements. Open pit contact water

and discharge from pit dewatering wells will be diverted from the pit rims via ditches

or direct drainage and via pipelines to the water treatment pond or plant.

During the construction period, four temporary water treatment systems will operate

to deal with the potential for acid rock drainage (ARD) from tunnel portals and the

temporary stockpiles of tunnel muck. These plants will include reactor tanks, lime

dosing, and settling ponds, and will treat metals and reduce suspended solids. Two

additional treatment systems to deal with suspended sediments will be operated

during construction at the portals of the MTDT, and will consist of sediment ponds.

Tunnel muck will be stockpiled during winter months on lined pads located at the

temporary water treatment sites and will be hauled to permanent disposal sites when

roads are open.

1.15.3 M IN E AR EA CLOSUR E PLAN

The RSFs will be placed close to their final closure configuration and recontoured as

necessary. The RSFs will be primarily built bottom-up to result in stable dump slopes

during operation and closure. As the MTRSF will be a flat-topped valley fill, the

possibility of using a closure cover of neutral tailing (to reduce infiltration) will be

examined during the Feasibility Study. Other potential measures to limit ARD

generation that will be examined in the next phases of design include the inclusion of

till cores within the MTRSF to saturate internal zones. The RSFs will have a soil

cover applied to promote plant growth and the area will be revegetated where

required.


Upon closure, the hydroelectric plants will remain in operation, generating more

power than required to operate the treatment plant and generating income to offset

treatment costs. Upon closure, the extreme storm relief channels maintained on the

dump surface during operations will be upgraded to closure channels capable of

conveying the predicted maximum flood. An 80 m-high closure dam will be

constructed to elevation 840 m to:

allow partial flooding of the Mitchell pit

route closure flows around the MRSF in the event that the MDT is no longer

operational.

The tunnels used for hydro power generation will continue to operate after closure

and will continue to serve as diversion structures. Upon decommissioning of the

mine, the RSFs will be contoured such that surface closure channels are present to

route clean water flows around the RSFs, in the event of failure of the diversion

tunnels or to handle extreme flood events.

1.15.4 TMF CLOSURE PLAN

The TMF will be closed as a dry-surface, saturated facility with a minimal pond. The

sulphide stream will be deposited below the saturated level to avoid ARD generation.

The cyclone dam and beach surfaces are net non-acid generating due to the removal

of sulphides. The dam faces will be either covered with an erosion protection layer,

or covered with till and revegetated using soil stockpiled during construction of the

dams.

The MTT will remain after mine closure and will continue to provide site access. The

power cables in the tunnels will also remain and convey power generated by the

hydroelectric plants to market via the grid and will ensure a power supply and

communications connection to the water treatment plant.

If the tunnels are no longer required at site, the low gradient of the tunnels allows

sealing of the tunnel portals with an engineered plug to block tunnel drainage and the

generation of potential ARD.

1 . 1 6 E N V I R O N M E N T A L C O N S I D E R A T I O N S

The KSM Project requires certification under both the British Columbia

Environmental Assessment Act (BCEAA) and Canadian Environmental Assessment

Act (CEAA) processes. In addition, numerous federal and provincial licences,

permits, and approvals will be required to use, construct, and operate the project. In

particular, the project will require an amendment to Schedule 2 of the federal Metal

Mining Effluent Regulation (MMER) in order to construct the TMF in an area

occupied by fish.


The BC Environmental Assessment process was initiated in March of 2008 with

submittal of a “Project Description” to the BC Environmental Assessment Office

(BCEAO). Federal regulatory authorities were also informed of the proposed project

at that time. The BCEAO confirmed in April of 2008 that the KSM Project will require

an Environmental Assessment. On November 6, 2009, the BCEAO issued a

Section 11 Order to establish the scope, procedures, and methods for the

Environmental Assessment. The Canadian Environmental Assessment Agency

(CEA Agency) formally advised Seabridge on July 23, 2009, that the KSM Project will

require an Environmental Assessment under the CEAA.

Two years of on-site baseline environmental work was completed by Rescan in 2008

and 2009. Baseline work included comprehensive surveys of meteorology, air

quality, hydrology, hydrogeology, geochemistry, water quality, fish and aquatic

ecology, soils, wetlands, vegetation, wildlife, archaeology, regional social and

economic status, land use, and Aboriginal knowledge. The environmental

information collected has been considered in the design of the project to avoid,

minimize, or mitigate potential adverse environmental effects.

Rescan is also leading the preparation of the Environmental Assessment and the

submissions required to acquire operating permits. Seabridge and its team are

involved with engagement meetings with local communities, regulatory agencies,

regional and municipal governments, the Nisga’a Nation, and relevant First Nations

identified by the BCEAO to advance the proposed project through the review

processes.

1 . 1 7 O N - S I T E I N F R A S T R U C T U R E

The proposed permanent road access routes to the mine and plant site include a

35 km road south from the Eskay Creek Mine site and a 14 km road southwest from

Highway 37. These roads will provide access for supplies, equipment and crew

transport, and will be used for hauling concentrate to Highway 37.

A proposed winter access road that leads to the KSM mine will be constructed. The

route will begin at the end of an existing all-season road near the abandoned

Granduc Mine/Tide Lake airstrip, head north to the toe of the Frank Mackie Glacier,

and then follow across the glacier into the Ted Morris Creek valley, which is a

tributary of Sulphurets Creek. The winter access road will be used to mobilize

equipment and supplies. The equipment and supplies will enable some preliminary

construction work to be carried out at the mine site, and to initiate pioneering work

and tunnel construction at the Mitchell side and to construct an extension to the

existing access road from the Eskay Creek mine site in the Unuk River valley to the

Mitchell mine site area.

The plant site and Mitchell mine facility layouts are located to take advantage of the

natural topography and, to the extent possible, minimize the impact on the

environment (Figure 1.2).


The ground mill feed at Mitchell will be transported through one of the two parallel

23 km tunnels, known as the MTT, by two stages of pumping to the main plant site,

which is to be located on KSM’s Seabee property northeast of the Mitchell pit. The

tunnel would extend from the north side of the Mitchell Zone to the northeast into the

upper reaches of the Teigen Creek valley, north of the TMF. There is a saddle point

approximately 16 km from the Mitchell portal where the tunnel daylights. There

would be a 17 km temporary construction access road, known as the Tunnel Divide

Portals Spur Road (TDPR), constructed from the plant site to where the MTT

daylights.

One of the MTT’s would also be used for two slurry pipelines, a return water pipeline

from the TMF, a diesel fuel pipeline, and electrical power transmission cables. The

other MTT will provide maintenance services between the main plant site, deliver

bulk supplies, and move personnel to/from the Mitchell valley mine areas. The

proposed tunnel route is through Crown land and approximately 15 km of its length

passes through ground subject to mineral claims held by third parties.

At the Mitchell pit (Figure 1.3), the primary crusher will feed a conveyor material

handling system. Services will be constructed to deliver feed for crushing in the

secondary crusher building, HPGR building, and ball mills (located in the grinding

building). Figure 1.3 shows the conveyors, plant access roads, fuel storage, ancillary

buildings, electrical buildings, and haul routes from the Mitchell pit.

Ore from the Kerr and Sulphurets pits will be crushed at the respective pits and be

transported by means of a rope conveyor system starting at the Kerr pit. At a

transfer point southwest of the Sulphurets pit, the material will be transported on an

overland conveyor through the Sulphurets Mitchell conveyor tunnel and, finally, by

rope conveyor to the Mitchell coarse ore stockpile. Ore from the Sulphurets pit will

be trucked to a stockpile adjacent to the transfer point and conveyed to the tunnel

conveyor. Non-mineralized material will be transported in a similar way but diverted

to an RSF in the Mitchell valley.

The Kerr pit will supply ore for blending with Mitchell ore during mine production

Years 6 to 18. Sulphurets will then provide ore for blending with Mitchell ore starting

in Year 19. A conveyor material handling system and services will deliver the Kerr

and Sulphurets ores to the Mitchell area for delivery into the crushed ore stockpiles.

Figure 1.4 shows the lower Mitchell site area including additional infrastructure such

as the initial staging, construction and permanent camps, explosive facilities, the

water storage dam, diversion tunnels, and power plants. Access and appropriate

haul roads would be provided to all of these areas.

The flotation processing facility is shown below in Figure 1.5, including a construction

and permanent accommodation complex and related administration, as well as

maintenance and support facilities.


Figure 1.3 Process Plant at Mitchell


Figure 1.4 Lower Mitchell Area Site Plan


Figure 1.5 Plant Site at the TMF


1 . 1 8 O F F - S I T E I N F R A S T R U C T U R E

Copper concentrates (averaging approximately 820 t/d) produced at the process site

will be filtered at the plant site and transported 200 km by contract trucking firms on

Highway 37 and 37A to a storage and concentrate loading facility site near Stewart,

BC. Concentrates would be loaded and shipped via ocean transport to overseas

smelters.

The project will utilize a marshalling/staging area at Smithers to receive and deliver

equipment and supplies to the site during construction and operation of the KSM

mine.

1 . 1 9 P O W E R S U P P L Y A N D D I S T R I B U T I O N

The high voltage transmission utility in this area of BC is the British Columbia

Transmission Corporation (BCTC). Whereas electric power may be purchased from

other generators and wheeled over BCTC lines, no other supplier is competitive with

the rates available under Tariff 1823 “Transmission Service” from BC Hydro, the

major generator in the province.

The northern most extension of the current BCTC grid in this area of the province is a

220 km long, 138 kV transmission line to Meziadin Junction from the Skeena

substation near Terrace, BC. The community of Stewart is provided service by a

continuation of the transmission line from Meziadin. This existing 138 kV

transmission line does not have adequate capacity to supply an extension to the

KSM property. There is a currently proposed new 335 km long 287 kV “Northwest

Transmission Line” (referred to as the NTL) from Skeena substation following in

proximity to Highway 37 past the KSM property as far north as Bob Quinn Lake. The

required environmental studies for the NTL are currently proceeding. Due to the

uncertainty of this project and the estimated costs, it is proposed to take regular

service from BC Hydro at Meziadin Junction under their bulk rate schedule 1823.

This will require significant system reinforcement on the part of BCTC, including the

construction of a new 287 kV transmission line from Skeena to Meziadin (similar to

the current NTL plans). As the KSM load is large, in the range of 150 MW,

BC Hydro’s revenues will be sufficient such that they would under the current tariffs

fund this construction, only requiring a bond from KSM to guarantee continued mine

operation over a seven year period. Consequently, the KSM Project would take

service from BC Hydro at Meziadin and would then be responsible for construction of

a 287 kV transmission line from Meziadin to Snowbank Creek, just north of Bell II

(102 km in length) and then a further 15 km interconnection to the KSM No. 1

substation, located adjacent to the flotation plant.

Overhead power lines and underground cables will be run from feeder breakers in

the 287 kV No. 1 Flotation step-down substation to distribute power around the plant

site.


Service to the Mitchell mine and mill site would be provided by a 287 kV cable

(24 km in length, including lead-in to the portals) through the slurry pipeline tunnel

connecting the plant sites. This supply would terminate at the 287 to 25 kV step-

down Substation No.2 at in the proposed Mitchell plant area. There will be 25 kV

cables feeding the mill building and 25 kV overhead power lines extending from the

substation to the primary crusher area, conveyors systems, service complexes,

hydro plants, and around the rim of the open pit mines to service pit equipment.

The PFS capital and operating cost estimates were developed from these electrical

service concepts. A map of the proposed KSM and BCTC transmission lines, which

would be essentially the same as the proposed NTL installation, is shown in Figure

1.6.

The recommended power supply option involves construction (by KSM) of 103 km of

287 kV transmission line from Meziadin Junction, generally parallel to Highway 37, to

Snowbank Creek, a point just north of Bell II. The plan is based on use of the same

right-of-way and the associated environmental assessment review process, currently

underway, for the NTL project and assumes cooperation by BCTC and the BC

government. The current utility tariffs allow private construction within a BCTC right-

of-way, provided all work is in accordance with BCTC standards. It is anticipated that

ownership of this section of line would be transferred to BCTC for a nominal sum

after completion of construction and the metering point would thus be close to the

mine along Highway 37 in the vicinity of Bell 2.

The 287 kV branch line to the mine (to be constructed and owned by KSM) includes

15 km of 287 kV transmission line generally following the mine access road from

Highway 37 to the plant site.


Figure 1.6 Map of the Proposed Northwest Transmission Line

1.19.1 M IN I HYD RO PLANT S AN D ENERGY REC OVER Y

Several energy recovery and mini-hydro plants have been included in the project

development plan. These plants generate electric power by making use of facilities

already included in the project development plan; their inclusion will result in

significant net project energy savings. The plants will all be located within the mining


lease area. The total annual energy saving is estimated to be 92,019,000 kWh. All

of the plants, similar to small independent power producer (IPP) hydroelectric plants,

will operate unattended and automatically controlled by PLC systems. The power

will be fed into the local mine distribution power lines. The plants will either displace

costly “Tier 2” utility power, or will be sold back to BC Hydro under their “Standing

Offer” program. The per-kilowatt-hour value of the generated electricity will therefore

be relatively high.

This section provides a brief summary of the generation plants.

RETU RN WAT ER EN ER GY REC OVER Y

This plant will consist of a water turbine at the end of the 24 km-long return (process)

water line that will run downhill through the pipe tunnel from the tailing storage facility

to the Mitchell grinding plant. A small impulse “Turgo” type turbine will be used. The

equipment will be located in a small building near the Mitchell portal, with the

discharged water running by gravity to the return (process) water tank. Power will be

fed into the adjacent plant electrical system.

WAT ER TREATMENT PLA NT ENERGY REC OVER Y

This generation plant is similar in concept to the return water energy recovery plant.

It uses the water running downhill from the water storage pond to the water treatment

plant to generate electric power. A small impulse “Turgo” type turbine will be used.

The output will be fed into the plant power distribution system at the water treatment

plant. This facility will continue to operate after mine closure.

TAIL ING EN ER GY REC OVERY

This plant will consists of four slurry pumps running in reverse as turbines, with

induction generators to supply power back into the local plant electrical distribution

system. The equipment is located in two buildings at two separate locations

straddling the two tailing lines between the flotation plant and the tailing storage

facility.

M ITCH ELL D IVERSION HYDR O

This plant will make use of the normal (but not flood) stream flows that will be

diverted around the mining operations by the Mitchell diversion tunnel. The

installation will consist of a Pelton turbine, and will be very similar to IPP run-of-river

hydro plants, as it makes use of the flow as it naturally occurs, with no water storage

facilities or any other works other than what’s required for water diversion around the

mine. The equipment will be housed in a small powerhouse building near Sulphurets

Creek. Power will be delivered to the open pit electrical distribution system. This

plant will continue to operate after mine closure.


MCTA GG D IVER SION HYDRO

This plant will be very similar to the Mitchell diversion scheme. It will consist of two

Pelton turbines, and will feed power into the plant distribution system at the water

treatment plant. This facility will continue to operate after mine closure.

1 . 2 0 C A P I T A L C O S T E S T I M A T E

An initial capital of US$3.365 B is estimated for the project, based on capital cost

estimates developed by the following consultants:

MMTS – mine capital costs, rock storage areas, and Mitchell Side

pioneering works

KCBL –water management and mine waste construction costs

Allnorth – water storage dam and tailing starter dam earthworks costs

BVL – conveying, slurry, tailing and return piping, and pumping costs

Thyssen – tunnel costs

Wardrop – process plant and associated infrastructure costs

Brazier – power supply costs

McElhanney – access road costs

EBA – winter road access.

All currencies in this section are expressed in United States dollars. Costs in this

report have been converted using a fixed currency exchange rate of Cdn$1.00 to

US$0.92. The expected accuracy range of the capital cost estimate is +25%, -10%.

Initial capital has been designated as all capital expenditures required to produce

concentrate and doré. A summary of the major capital costs is shown in Table 1.8.

This PFS estimate is prepared with a base date of Q1 2010 and does not include any

escalation past this date. The quotes used in this estimate were obtained in Q1 2010

and have a validity period of 90 days.

Budget quotations were obtained for all major equipment. The vendors provided

equipment prices, delivery lead times, freight costs to a designated marshalling yard,

and spares allowances. The quotations provided are budgetary and non-binding.

For non-major equipment (i.e. equipment less than $100,000), costing is based on in-

house data or quotes from recent similar projects.

All equipment and material costs include Free Carrier (FCA) manufacturer plant Inco

terms 2000. Other costs such as spares, taxes, duties, freight, and packaging will be

covered separately in the Indirects section of the estimate.


Table 1.8 Capital Cost Summary

Cost

(US$ 000)

Direct Works

A Overall Site 106,000

B Open Pit Mining 153,000

C Crushing, Stockpiles and Grinding 371,000

D1 Tunnelling 199,000

D2 Mitchell Teigen Tunnel Transfer System 127,000

E Plant Site Grinding and Flotation 272,000

F1 Tailing Management Facility 72,000

F6 Water Treatment 185,000

G Site Services and Utilities 70,000

J Ancillary Buildings 83,000

K Plant Mobile Equipment 10,000

M Temporary Services 142,000

N1 Permanent Electrical Power Supply 146,000

N2 Energy Recovery Plants 51,000

P1 Permanent Access Roads 72,000

P2 Temporary Winter Access Roads 15,000

Q Off-site Infrastructure and facilities 62,000

Direct Works Subtotal 2,134,000

Indirects

X Project Indirects 760,000

Y Owner's Costs 77,000

Z Contingencies 394,000

Indirects Subtotal 1,231,000

Total 3,365,000

1 . 2 1 O P E R A T I N G C O S T E S T I M A T E

The operating cost for the KSM operations are estimated at US$11.66/t milled. The

estimate was based on an average daily process rate of 120,000 t/d milled.

The cost estimates in this section are based upon budget prices in Q1 2010 or based

on the data from the database of the consulting firms involved in the cost estimates.

When required, costs in this report have been converted using a fixed currency

exchange rate of Cdn$1.00 to US$0.92 from Seabridge. The expected accuracy

range of the operating cost estimate is +25%, -10%.

Power will be supplied by BC Hydro at an average cost of US$0.036/kWh at the plant

25 kV bus bars. Process power consumption estimates are based on the Bond work


index equation for specific grinding energy consumption and estimated equipment

load power draws for the rest of the process equipment. The power cost for the

mining section is included in the mining operating cost. Power costs for surface

service is included in the site services.

The estimated electrical power costs are based on the 2009 tariffs escalated to 2010

rates and the implementation of BC Hydro-approved energy conservation measures

in the plant design phase, which essentially eliminate the more costly “Tier 2” power

in the BC Hydro stepped rate tariff 1823.

Table 1.9 Average Operating Cost Summary

US$/a

(000)

US$/t

Milled

Mine

Mining Costs - Mill Feed* 217,596 4.97

Mill

Staff & Supplies 196,147 4.48

Power (Process only) 39,108 0.89

G&A and Site Service

G&A 26,946 0.62

Site Service 10,090 0.23

Tailing and Water Treatment

Tailing 10,856 0.25

Water Treatment 15,556 0.36

Subtotal Mine Operating Cost 516,299 11.80

Hydro-power Credit -6,238 -0.14

TOTAL OPERATING COST 522,537 11.66

* including pre-production operating costs of US$6 M.

The mine operating costs are defined as the direct operating costs including mining,

processing, tailing storage, water treatment, site services and G&A. The hydro-

power credit is from the recovered hydro-energy during mining operations.

Sustaining capital includes all capital expenditures after the process plant has been

put into production.

1 . 2 2 E C O N O M I C E V A L U A T I O N

An economic evaluation of the KSM Project was prepared by Wardrop based on a

pre-tax financial model. For the 36.6-year mine life and 1,602 Mt reserve, the

following pre-tax financial parameters were calculated using the base case metal

prices:

11.4% internal rate of return (IRR)

6.9-year payback on US$3,365 M capital


US$2,886 M net present value (NPV) at 5% discount value.

The base case prices, using the 3-year trailing average (as of March 15, 2010) were

as follows:

gold – US$878/oz

copper – US$2.95/lb

silver – US$14.59/oz

molybdenum – US$16.50/lb (lower than 3-year average of US$23.16/lb)

exchange rate – 0.92 (US$:Cdn$).

Metal revenues projected in the KSM cash flow models were based on the average

metal values indicated in Table 1.10.

Table 1.10 Metal Production from KSM Project

Years 1 to 5 LOM

Total Tonnes to Mill (000s) 219,050 1,602,330

Annual Tonnes to Mill (000s) 43,810 43,803

Average Grades

Gold (g/t) 0.796 0.586

Copper (%) 0.187 0.199

Sliver (g/t) 2.62 2.58

Molybdenum (ppm) 54.2 59.4

Total Production

Gold (000s oz) 4,388 23,191

Copper (000s lb) 745,900 5,773,922

Silver (000s oz) 13,468 96,138

Molybdenum (000s lb) 8,605 75,811

Average Annual Production

Gold (000s oz) 878 634

Copper (000s lb) 149,180 157,843

Silver (000s oz) 2,694 2,628

Molybdenum (000s lb) 1,721 2,072

Two alternate metal price scenarios were also developed. The spot price scenario

used current metal prices from the middle of March 2010. The input parameters and

results of all scenarios can be found in Table 1.11.


Table 1.11 Summary of the Economic Evaluations

Unit

Base

Case

Alternate

Case

Spot Price

Case

Metal Price

Gold US$/oz 878 900 1100

Copper US$/lb 2.95 2.25 3.25

Silver US$/oz 14.59 14.00 17.00

Molybdenum US$/lb 16.50 16.50 16.50

Exchange Rate US:Cdn 0.92 0.92 0.92

Economic Results

NPV (at 0%) US$ M 11,731 8,317 18,625

NPV (at 5%) US$ M 2,886 1,572 5,593

IRR % 11.4 8.8 16.5

Payback Years 6.9 8.5 4.4

Cash Cost/oz Au US$/oz 144 313 68

Total Cost/oz Au US$/oz 373 541 297

1.22.1 SENSIT IVIT Y ANALYSIS

Sensitivity analyses were carried out on the following parameters:

copper and gold metal prices

exchange rate

initial capital expenditure

on-site operating costs

off-site charges.

The analyses are presented graphically as financial outcomes in terms of NPV and

IRR. Both the project NPV and IRR are most sensitive to gold price and exchange

rate followed by operating costs. The NPV and IRR sensitivity can be seen in Figure

1.7 and Figure 1.8.


Figure 1.7 Base Case Sensitivity to NPV at 5% Discount Rate

Figure 1.8 Base Case Sensitivity to IRR


1 . 2 3 P R O J E C T D E V E L O P M E N T P L A N

The project will take approximately four and half years of construction activities to

complete, with an additional possible six months for start up and commissioning,

after receipt of construction and operating permits. Construction permitting is

expected in Q4 2011 and the mine will commence operation in Q1 2016. Section

25.0 gives a high-level project schedule.

1 . 2 4 O P P O R T U N I T I E S A N D R E C O M M E N D A T I O N S

Based on the work carried out in this PFS and the resultant economic evaluation, this

study should be followed by a Feasibility Study in order to further assess the

economic viability of the project.

Detailed opportunities and recommendations are provided in Section 29.0 of this

report.

1 . 0 s u m m a r ysulphurets, and mitchell zones, using minesight® software. there were 128...

Documents