Drills Turning at Explorer's Yukon Gold Project

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) announced it has started a 7,500-meter drilling campaign at its 100%-owned 3 Aces project in the Yukon Territory.

The core and reverse circulation drilling is designed to test the company's comprehensive exploration model at the project, which it acquired in 2020.

Historical drilling at 3 Aces focused on a 13-kilometer-square region known as the Central Core Area. Good widths of high-grade gold were discovered, but not enough of the continuity needed for a resource estimate.

"We are now gunning for our next round of exploration successes at our 3 Aces and Iskut projects," Chairman and Chief Executive Officer Rudi Fronk said. "The preparatory work has been done. At 3 Aces, we are looking for the continuity that eluded previous operators and which is needed for resource delineation."

Jim Rickards, editor of the Strategic Intelligence newsletter, called KSM "one of the most attractive gold-copper acquisition targets in the world."

Seabridge has high hopes for the project. "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," Fronk has said.

The company believes the project could host higher-grade gold than its flagship project, KSM, in British Columbia’s Golden Triangle. Jim Rickards, editor of the Strategic Intelligence newsletter, called KSM "one of the most attractive gold-copper acquisition targets in the world."

Seabridge recently announced it had restructured and closed on the sale of a US$150 million secured note to Sprott Resource Streaming and Royalty Corp. to complete work at KSM to meet the criteria for "substantially started" status to get its environmental assessment certificate (EAC) there extended indefinitely.

When the note matures, Sprott Streaming will use the principal amount repaid to purchase a 1% net smelter royalty (NSR) on all metals produced at the project, the company said.

The Catalyst: Finding the Resource

Four different 3 Aces target areas — Spades, Hearts, Hearts West, and Clubs — will be drill tested to evaluate different settings where the company's model predicts gold continuity.

In last year's drilling at the site, Hole 3A22-355 intersected 3.53 grams per tonne gold (g/t Au) over 22.5 meters, Seabridge said, including 11.97 g/t Au over 5.2 meters. The remaining three holes all assayed for less than 1 g/t Au, the best intercept being 0.96 g/t Au over 1.8 meters in hole 3A22-357.

Analyst Lucas N. Pipes of B. Riley Securities noted in an April 20 research update that KSM is the world's largest undeveloped gold project by reserves and resources.

The 35,700-hectare project consisting of more than 1,700 claims is in a readily accessible part of the southeastern Yukon.

The company said it believes the project could be "consistent with some of the biggest and richest gold deposits in the world."

"We are looking forward to executing our first full program at 3 Aces," Fronk said. "Our team has been refining our new model and checking its concepts against field observations. They believe this model will provide the basis to integrate past and current drill results into meaningful zones of mineralization. We expect this program will help us prioritize mineralized zones and take us steps closer to delineating resources."

The project is on the eastern margin of the Selwyn Basin, with sedimentary rocks extending across the Yukon and host to several base metal deposits, the company said.

'A Clear Vision' for Potential Joint Ventures

The Sprott money will be used to complete work at KSM to meet the criteria for "substantially started" status to get its environmental assessment certificate (EAC) there extended indefinitely. It also will enable the company to complete a switching station and work needed to connect to BC Hydro's electricity lines for the construction and operation of the mine. 

Proven and probable reserves at KSM's initial mine total 47.3 million ounces gold (Moz Au), 7.3 billion pounds copper (Cu), 160 Moz silver (Ag), and 385 million pounds of molybdenum (Mo), with average production over a 33-year mine life of 1.03 Moz Au, 178 million pounds Cu, 3 Moz Ag, and 4.2 million pounds Mo, a preliminary feasibility study (PFS) found.

Pipes said the company has "a clear vision for a potential partnership agreement" and maintained his Buy rating on the stock with a target price of CA$60 per share.

The company also released a preliminary economic assessment (PEA) for a separate, underground block cave mine with a small open pit. That mine is expected to produce 14.3 billion pounds Cu, 14.3 Moz Au, 68.2 Moz silver, and 13.8 million pounds Mo over 39 years. 

Analyst Lucas N. Pipes of B. Riley Securities noted in an April 20 research update that KSM is the world's largest undeveloped gold project by reserves and resources.

Pipes said the company has "a clear vision for a potential partnership agreement" and maintained his Buy rating on the stock with a target price of US$60 per share.

"The market is currently short on development projects, and market interest/M&A is heating up," Pipes wrote. "While the lack of partnership at KSM has been an overhang for the stock, we believe the asset is now ripe for third-party validation."

The company said it had engaged a leading mining industry bank to assist in joint venture discussions with larger companies.

Tunnels Questioned

Seabridge also reported this week that Tudor Gold Corp. (TUD:TSX.V) has requested a license and permit held by Seabridge to construct tunnels between the mine and mill at KSM be canceled. More than a dozen kilometers of the Mitchell Treaty Tunnels (MTT) would pass through mineral claims owned by Tudor.

In a Tuesday update note, analysts David Talbot and Taylor Combaluzier of Red Cloud Securities said they don't see the cancellation happening.

"Due diligence would have shown that this license and permit were in effect well before Tudor became the owner of the mining claim through which Seabridge has the right to construct the MTT," they wrote. "In our conversation with management, they indicated that this does not impact any plans or ongoing work at KSM, and they indicated that work is continuing."

Ownership and Share Structure

About 36% of the company is held by institutional investors, according to Reuters, including Pan Atlantic Bank and Trust with 7.69% or 6.25 million shares, National Bank of Canada with 5.68% or 4.62 million shares, and FCMI Financial Corp. with 5.11% or 4.16 million shares.

Management, board members, and company insiders own approximately 30%, the company said. Fronk owns 1.49% or 1.21 million shares, according to Reuters. The rest is retail.

It has a market cap of CA$1.47 billion and has about 82.4 million shares outstanding, with 79.95 million free-floating. It trades in a 52-week range of CA$21.78 and CA$13.83.

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1. Seabridge Gold Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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