After receiving its exploration permit from the Yukon government, Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) is drilling 1,500 to 1,800 meters at its 3 Aces project there with assays pending before the end of the year.
The company believes the project could host even higher-grade gold than its massive KSM project in British Columbia’s Golden Triangle, which Jim Rickards, editor of the Strategic Intelligence newsletter, called “one of the most attractive gold-copper acquisition targets in the world.”
Cantor Fitzgerald analyst Mike Kozak put a Buy rating on the stock as well with a CA$43.50 target. Its price on Thursday on the TSX exchange was CA$14.79 per share.
Seabridge’s gold resources have grown 915% from 2003 to 2020, during a period when its outstanding shares increased by only 167%.
Rickards said, “Management’s objective is to grow ounces in the ground faster than shares outstanding. It has succeeded,” Rickards wrote. “When most other development-stage juniors have issued tens of millions of new shares to fund operations and drilling programs, Seabridge has been disciplined with its share count.”
Rickards rated the stock a Buy up to US$21. It was at US$10.72 on the NYSE on Thursday.
The Catalyst
While KSM is the company’s flagship and has gold resources totaling more than 88 million ounces gold (Moz Au), the 100%-owned 3 Aces is a “district-scale, orogenic gold project with many sizable, near surface, high-grade gold zones,” Rudi Fronk, Seabridge’s chairman and chief executive officer, told Streetwise Reports.
“Our expectation is that over time, we will be able to deliver a high-grade gold resource with grades significantly higher than our existing gold resources at our other projects” at 3 Aces, Fronk said.
The Class 4 Quartz Exploration Permit issued by the Yukon government’s Department of Energy, Mines, and Resources allows Seabridge to set up camp operations, undertake fieldwork like trenching and geophysical surveys, and drill for resource concentrations.
Drilling started after it was issued in September.
The company acquired the 35,700-hectare project consisting of more than 1,700 claims in March 2020, and it’s located in a readily accessible part of the southeastern Yukon. Historical work has found a broad area of gold extending more than 10 kilometers along strike, Seabridge said.
“KSM is in a class of its own as the world’s only standalone development-stage mining project capable of producing +1 MMoz Au annually for decades from open-pit operations only,” Kozak wrote.
Work by previous operators identified four separate areas for the company to drill and test its three-dimensional model of the site.
Then the company plans to follow with a more extensive exploration program in 2023.
It “will be a much larger program than this year as we will be able to commence drilling much earlier in the year as we won’t be waiting on the permit,” Fronk said.
KSM ‘One of Most Coveted’ Projects
At least one analyst has already said the company’s work at KSM could help attract a large-tier partner. Cantor Fitzgerald analyst Mike Kozak put a Buy rating on the stock as well with a CA$43.50 target. Its price on Thursday on the TSX exchange was CA$14.79 per share.
“KSM is in a class of its own as the world’s only standalone development-stage mining project capable of producing +1 MMoz Au annually for decades from open-pit operations only,” Kozak wrote.
Seabridge is working toward getting “substantially started” status for KSM from British Columbia’s Environmental Assessment Office (EAO), so it can get its environmental assessment certificate there extended indefinitely.
In June, the company released a preliminary feasibility study (PFS) for KMS that predicted a 33-year mine life with an annual production of 1 Moz Au, 178 Moz copper (Cu), and 3 Moz silver (Ag) from an open pit for three deposits. It released a preliminary economic assessment (PEA) in August for a separate, underground block cave mine with a small open pit at two other KSM deposits. That mine is expected to produce 14.3 billion pounds Cu, 14.3 Moz Au, 68.2 Moz silver, and 13.8 million pounds of molybdenum over 39 years.
The PFS for the initial mine has an initial capex of $6.4 billion and a post-tax net present value at a 5% discount rate of $7.9 billion. The PEA for the other mine adds $1.5 billion in capex and has a post-tax net present value at a 5% discount rate of $5.8 billion.
The company is using funds raised through a CA$285 million secured note (6.5% coupon) with Sprott Resource Streaming and Royalty and Ontario Teachers’ Pension Plan exchangeable for a 60% gross silver royalty once KSM is in commercial production, Kozak noted.
Rickards called KSM “one of the most coveted gold-copper projects in the world.”
“We see 200% upside over the next year or two and the possibility of an acquisition offer at an overnight premium,” Rickards wrote of Seabridge.
Ownership, Coverage, and Share Structure
About 34% of the company is held by institutional investors, including Pan Atlantic Bank and Trust with 7.7%, FCMI Financial Corp. with 5.1%, and Van Eck Associates with 4.6%.
Seabridge is covered by a myriad of analysts. Click the "See More Live Data" tab in the data box at the top right for more information.
It has a market cap of CA$1.19 billion and has about 80.3 million shares outstanding, with 66.4 million free-floating. It trades in a 52-week range of CA$28 and CA$14.25.
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1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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