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Skeena Resources (TSXV: SKE) will be exercising its option to acquire 100% of the Eskay Creek gold-silver project from Barrick Gold (TSX: ABX; NYSE: GOLD) via a binding term sheet signed between the parties on Monday.

Discovered in 1988, the former Eskay Creek mine located in British Columbia’s Golden Triangle was once the highest-grade gold mine and the fifth-largest silver mine in the world by volume, having produced approximately 3.3 million oz gold and 160 million oz silver at average grades of 45 g/t gold and 2,224 g/t silver.

Based on the preliminary economic assessment released by Skeena in late 2019, the Eskay Creek mine, once reopened, is estimated to produce 236,000 oz gold and 5.81 million oz silver annually. The company is currently focused on infill and exploration drilling to advance the project towards pre-feasibility stage.

The binding agreement involves the amendment of an original option agreement between Skeena and Barrick that was in place for the project. Under the new terms, Skeena will acquire a 100% ownership in Eskay Creek through the issuance of 22.5 million units to Barrick. Each unit comprises one common share and one-half warrant of the company, with each full warrant exercisable for one Skeena common share at C$2.70 per share.

In addition, Barrick has agreed to waive its back-in right on Eskay Creek. Following the transaction, Barrick would become a major shareholder in Skeena, with 12.4% ownership of Skeena’s outstanding shares a non-diluted basis and 17.2% on a partially diluted basis.

Skeena will also grant of a 1% net smelter return royalty on the entire Eskay Creek land package. Half of that royalty may be repurchased from Barrick during the 24-month period after closing at a cost of C$17.5 million.

A contingent payment of C$15 million is also agreed upon, which will become active if Skeena sells more than a 50% interest in Eskay Creek during the 24-month period after closing.

News of the Eskay Creek purchase sent Skeena’s stock to an all-time high on Monday morning. By 12:30 p.m. EDT, the company’s shares were up nearly 15.6% on a trading volume of 986,499, more than three times the daily average.

The Vancouver-based precious metals miner currently has a market capitalization of approximately C$380.4 million.