Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) increased the combined updated gold equivalent resources at its Mitchell and East Mitchell deposits at KSM by 21%, reported Red Cloud Securities analyst David Talbot in an April 18 research note. As such, Red Cloud raised its target price on Seabridge to CA$43 per share from CA$42.80. The company is currently trading at around CA$27.12 per share.
"We see this resource update leading to a likely increase in Proven and Probable reserves, better grades early in the mine life and a deferral of the capital-intensive underground block cave development at KSM," Talbot wrote.
The analyst provided the new and previous updates for each of the metals present in the two deposits. The new Measured and Indicated (M&I) resources for Mitchell and East Mitchell (formerly Snowfield) together now are 87,400,000 ounces (87.4 Moz) of gold, 446.3 Moz of silver, 16,100,000,000 pounds (16.1 Blb) of copper and 819,000,000 pounds (819 Mlb) of molybdenum. These figures include results from 2021 drilling done at both deposits.
These revised figures represent the following increases in resource metals at these prices: 11.7 Moz of gold (US$1,900 per ounce), 91.8 Moz of silver (US$28 per ounce), 4.2 Blb of copper (US$4 per pound) and 148 Mlb of molybdenum (US$12 per pound).
This minerals resource update should boost the economics outlined in the upcoming KSM prefeasibility study (PFS), in which one large open pit is expected to encompass Mitchell and East Mitchell. The recent resource increase plus higher metals prices should help offset inflation and labor costs, according to Seabridge management. The PFS, which will include East Mitchell for the first time, is slated for completion this June.
On a related note, Reagor pointed out, Seabridge increased gold ownership on a per share basis in 2021, one of its yearly objectives. Since the December 2020 resource estimate, the company added 11.7 Moz of gold in the M&I category, lowered Inferred gold resources by 0.2 Moz and based on new financings, increased shares outstanding by about 5.6 million.
Reagor noted that Seabridge is well funded to advance KSM to development. Additionally, the mining firm's agreement with BC Hydro to provide electricity during construction should afford savings on capex as grid power is about one-fourth the cost of diesel generated power.
Red Cloud has a Buy rating on Seabridge.
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Disclosures for Red Cloud Securities, Seabridge Gold Inc., April 18, 2022
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