Instead of opening in 2021, Sabina Gold and Silver’s gold mine will now start operations in late 2022, at the earliest.
That’s a decision the company made in February when it couldn’t find a taker to buy equity on terms Sabina deemed satisfactory. It’s an industry-wide dilemma, according to Bruce McLeod, Sabina’s president and CEO.
The choice was welcomed by some of Sabina’s existing shareholders, McLeod said, because the resulting dilution would have lowered the value of their holdings in the company more than they would have liked.
“You really have to wait until those markets are willing to finance good assets,” said McLeod.
Sabina, in need of $540 million to build the mine, has expressed confidence in its ability to negotiate a debt package. However, the company wanted debt to account for no more than 60 per cent of the funds, with equity accounting for the remainder.
Due to the financing setback, Sabina will spend the next year aiming to eliminate risks, McLeod said. One item working in the explorer’s favour is the availability of a fixed-price approach to build a process plant instead of only a cost-plus contract, which would reimburse the contractor for labour and materials, plus pay a profit.
“That will certainly provide far more cost certainty and less risk to, at least, the physical plant,” McLeod said of the fixed-contract option, adding that a bid is expected to be delivered within the next month.
The location of the burgeoning mine, 400 km southwest of Cambridge Bay – “to most people in the middle of nowhere,” he said – is also perceived as a risk. That hasn’t stopped Agnico Eagle, McLeod noted.
Sabina, which has $41 million budgetted for 2019 activities, established its port facility at Bathurst Inlet in 2018 and was working on its winter road in February and March. Although 70-90 truckloads are planned this year, upwards of 600 truckloads per season will move from the port to the Goose site during the mine’s construction phase. McLeod compared building an ice road to assembling IKEA furniture, saying it will get easier and more efficient as it’s done year after year. Asked about the possibility of an all-season road in the future, he replied that the winter road is sufficient for Sabina’s needs. In addition, all-season roads generally cost $1 million per kilometre, meaning a $160 million expenditure for Sabina versus less than $10 million annually to construct the winter road.
“The payback just isn’t there,” McLeod said of an all-season road, adding that the company will be flying its gold bars out.
One other thing Sabina is determined to do is “continuing to add ounces and show that this is truly is a multi-generational long-life asset,” he said.
Sabina received its type A water licence from the Nunavut Water Board in November and is in possession of a project certificate for the Goose property mine.