Seabridge Gold Inc.'s (SEA:TSX; SA:NYSE.MKT) new preliminary economic assessment (PEA) laying out a copper-rich expansion to its KSM project in British Columbia will provide “considerable value” to the company, Red Cloud Securities analyst David Talbot wrote in an Aug. 4 research note.
As a consequence, Talbot maintained his Buy rating on the stock and raised his target price from CA$49.60 to CA$51 per share.
“This add-on project requires minimal infrastructure capital, as roads and other infrastructure, including a mill, would have already been built,” Talbot wrote.
The PEA covers the Iron Cap and Kerr deposits, part of Seabridge’s 100%-owned Golden Triangle project that also includes three other deposits covered by a preliminary feasibility study (PFS) released in June. It has a post-tax net present value at a 5% discount rate of $5.8 billion, an internal rate of return of 18.9%, and payback of 6.2 years. It also adds an additional 39 years to the existing 33-year life of KSM.
“While KSM is a world-class deposit, we believe it would likely need investment from a senior miner/strategic to help Seabridge overcome the capital spend and associated financial risk,” Talbot wrote. “Additional resources and potential production from copper-rich underground deposits help provide optionality to any potential partner.”
The 33-year PFS is to be followed by the 39-year PEA, but the analyst said it was likely some high-grade copper production “might be pulled forward to be blended with earlier production.”
The average annual production for the PEA is estimated at 368,000 ounces gold (Au), 366 million pounds copper (Cu), 1.8 million ounces silver (Moz Ag), and 0.4 million pounds molybdenum (Mo).
Initial capex for the PEA is estimated at $1.5 billion, with sustaining capital of $12.8 billion over the 39 years of the mine.
Development of the initial Iron Cap block cave will likely start in 2051, and open pit construction at Kerr could begin a year later, Talbot said.
The analyst said he based his Buy rating and increased target price on Red Cloud’s net asset value per share (NAVPS) estimate of CA$72.70 (formerly CA$62.03).
The NAVPS and target are predicated on the development of KSM, a successful joint-venture arrangement, project financing, and production by the first quarter of 2029, Talbot wrote.
Sign up for our FREE newsletter
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.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Seabridge Gold Inc. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures for Red Cloud Securities Inc., Seabridge Gold Inc., Aug. 4, 2022
Red Cloud Securities Inc. is registered as an Investment Dealer in all Canadian provinces and territories, and is a member of the Investment Industry Organization of Canada (IIROC). Part of Red Cloud Securities Inc.'s business is to connect mining companies with suitable investors. Red Cloud Securities Inc., its affiliates and their respective officers, directors, representatives, researchers and members of their families may hold positions in the companies mentioned in this document and may buy and/or sell their securities. Additionally, Red Cloud Securities Inc. may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
Red Cloud Securities Inc. has prepared this document for general information purposes only. This document should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided has been derived from sources believed to be accurate but cannot be guaranteed. This document does not take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud Securities Inc. will not treat recipients of this document as clients by virtue of having viewed this document.
Red Cloud Securities Inc. takes no responsibility for any errors or omissions contained herein, and accepts no legal responsibility for any errors or omissions contained herein, and accepts no legal responsibility from any losses resulting from investment decisions based on the content of this report.
Company Specific Disclosure Details: The analyst has visited the head office of the issuer or has viewed its material operations. The issuer paid for or reimbursed the analyst for a portion or all of the travel expense associated with a visit.
Companies with Buy, Hold or Sell recommendations may not have target prices associated with a recommendation. Recommendations without a target price are more speculative in nature and are followed by “(S)” to reflect the higher degree of risk associated with it. Additionally, our target prices are set based on a 12-month investment horizon.
Dissemination: Red Cloud Securities Inc. distributes its research products simultaneously, via email, to its authorized client base. All research is then available on www.redcloudsecurities.com via login and password.
Analyst Certification: The Red Cloud Securities Inc. Analyst named on the report hereby certifies that the recommendations and/or opinions expressed herein accurately reflect such research analyst’s personal views about the company and securities that are the subject of this report; or any companies mentioned in the report that are also covered by the named analyst. In addition, no part of the research analyst’s compensation is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
