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Gold Co. Looks for Partner as M&A Interest Heats Up

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Seabridge Gold Inc. says joint venture discussions with larger companies have "taken on a new life" with improvements in metal prices and "a much more vibrant M&A environment for gold and copper projects."

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) told its shareholders in its annual report that joint venture discussions with larger companies have "taken on a new life" with improvements in metal prices and "a much more vibrant M&A environment for gold and copper projects."

The company's KSM project in British Columbia is the world's largest undeveloped gold project by reserves and resources, analyst Lucas N. Pipes of B. Riley Securities noted in an April 20 research update.

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 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."

Lucas N. Pipes of B. Riley Securities said the company has "a clear vision for a potential partnership agreement" and maintained his Buy rating on the stock.

Seabridge said it had engaged a leading mining industry bank to assist JV negotiations.

"Could we have done a joint venture deal along the way? We received proposals, but they would have meant leaving far too much value on the table," Seabridge Chairman and Chief Executive Officer Rudi Fronk wrote in a message to shareholders in the report. "Projects like KSM are very rare. We think the final terms of a JV will be well worth the wait."

The Catalyst: Next Bull Market 'At Hand'

Proven and probable reserves at KSM's initial mine total 47.3 million ounces gold (Moz Au), 7.3 billion pounds copper (Cu), 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 silver (Ag), and 4.2 million pounds Mo, a preliminary feasibility study (PFS) found.

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.

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

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

In his report, Fronk said the project's attractiveness to possible partners had been de-risked by the release of the PFS and the work the company has done on early construction activities at the site to meet the criteria for "substantially started" status to get its environmental assessment certificate there extended indefinitely. Work has included the building of roads, camps, bridges, and special fish habitats.

Fronk also said the company's "original strategy of maximizing metal ownership per share is about to pay off in a big way."

"In an age of such profound change, with unparalleled volatility and uncertainty, we are confident the price of gold is going to rise. The next bull market appears to be at hand," Fronk wrote. "What is more, gold's role is changing. We expect gold's stability and reliability and its universal acceptability will warrant a more central part for it to play in the global financial system of the future."

Fewer than Ten Companies?

Because of the size and complexity of KSM, possible JV partners are probably limited to fewer than ten major gold and base metal companies, Fronk told shareholders.

"We continue to believe that the combination of KSM's size, location, economics, and permit status represents one of the most compelling development opportunities on the planet," he wrote.

Seabridge holds a 100% interest in several North American gold projects, including the Iskut project, which is also in British Columbia; the Courageous Lake project in the Northwest Territories; the Snowstorm project in the Getchell Gold Belt of Northern Nevada; and the 3 Aces project in the Yukon Territory.

Because of time constraints, only four holes were sunk in 2022 at 3 Aces. But the company has high hopes for that project, as well.

Streetwise Ownership Overview*

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT)

*Share Structure as of 5/3/2023

"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 has said.

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$1.65 billion and has about 81.3 million shares outstanding, with 67.8 million free-floating. It trades in a 52-week range of CA$23.62 and CA$13.83.

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Disclosures:

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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Disclosures for Lucas N. Pipes, B. Riley Securities, April 20, 2023:

This report has been prepared by B. Riley Securities, Inc. (“B. Riley Securities”) and may be distributed by its affiliates and subsidiaries as third-party research pursuant to FINRA Rule 2241. National Holdings Corporation, parent company to National Securities Corporation (“National Securities”), is a subsidiary of B. Riley Financial, Inc., which is the parent company to B. Riley Securities and its affiliate B. Riley Wealth Management, Inc. (“B. Riley Wealth”). As such, each of National Securities and B. Riley Wealth may distribute B. Riley Securities research pursuant to Rule 2241 and by mutual agreement.

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Company-Specific Disclosures

B. Riley Securities, Inc. or any of its affiliates, expects to receive or intend to seek compensation for investment banking services from Seabridge Gold Inc. in the next 3 months.
B. Riley Securities, Inc. or any of its affiliates, has received compensation for investment banking services from Seabridge Gold Inc. in the past 12 months.

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