Gold Co. Issues Q2 Report, Seeks JV Partner

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) announced it earned a net profit of CA$9 million in the second quarter, or CA$0.11 per share, compared to CA$19.1 million, or CA$0.24 per share, in the same quarter of 2022.

The company has filed its second-quarter report and earnings for the three-month period that ended June 30.

Also, during Q2 2023, Seabridge invested CA$47.7 million on mineral interest projects, compared to CA$27.2 million in Q2 2022. Its net working capital increased to CA$147.2 million on June 30 from CA$88.4 million at the end of 20222.

The goal of the company is to secure a joint-venture project for its flagship KSM project in British Columbia. It said it had engaged RBC Capital Markets to set up a formal search process and advise the company going forward.

"KSM is now advanced well beyond the stage typically achieved by junior companies," Seabridge wrote in a note to shareholders. "To date, over CA$800 million has been spent on the project, including significant infrastructure investments, engineering and technical work, obtaining permits, and on securing social license from local First Nations and communities."

The Catalyst: M&A Market Heats Up

The site is in one of the world's best mining jurisdictions with good government infrastructure, including green hydroelectric power.

"We are looking forward to the next stage in the life of KSM with a partner able to build and operate it," the company wrote.

Analyst Lucas N. Pipes of B. Riley Securities noted in an April 20 research update that KSM is the world's largest undeveloped gold project by reserves and resources.

Analyst Lucas N. Pipes of B. Riley Securities noted in an April 20 research update that KSM is the world's largest undeveloped gold project by reserves and resources.

Pipes said the company has "a clear vision for a potential partnership agreement," rating the stock a Buy with a target price of CA$60 per share.

"The market is currently short on development projects, and market interest/M&A is heating up," Pipes wrote. "While the lack of partnership at KSM has been an overhang for the stock, we believe the asset is now ripe for third-party validation."

Sprott-Secured Note Sale

Seabridge also recently announced it had restructured and closed on the sale of a US$150 million secured note to Sprott Resource Streaming and Royalty Corp. to complete work at KSM to meet the criteria for "substantially started" status to get its environmental assessment certificate (EAC) there extended indefinitely.

When the note matures, Sprott Streaming will use the principal amount repaid to purchase a 1% net smelter royalty (NSR) on all metals produced at the project, the company said.

David Talbot and Taylor Combaluzier of Red Cloud Securities rated the stock a Buy with a target price of CA$45.25 per share.

The same financing structure was used last year to raise US$225 million from Sprott Streaming and the Ontario Teachers' Pension Plan.

"We view this royalty agreement positively as it avoids shareholder dilution in the near term and, along with the US$225M (Seabridge) secured from Sprott and Ontario Teacher's Pension Plan in 2022, should allow the company to reach the substantially started designation ahead of 2026 deadline for the current EAC," analysts David Talbot and Taylor Combaluzier wrote in a research note for Red Cloud Securities after the original announcement.

The analysts rated the stock a Buy with a target price of CA$45.25 per share.

KSM's current deadline for the EAC is July 29, 2026. In deciding whether a project has been "substantially started," the province decides whether sufficient on-site physical improvements have been made. Work Seabridge has completed includes the building of roads, camps, bridges, and special fish habitats.

'An Opportunistic Move'

Last month, Tudor Gold Inc. (TUD:TSX.V) requested a license of occupation and permit for KSM be revoked because it claims the government lacked the authority to issue a license and permit and said the permissions destroy the value of the company's mineral rights.

Seabridge, however, asserted that it already had the license and permit before Tudor acquired its rights.

Red Cloud's Talbot agreed. "We believe this is an opportunistic move by Tudor," Talbot wrote. "Due diligence would have shown that this license and permit were in effect well before Tudor became the owner of the mining claim through which Seabridge has the right to construct the MTT."

Tabot did not change Red Cloud's target price on the stock.

Fronk also used his shareholder message to comment on the state of the gold market. "The U.S. Treasury has a rendezvous with a dislocation in the Treasury market in the near future," he said.

"The over-valued dollar will be sacrificed," he wrote. "The alternative to the dollar is gold, as ongoing record central bank purchases clearly indicate. We believe the financial environment for which we formed Seabridge in 1999, with our strategic emphasis on gold ownership per share and leverage to the price of gold, is near at hand."

Ownership and Share Structure

About 36% of the company is held by institutional investors, according to Reuters, including Pan Atlantic Bank and Trust with 7.69% or 6.25 million shares, National Bank of Canada with 5.68% or 4.62 million shares, and FCMI Financial Corp. with 5.11% or 4.16 million shares.

Management, board members, and company insiders own approximately 30%, the company said. Fronk owns 1.49% or 1.21 million shares, according to Reuters. The rest is retail.

It has a market cap of CA$1.47 billion and has about 82.4 million shares outstanding, with 79.95 million free-floating. It trades in a 52-week range of CA$21.78 and CA$13.83.

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1. Seabridge Gold Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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