Skeena Resources Limited (NYSE: SKE) shares exhibited an upward trajectory in the after-market session, registering a noteworthy 7.71% increase to reach $4.89. During the regular trading session, Skeena stock displayed stability with a modest uptick of 1.79%, concluding at $4.54. The surge in SKE stock was precipitated by a strategic equity move disclosed on Monday.
Skeena (SKE) successfully concluded a financing arrangement amounting to C$81 million in collaboration with Franco-Nevada Corporation. This financing endeavor is earmarked for the progressive development of their Eskay Creek Gold-Silver Project, a property wholly owned by Skeena, situated in the Golden Triangle of Northwest British Columbia.
The C$81 million financing package comprises the sale of a 1.0% Net Smelter Return ("NSR") royalty on Eskay Creek for C$56 million, along with a C$25 million unsecured Convertible Debenture. This incremental royalty acquisition has elevated Franco-Nevada's NSR stake to 2.5% across all of Skeena's Eskay Creek properties.
Securing funding for the advancement of Eskay Creek to the production stage is of paramount importance for Skeena. In the face of the challenging capital markets environment for mine developers in Canada, SKE is committed to minimizing shareholder dilution. To accomplish this objective, Skeena is exploring unconventional financing avenues that curtail the issuance of conventional common equity.
At a gold price of US$2,000/oz, the 1% royalty is projected to contribute approximately US$20 to Eskay Creek's exceptionally low All In Sustaining Cost of US$687/oz, ensuring that Skeena maintains a robust profit margin. The Convertible Debenture carries a 7% interest rate and matures on the earlier of December 19, 2028, or upon the completion of a Board-approved project financing for Eskay Creek.
Conversion of the Debenture into common shares is set at a price of C$7.70, reflecting a 35% conversion premium to Skeena's 5-day TSX volume-weighted average price. Notably, no commissions or financing fees will be incurred in connection with this financing, and interest payments will be capitalized and deferred until maturity.