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In light of the improved
gold market, Seabridge plans to review historical
technical work performed on Grassy Mountain
during 2004 to ascertain whether any of the
gold resources can be reclassified as reserves.
Open Pit Scenarios
As part of a detailed feasibility study conducted
by Kilborn in 1990, an open-pit mine model was
developed by PAH. Pit limits were developed
using a net realizable gold price of US$350,
mining costs estimated by PAH, and processing
costs and recoveries estimated by Kilborn.
Manual refinements were made to the pit to accommodate
haul road access, designed catch benches, and
geotechnical recommendations by Seegmiller International
and Golder & Associates. The 1990
feasibility study resulted in a measured and
indicated reserve at a US$350 gold price of
996,000 ounces from 16 million tons grading
0.062 opt Au of mill and heap leach ores.
Neither the recovered silver nor low grade leach
ores were considered. The contained silver
is approximately 2,467,000 ounces. The
stripping ratio, excluding the low grade material,
was 5.4 to 1. Total recoverable gold was
estimated at over 800,000 ounces. The
feasibility study forecasted life of mine cash
operating costs of US$127 per ounce, and total
costs of US$241, before financing costs.
In its 1997 study, PAH re-examined the open-pit
scenario and concluded that at gold prices ranging
from US$350 to US$400, the project as an open-pit
was not economically viable. In its analysis,
PAH re-estimated the measured and indicated
geologic resource using a 0.020 opt lower cutoff,
and high-grade cut to 0.30 opt at 17,376,000
tons grading 0.052 opt Au for total contained
gold of 901,785 ounces. As a test of the
sensitivity of the resource model to the capped
grade, PAH examined the impact of removing the
0.30 ounce gold per ton cap from the open-pit
resource model and determined that removing
the cap would add approximately 150,000 ounces
to the resource estimate.
Underground Scenarios
The 1997 PAH Conceptual Review analyzed five
development scenarios for the project: a pure
open-pit, a combined open-pit and small underground
mine, and three underground options with either
(1) onsite processing, (2) offsite processing
in a facility owned by the operator, or (3)
toll milling in an existing plant operated by
a non-related owner. Each of the scenarios
was analyzed at US$350 and US$400 gold and assumed
new equipment for all mining and processing
facilities. At US$350 gold, only the underground
mining scenario with onsite processing yielded
a positive after-tax internal rate of return
of 5.5%. At US$400 gold, all three underground
scenarios yielded positive after-tax internal
rates of return ranging from 7.9% to 13.3%.
The PAH study suggested that at gold prices
above US$350 per ounce, an underground operation
with on-site processing facilities at Grassy
Mountain could be economically attractive.
Based on an high grade cut of 1.5 opt Au, PAH
estimated the present high-grade diluted measured
and indicated resource at Grassy Mountain to
be 1.56 million tons @ 0.265 opt Au, or 414,000
ounces. The most economically attractive
scenario analyzed by PAH included a 1,400 tpd
underground mine with onsite processing facilities.
This scenario yielded a 5-year mine life averaging
77,426 ounces of gold production per year at
an average cash operating cost of US$173 per
ounce, and total costs, including capital, of
approximately US$325 per ounce. The PAH
study also concluded that due to the high-grade
gold assay capping imposed in the model, an
additional 100,000 to 200,000 ounces of gold
could be added to resources. PAH recommended
that additional exploration be undertaken to
better define and to confirm the nature of the
high-grade core of the deposit.
The profitability estimates of the Open-Pit
and Underground scenarios presented above are
based on numerous assumptions which, while perhaps
reasonable and appropriate at the time, are
presently out of date. Accordingly, the
scenario presented should not be relied upon
at this time, in particular reliance should
not be placed on estimates of profitability
at a particular gold price.
Environmental/Regulatory
The Bureau of Land Management (BLM) through
its Vale District office is the lead agency
responsible for the Grassy Mountain area.
The BLM retained an independent third party
to prepare an Environmental Impact Statement
(EIS) for the Grassy Mountain Property.
Geological, geochemical, geotechnical and related
physical resource information has been obtained
throughout the property’s development.
As part of the EIS, independent consultants
supervised the drilling and installation of
seven monitor and water wells. They also
performed material testing on soils, tailings
and heap-leach materials, as well as surface
water impacts. Other independent consultants
also (1) conducted various tests associated
with the hydraulic evaluation of the property
area; (2) evaluated the surface water flows
and produced conceptual reclamation plans; (3) performed
the static and dynamic tests for potential acid
generation; and (4) coordinated the analysis
of the physical and hydraulic resources.
An additional eleven monitor wells were drilled
in 1993. Additionally, extensive biological
and socioeconomic studies were completed by
the consultants as part of the EIS.
Public hearings were held by Atlas in Portland
and Ontario as part of the EIS scoping process
in 1991 and 1992. Newmont held additional
public hearings in Portland and Ontario in late
1993.
Based upon the extensive environmental work
already completed, the 1997 PAH study examined
the likelihood of obtaining the necessary permits
for each of the five operating scenarios.
The PAH study concluded that although each of
the five operating scenarios were permitable
under current Oregon law, permitting the open-pit
scenario would take 5 years, while the underground
scenarios would require 2-3 years.
To further study the permitting issues at Grassy
Mountain, the Issuer retained Gochnour &
Associates of Parker, Colorodo (“Gochnour”)
to undertake an environmental review and regulatory
permitting due diligence on Grassy Mountain.
The report of Gochnour, prepared by Lee “Pat”
Gochnour, is entitled “Grassy Mountain
Project Permitting/Environmental Report”
(the “P/E Report”) and dated June
27, 2000. The following material summarizes
information from the P/E Report. The Gochnour
study examined three potential development scenarios:
(1) open-pit mining with a combination
of heap-leach and milling processing; (2) underground
mining with on-site milling; and (3) underground
mining with off-site milling. Gochnour
concluded that each of the development scenarios
are permittable under current federal and state
law. To complete the permitting process,
Gochnour estimates that the open-pit scenario
would take 3-5 years to permit once a Plan of
Operations (“POO”) had been submitted.
Gochnour estimated the permitting time frame
for the underground scenarios at 2-3 years after
the POO was submitted. As part of its
mandate, Gochnour also reviewed the extensive
database of all previous environmental and baseline
work and estimated the cost and time-frame associated
with bringing the work up to date. In
aggregate, Gochnour estimated a minimum of one
year to bring the base-line work up to date
at a cost of approximately US$500,000.
Gochnour recommended that this work be performed
concurrently with the development of a final
feasibility study.
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