Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) caught the interest of RBC Capital Markets, which initiated it with an Outperform – Speculative Risk rating and a US$25 per share target price, reported RBC Capital Markets analyst Michael Siperco in a September 18 research note. This target implies a significant 124% return for investors, given the mining company's current share price is about US$11.14 per share.
"Seabridge has begun to accelerate development of the world-class, large-scale, 100%-owned KSM gold/copper project in the 'Golden Triangle' region of northern British Columbia. . .with long-term upside potential," Siperco wrote.
The analyst presented the Top 4 factors that make Seabridge a compelling investment.
A Lot of Gold, Copper
1) KSM's size, as one of the largest undeveloped copper-gold projects globally, is noteworthy, Siperco pointed out. Its current total resource is 150,000,000 ounces (150 Moz) of gold and 55,000,000,000 pounds of copper. At spot prices, this equates to 300 Moz of gold equivalent (Au eq), including silver and molybdenum.
"At full production, KSM would be a Top 5 annual gold producer (Top 10 Au eq) with resources that could support a mine life of 100-plus years," wrote Siperco.
Simplified Project, Engineering
2) KSM has evolved over time for the better, Siperco noted. The current plan, outlined in the updated 2022 prefeasibility study, calls for open-pit mining of three of KSM's five deposits, thereby producing a minimum of 1 Moz of gold and 175,000,000 pounds of copper per year, over a 33-year mine life.
The base case after-tax net present value discounted at 5% is an estimated US$7.9 billion with an internal rate of return of 16.1%.
Costlier, complicated underground block cave operations are no longer being considered. There is flexibility in terms of development, simultaneous with the open-pit operation or following the life of mine.
Infrastructure in Place
3) Significant regional infrastructure, including highway, power, and port access, now exists to support a mine of KSM's magnitude, wrote Siperco. Further, Seabridge is investing about US$400 million (US$400M) and continues to work toward achieving the "substantially started" designation for KSM, aiming to reach the goal by 2026. This project status would make existing environmental permits valid for the duration of KSM's mine life.
"Seabridge has CA$203 million in cash exiting Q2/23, in our view sufficient to take the project through to substantially completed status (potentially by early 2025) and to a construction decision, pending any partnership agreements in the interim," reported Siperco.
Partner Equals Game Changer
4) Securing a senior partner to advance KSM to a feasibility study and a construction decision is the key catalyst for the company's stock, purported Siperco.
"We think generational gold/copper assets in good mining jurisdictions are hard to find and harder to advance," wrote Siperco, "making KSM a potentially attractive option for producers looking for long-term, consistent production potential."
A partner, which management is actively seeking, could further validate KSM, drive a rerating of the company, and provide a way for Seabridge investors to participate in future upside in the event of a positive construction decision.
RBC Capital bases its Outperform rating on Seabridge on three assumptions, Siperco explained: that the mine developer lands a partner, that existing permits get extended, and that a feasibility study further confirms KSM's economic potential.
Other Projects in Portfolio
Siperco relayed that Seabridge also owns these four mining projects in Canada and the U.S.:
1) Courageous Lake, in Canada's Northwest Territories: An updated prefeasibility study (PFS) is expected to be done this year.
2) Iskut, in British Columbia: Exploration is ongoing at this project, about 30 kilometers away from KSM.
3) 3 Aces, in the Yukon: Seabridge launched a new 7,500m drill program within the project's central core area.
4) Snowstorm, in Nevada: Recent exploration focused on the property's western, with a US$3M drilling budget for 2023.
Other catalysts on the horizon include further KSM optimization, an updated PFS on Courageous Lake, and exploration results from Iskut and 3 Aces.
Experienced Leadership
Seabridge has a strong management team comprised of 10 individuals.
At the helm is Rudi Fronk as chief executive officer and chairman. Fronk has 35-plus years of experience in the mining industry.
Among the other executives are William Threlkeld, senior vice president of exploration, a geologist who has been with Seabridge for 19 years. Ryan Hoel, senior vice president and chief operating officer, has expertise in mining project management. Peter Williams, senior vice president of technical services, has three decades of experience in mine engineering, design, analysis, and startup.
Ownership of Shares
Seabridge has about 83 million fully diluted shares outstanding. Among those who have an interest in Seabridge, management and directors hold about 3%, founders and other long-term individual associates have about 8%, and companies related to early Seabridge investor Albert Friedberg control about 14%.
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Important Disclosures:
- 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.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- 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.
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Disclosures for RBC Capital Markets, Seabridge Gold Inc., September 18, 2023
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