Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) saw a net profit in the third quarter as it continues to advance its flagship KSM project in British Columbia’s Golden Triangle and drill at its 3 Aces project in the Yukon Territory.
During the three-month period that ended Sept. 30, the company posted a net profit of CA$5 million or CA$0.06 per share, compared to a net loss of CA$800,000 or CA$0.01 per share in the same period in 2021.
“The company continues to advance a number of activities to demonstrate a substantial start of the flagship KSM project, including infrastructure and offsetting habitat programs,” B. Riley Securities analyst Lucas N. Pipes wrote in a note on Nov. 21. “As a reminder, Seabridge published its 2022 PFS (preliminary feasibility study) for the KSM project (last summer), which highlighted several major changes to the mine plan, most notably, shifting to an entirely open pit operation.”
Analysts said KSM could help Seabridge attract a large-tier partner. Cantor Fitzgerald analyst Mike Kozak has also put a Buy rating on the stock with a CA$43.50 target.
As a result, Pipes reiterated his Buy rating on the stock and upped the target price from US$57 to US$60.
The company’s profit was driven by a CA$24.9 million gain from the remeasurement of Seabridge’s secured notes and was slightly offset by a foreign exchange loss of CA$11.1 million.
Analysts said KSM could help Seabridge attract a large-tier partner. Cantor Fitzgerald analyst Mike Kozak has also put a Buy rating on the stock with a CA$43.50 target.
“KSM is in a class of its own as the world’s only standalone development-stage mining project capable of producing +1 MMoz Au annually for decades from open-pit operations only,” Kozak wrote.
The Catalyst: Two Massive Projects
Seabridge’s PFS for KMS’ initial mine predicted a 33-year life that would also produce 178 Moz copper (Cu) and 3 Moz silver (Ag) annually.
The company also released a preliminary economic assessment (PEA) for a separate, underground block cave mine with a small open pit. That mine is expected to produce 14.3 billion pounds Cu, 14.3 Moz Au, 68.2 Moz silver, and 13.8 million pounds of molybdenum over 39 years.
The copper-rich expansion will add "considerable value" to the company, Red Cloud Securities analyst David Talbot wrote in a research note.
“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 PFS for the initial mine has an initial capex of $6.4 billion and a post-tax net present value at a 5% discount rate of $7.9 billion. The PEA for the other mine adds $1.5 billion in capex and has a post-tax net present value at a 5% discount rate of $5.8 billion.
The company is using funds raised through a CA$285 million secured note (6.5% coupon) with Sprott Resource Streaming and Royalty and Ontario Teachers’ Pension Plan exchangeable for a 60% gross silver royalty once KSM is in commercial production, Kozak noted.
Pipes with B. Riley liked the revisions the company made to the PFS for KSM.
“Major highlights of the updated study were the electrification of the mine haul fleet, the shift to open pit operations, and the 50% increase in mill throughput,” the analyst wrote. “We believe the project's reduced need for diesel fuel and lower sustaining capital were key optimization efforts amid this persistent inflationary environment.”
Seabridge is also drilling 1,500 to 1,800 meters at 3 Aces, with assays pending before the end of the year.
The company believes the project could host even higher-grade gold than KSM, which Jim Rickards, editor of the Strategic Intelligence Newsletter, called “one of the most attractive gold-copper acquisition targets in the world.”
Growing Resources
The Class 4 Quartz Exploration Permit issued by the Yukon government’s Department of Energy, Mines, and Resources allows Seabridge to set up camp operations, undertake fieldwork like trenching and geophysical surveys, and drill for resource concentrations at 3 Aces.
The company acquired the 35,700-hectare project consisting of more than 1,700 claims in March 2020, and it’s located in a readily accessible part of the southeastern Yukon. Historical work has found a broad area of gold extending more than 10 kilometers along strike, Seabridge said.
Seabridge’s total gold resources have grown 915% from 2003 to 2020.
Jim Rickards, editor of the Strategic Intelligence Newsletter, called SEA“one of the most attractive gold-copper acquisition targets in the world.”
One of the company’s directors, Clem Pelletier, was awarded the 2022 Robert R. Hedley Award by the Association for Mineral Exploration in British Columbia, given for making global contributions to environmental, social, and governance practices over his 50-year career in the mining industry.
And in September, the company was recognized with the 2022 Jake McDonald Annual Mine Reclamation Award from the British Columbia Technical and Research Committee on Reclamation for its work with the Tahltan Nation bringing the former Johnny Mountain Mine site, which operated in the late 1980s, back to pre-mining conditions.
“The Iskut property is stunningly beautiful, and it was a privilege to remove the blight of irresponsible historical mining practices,” Seabridge Chairman and Chief Executive Officer Rudi Fronk said.
Ownership and Share Structure
About 34% of the company is held by institutional investors, including Pan Atlantic Bank and Trust with 7.8%, FCMI Financial Corp. with 5.2%, and Van Eck Associates with 4.5%.
Seabridge is covered by a myriad of analysts. Click the "See More Live Data" tab in the data box at the top right for more information.
It has a market cap of CA$1.25 billion and has about 80.4 million shares outstanding, with 66.5 million free-floating. It trades in a 52-week range of CA$28 and CA$13.83.
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