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 property that likely will improve KSM's project economics.
Marrone reiterated that Snowfield, purchased from Pretium Resources, is located right next to Seabridge's KSM gold-copper project, thereby presenting Seabridge with varied opportunity. For one, 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 investment thesis for Seabridge remains the same. Essentially, the value of the KSM plus Snowfield project will "ultimately be realized via a joint venture with a major mineral producer." Whereas progress toward that end is and will be slow and steady, "the direction continues to be positive."
Singular has a Buy rating and a $30 per share price target on Seabridge Gold, the stock of which is trading today at about $16.33 per share.
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