Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) released an updated preliminary feasibility study (PFS) for its 100%-owned Courageous Lake gold project in the Northwest Territories, reported Red Cloud analysts Taylor Combaluzier and David Talbot in a January 17 research note.
The study outlines improved economics on a smaller but higher-grade initial mine plan with a 12.6-year run at 200,000 ounces per year average gold production.
A separate preliminary economic assessment (PEA) details an envisioned 15.9-year underground expansion phase below the PFS open pit. Analyst Taylor Combaluzier still sees considerable upside for the full-scale project.
Updated Prefeasibility Results
The new PFS incorporates larger gold reserves and resources compared to 2012, now sitting at 2.8 million ounces proven and probable and 11 million ounces measured and indicated, respectively.
By applying a lower 7.6:1 strip ratio and a reduced US$747 million capital program, Courageous Lake's after-tax net present value (NPV5%) rises 73% to US$523 million with 20.6% IRR at US$1,850 per ounce gold.
Average all-in-sustaining costs are forecast at US$999 per ounce of gold, with payback in under three years from initial production expected for 2030. This optimized starter plan utilizes just 30% of defined resources, retaining major expansion potential.
Growth Potential Below Mine Plan
An additional PEA considers a conceptual underground expansion post the open pit phase, leveraging inferred resources not in the base case. Combaluzier sees this potentially tacking on 16 years of operations at a similar production rate.
The incremental project nets a discounted value of US$104 million with minimal added upfront development cost.
Valuation Lifted on Execution
Red Cloud lifts its target price to C$46.50 as updated studies have increased visibility into building Courageous Lake. The firm also cites progress derisking Seabridge's flagship KSM project in updated valuation metrics.
Combaluzier maintains a Buy rating, now applying a 0.75x multiple to his CA$62 net asset value per share estimate given enhanced confidence in the path forward for Seabridge's assets.
Upcoming drilling, engineering, and environmental programs should continue to unlock fundamental value not yet reflected in shares, in the analyst's view. Ongoing efforts to secure a joint venture partner may provide additional upside catalysts.
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Disclosures for Red Cloud Securities, Seabridge Gold Inc., January 17, 2024
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