In a March 26 research note, Singular Research analyst Jim Marrone reported that Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) closed its acquisition of Snowfield, a large gold resource immediately adjacent to the company's 100%-owned KSM gold-copper projects.
"The acquisition enables exciting new development opportunities for KSM which could have a significant positive impact on project economics.," Marrone wrote.
The analyst noted that among these opportunities are environmental approvals already in place for Snowfield include haul roads through the property, which Seabridge could use to speed up development and mine its highest grades early on.
Also, "a large portion of the Snowfield mineral resource could be exploited in a combined operation, which could potentially improve KSM's internal rate of return (IRR) and net present value (NPV) projections as well as shorten the payback period of initial capital," Marrone wrote.
The analyst indicated that the next step is to complete a preliminary feasibility study for KSM plus Snowfield. Already a preliminary economic assessment (PEA) on KSM alone was done, last year, which showed that including the recently expanded, higher grade Iron Cap deposit into the mine plan would significantly enhance the project's economics.
"The PEA economic projections, if achieved, would rank KSM among the best large-scale producing mines in the world," commented Marrone.
The PEA outlines an after-tax NPV of $6 billion and an after-tax IRR of 14%, using a $1,340 per ounce gold price and a $2.80 per pound copper price.
Finally, Marrone noted that "the long term thesis for SA remains unchanged, which is that based on proven and probable reserves it controls the world's largest undeveloped gold and copper project (KSM), and that the value of this project will ultimately be realized via a JV with a major mineral producer."
We believe that while progress at Seabridge will remain slow and steady towards a JV, the direction continues to be positive," Marrone stated.
Singular has a Buy rating and a US$30 per share price target on Seabridge Gold, the stock of which is trading at about US$17.31 per share.
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Disclosures from Singular Research, Seabridge Gold, March 26, 2021
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