On the heels of Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) providing a Q3/22 financial and operational update, B Riley Securities increased its target price on the Canadian explorer to US$60 per share from US$57, reported analyst Lucas Pipes in a Nov. 21 research note.
Seabridge's current share price is much lower, at about US$15.20. The difference between it and B Riley's target price implies a significant potential return for investors. B Riley rates Seabridge Buy.
B Riley updated its model on Seabridge to reflect the company's Q3/22 numbers, improved economics at KSM outlined in the recent prefeasibility study (PFS), increased Proven and Probable (2P) reserves and US$2,000 per ounce gold prices, Pipes wrote.
"We believe the project's reduced need for diesel fuel and lower sustaining capital were key optimization efforts amid this persistent inflationary environment," Pipes added.
The result was a greater KSM valuation of US$4,724 million (US$4,724M), up from US$3,919M.
Currently, Pipes pointed out, the Toronto, Ontario-based company is "demonstrating a substantial start of its flagship KSM operations, which, besides developing critical path infrastructure, extends the environmental assessment certificate until the end of the project."
Profitable Q3/22
Pipes provided a summary of Seabridge's Q3/22 financial results.
The company generated US$5M in net income and a gain of US$24.9M from the remeasurement of its secured notes. Offsetting this, however, was a US$11M forex loss. Recurring expenses were as expected.
Seabridge ended Q3/22 with US$66.2M in cash and about US$137M in short-term deposits.
Key Mine Plan Changes
Pipes noted that important revisions in the PFS mine plan led to B Riley updating its Seabridge model. These included a shift to a wholly open-pit operation, electrification of the mine haul fleet, and a 50% increase in mill throughput (to 195,000 tons per day from 130,000).
"We believe the project's reduced need for diesel fuel and lower sustaining capital were key optimization efforts amid this persistent inflationary environment," Pipes added.
Boosted Gold Reserves
The analyst also noted that B Riley's revised valuation of Seabridge also accounted for recent changes to KSM's reserve quantities. In an update, 2P gold reserves went up to 47,300,000 ounces from 38,800,000, whereas 2P copper reserves decreased, as did life-of-mine copper production.
This is because "Seabridge chose to focus on the gold-rich deposits in the updated PFS, due to a significantly quicker payback period of 3.7 years (post-tax) versus a post-tax payback of 6.8 years under the 2016 PFS," Pipes explained.
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Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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B. Riley Securities, Seabridge Gold Inc., November 21, 2022
This report has been prepared by B. Riley Securities, Inc. (“B. Riley Securities”) and may be distributed by its affiliates and subsidiaries as third-party research pursuant to FINRA Rule 2241. National Holdings Corporation, parent company to National Securities Corporation (“National Securities”), is a subsidiary of B. Riley Financial, Inc., which is the parent company to B. Riley Securities and its affiliate B. Riley Wealth Management, Inc. (“B. Riley Wealth”). As such, each of National Securities and B. Riley Wealth may distribute B. Riley Securities research pursuant to Rule 2241 and by mutual agreement.
B. Riley Securities, B. Riley Wealth, and National Securities are broker-dealer registered with the SEC and are members of FINRA, SIPC, and the NASDAQ stock market.
The principal business address of B. Riley Securities is 11100 Santa Monica Blvd., Suite 800, Los Angeles, CA 90025. The principal business address of B. Riley Wealth is 40 S. Main Street, Suite 1800, Memphis, TN 38103. The principal business address of National Securities is 200 Vesey Street, 25th Floor, New York, NY 10281.
Company-Specific Disclosures:
B. Riley Securities, Inc. or any of its affiliates, expects to receive or intend to seek compensation for investment banking services from Seabridge Gold Inc. in the next 3 months. B. Riley Securities, Inc. or any of its affiliates, has received compensation for investment banking services from Seabridge Gold Inc. in the past 12 months. Seabridge Gold Inc. currently is, or within the past 12 months was, a client of B. Riley Securities, Inc. The services provided were Investment Banking Services.
Information about the Research Analyst Responsible for this report:
The primary analyst(s) covering the issuer(s), Lucas N. Pipes, CFA, certifies (certify) that the views expressed herein accurately reflect the analyst's personal views as to the subject securities and issuers and further certifies that no part of such analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in the report. The analyst(s) responsible for this research report has received and is eligible to receive compensation, including bonus compensation, based on B. Riley Securities, Inc.’s overall operating revenues, including revenues generated by its investment banking activities.
