Skeena Resources, Junior Gaining Investor Interest

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Disclosure Please see applicable disclosures here

Peter Epstein, CFA   March 18, 2015   See Terms of Use on left of this page

In a previous article on Skeena Resources (SKE.V) (SKREF), I interviewed the company’s Chairman and 2nd largest shareholder, Mr. Ron Netolitzky. That article was featured on several investment websites. Since my last piece, Mr. Netolitzky was inducted into the Canadian Mining Hall of Fame. Yet another accolade for a visionary geologist who’s received previous awards such as the Prospector of the Year award from the PDAC and Developer of the Year award from the BC & Yukon Chamber of Mines. Importantly, Skeena updated its corporate presentation, which is a must read for anyone considering an investment.

In my prior article I noted that Skeena’s Spectrum property has a historical non-N.I. 43- 101 compliant gold resource of 614,000 tons grading 12.3 g/t Au (5.0 g/t cut-off) for 243,600 oz. The Spectrum property was intermittently explored by numerous operators in the period from 1957 to 1991 and last drilled in 1992 by Columbia Gold Mines. This fact is essential in understanding the investment opportunity because prior work established an extensive database of geological mapping, geochemical sampling, trenching and more than 100 diamond drill holes (>14,000 metres). The cost in today’s dollars of conducting that magnitude of exploration and development would probably be $10 million or more.

With that in mind, Skeena’s goal of delivering a maiden N.I. 43-101 compliant resource of 1 million ounces within a year may not be as aggressive as it sounds. The company is raising $3-$4 million to fully fund its 2015 drill campaign. It has the extensive historical database and a recent, successful drill campaign of 9 drill holes totaling 1,940 meters, assays of which were reported in two batches on Dec. 11, 2014 and Jan. 14, 2015. The 1 million ounce figure from a gold resource grading 12+ g/t in, “multiple closely spaced, steeply dipping, parallel zones,” is not a sure thing, but Skeena has a lot going for it. Make no mistake it’s too early for me to have a high level of confidence in the company’s longer-term goal of establishing a 2-3 million ounce deposit. However, if Skeena can execute on the first 1 million ounces, then reaching the more ambitious goal of 2-3 million ounces won’t seem nearly as daunting.

Why does Mr. Netolitzky and his geologist team feel that 1 million ounces is an obtainable goal in the first place? Unlike many juniors who do a lot of arm waving about proximity to larger mining neighbors, Skeena has the single most important attribute of an advanced exploration company. High grade. Grade is king and that’s why Netolitzky and others have spent so much time on identifying the next round of drill targets. High grade trumps virtually everything. Mediocre attributes can be tolerated as long as there’s grade. That’s not to say that Skeena’s Spectrum project has mediocre metrics. On the contrary, the company has good access to infrastructure and manpower, a strong exploration and development team, access to modern technologies and capital.

Instead of arm waving about Skeena’s proximity to giant past-producing and producing mines in the Golden Triangle, Skeena has something far better. A very successful, past-producing analog mine that shows many of the same geological characteristics as the Spectrum deposit. Some readers might understand the importance of analog oil wells. Analog wells greatly reduce the risk of searching for oil. It’s no different when drilling for gold. The analog mine in Skeena’s case is the past-producing Snip mine. Not only is it very comparable on many levels to Spectrum, it also happens to be a mine that Netolitzky is credited for discovering! Snip produced over 1 million ounces. The key attributes that made Snip such a profitable mine were that it required minimal capital expenses to get up and running, had high grade and low operating expenses.

Like Snip, Spectrum would be an underground mine, meaning that it would have a small surface footprint, making it easier to permit and build. An exciting aspect of the analog mine Snip is that Spectrum would benefit from greater access to infrastructure and modern exploration and drilling technologies. Like Snip, Spectrum has the possibility of being a very profitable mine. Admittedly, it’s still early days, but Skeena appears to have less risk than others at this stage, while also possibly boasting better economics due to the high grade.

At today’s valuation, Skeena is being treated like a green field exploration company. That makes little sense because of Skeena’s historical database and its successful first 9 drill holes. [NOTE: For convenience, highlights from the two above linked press releases are reprinted here] 23.84 g/t over 6.5 m, including 40.43 g/t over 3.5 m in 14-SP-003; 10.63 g/t over 27.0 m, including 66.00 g/t over 2.0 m and 20.4 g/t over 2.0 m, 9.2 g/t over 2.0 m; 8.0 g/t over 2.0 m; and 22.7 g/t over 2.0 m in 14-SP-004; 18.60 g/t over 2.0 m, 3.19 g/t over 4.0 m, 7.32 g/t over 2.0 m, and 6.88 g/t over 2.0 m in 14-SP-005; 43.80 g/t over 2.0 m in 14-SP-006; 9.50 g/t over 2.0m in 14-SP-007; 4.58 g/t over 9.0 m in 14-SP-008; 13.70 g/t over 4.0 m and 254.50 g/t over 2.0 m in hole 14-SP-009. Not only are these high grade assays compared to many peer Golden Triangle mines, (see page 7) of Skeena’s March, 2015 corporate presentation, they are high grade by any measure and conform to attributes of the high grade Snip Mine.

If one is skeptical about any of the data presented herein, I urge readers to visit Skeena’s website and review the new corporate presentation and recent press releases.

Disclosure Please see applicable disclosures here

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