Hackett River is already one of the largest undeveloped deposits of its type in the world (volcanogenic massive sulphide ("VMS") and is analogous to the Kidd Creek and Noranda deposits which have been prolific large producing mines for decades.
Hackett River, located 45 km west of the Company's Back River gold project in Nunavut, is a silver rich volcanic massive sulphide ("VMS") project and is one of the largest undeveloped projects of its type. The project contains a potentially mineable resource of approximately 60 million tonnes including an indicated resource of 200 million ounces of silver (144 g/t) and 2 million tonnes of zinc (4.65%) along with an additional inferred resource of 64 million ounces of silver (136 g/t) and 652,000 tonnes of zinc (4.46%). The project also contains appreciable copper, lead and gold.
Over the last 18 months, the Company's focus has shifted to its Back River gold assets also in Nunavut. With significant gold resources, exploration success and exploration potential at Back River, Sabina is aggressively pushing forward to become a mid-tier gold producer.
Recognizing that the Company has two potentially world class projects and given the size and complexity of Hackett River, in the fall of 2010, the Company engaged BMO Capital Markets to look for a strategic partner on the project. This strategy allows for Sabina to focus on developing its gold assets, potentially enabling production sooner at a smaller scale, while at the same time continuing to push Hackett River forward. On June 2, 2011, it was announced that the Company had entered a binding agreement to sell Hackett River and some of the Wishbone claims to Xstrata Zinc Canada. The deal closed in October, 2011.
Under the terms of the Agreement, Xstrata paid a cash consideration of $50 million on closing. Sabina retains an interest of 22.5% of the first 190 million ounces of silver payable from the Properties and 12.5% of the silver payable thereafter. Sabina retains Wishbone claims at the south east of the belt covering geological units which are similar to Back River and are potential gold targets. Additionally, Xstrata would commit to spend $50 million in exploration over a four year period and complete a bankable feasibility study.
This transaction creates good value for our shareholders. Sabina's goal is to become a mid-tier gold company producing between 300k - 400k ounces of gold per year from Back River, a project scope small enough to be expedited. With a large, well respected mining group like Xstrata taking the reins at Hackett, Sabina shareholders as well as the stakeholders in Nunavut have an improved opportunity to realize value sooner. Based on our 2009 PEA, 22.5% of 190 million ounces of silver over 16 years at Hackett is approximately 2.7 million ounces annually. At today's ratio of 40 ounces of silver to one ounce of gold, Hackett silver production alone could add approximately 70,000 ounces of gold equivalent to Sabina's production profile annually at no cost. This deal allows the Company to focus on bringing Back River into production, while retaining leverage to the considerable silver at Hackett River and the exploration upside of both Hackett and the associated Wishbone claims.
Xstrata, the largest zinc producer in the world, provides a higher level of confidence that Hackett will be developed and become a producing mine. In addition to potential gold equivalent ounces from Hackett and Wishbone, Sabina operations at Back River could be further enhanced by the use of infrastructure built for Hackett by Xstrata.
