Gold Co. Notches Profit, Updates Search for Partner

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) has filed its report to shareholders and management's analysis for the three months ending on June 30.

The company earned a net profit of CA$9 million in the second quarter, or CA$0.11 per share, compared to CA$19.1 million, or CA$0.24 per share, in the same quarter of 2022.

During the six months ending June 30, the company had a net loss of CA$1.8 million, or CA$0.02 per share. In the first six months of 2022, the company recorded net earnings of CA$12.8 million or CA$0.16 per share.

"During the six months ended June 30, 2023, the company's main efforts and most significant spending were focused on its 2023 site capture and early infrastructure development activities that are designed to ensure that KSM's Environmental Assessment Certificate ("EAC") remains in good standing," management said in its discussion of the results.

The 100%-owned KSM project in British Columbia's Golden Triangle is Seabridge's flagship. Its current deadline for the EAC is July 29, 2026. In deciding whether a project has been "substantially started," the province decides whether sufficient on-site physical improvements have been made. Work Seabridge has completed includes the building of roads, camps, bridges, and special fish habitats.

"We talk about KSM being a project. In fact, what we have here is a district," Seabridge Chairman and Chief Executive Officer Rudi Fronk has said.

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.

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

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

During Q2 2023, Seabridge invested CA$47.7 million on mineral interest projects, compared to CA$27.2 million in Q2 2022. Its net working capital increased to CA$147.2 million on June 30 from CA$88.4 million at the end of 20222.

The company also recently closed on the sale of a US$150 million secured note to Sprott Resource Streaming and Royalty Corp. to complete the "substantially started" work at KSM.

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: Looking for a Partner

The company said "significant site capture activities" started at KSM in 2022 and are continuing this year, including road, bridge, and camp construction, hydro installations, fish habitat programs, and the acquisition of transport vehicles and construction equipment.

"The company anticipates submitting its Substantial Start application to the BC government in early 2024," Seabridge said.

"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 goal of the company is to secure a joint-venture project for KSM, which is in one of the world's best mining jurisdictions with good government infrastructure, including green hydroelectric power.

Analyst Lucas N. Pipes of B. Riley Securities noted in a research note 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," rating the stock a Buy 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."

Fronk agreed. "We're finally in a world where M&A is picking up again," he said on a recent webinar for Amvest Capital.

Other Project Updates

Seabridge is also conducting a 12,000-meter drilling campaign at its Iskut project, also in the Golden Triangle, to test for deeper copper-gold porphyry systems and to expand the Bronson Slope mineral resource.

At its Snowstorm project in Nevada, the company has also started a drilling program to test the potential for mineralized faults along a zone of uplifted host stratigraphy.

The exploration objective at its 3 Aces project in the Yukon Territory this year is to refine the 3-3-D exploration model with about 10,000 meters of drilling in three target zones, the company said.

Flexibility in Design

The company recently engaged RBC Capital Markets to lead a formal process for the search for a partner, with several companies doing due diligence, including many that have put boots on the ground at the project.

Seabridge "continues its pursuit of a joint venture agreement on the KSM project with a suitable partner on terms advantageous to the company since it does not intend to build or operate the project alone," the company said in its note from management. "The KSM project includes multiple deposits and provides a joint venture partner, or purchaser, flexibility in the design of the project."

The "market for metals streams and royalty interests seems to be growing," the company noted.

Ownership and Share Structure

About 36% of the company is held by institutional investors. Management, board members, and company insiders own approximately 25%, 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$1.25 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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