First Nations Group Challenges Gold Project's 'Substantially Started' Status

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An indigenous group has filed a petition in the British Columbia Supreme Court seeking review of the "Substantially Started" (SS) designation given to Seabridge Gold Inc.'s (SEA:TSX; SA:NYSE.MKT) massive KSM Project in B.C.'s Golden Triangle.

The Tsetsaut Skii km Lax Ha (TSKLH) is claiming extensive traditional territory in northwest B.C., including the area of the KSM Project, and contests the rights of the Nisga'a Nation and Tahltan Nation over the area of the eastern side of the project, Seabridge noted in a release.

During the application process for the designation, Seabridge said it submitted letters from "representatives of the three largest indigenous peoples in the area of the KSM project, the Nisga'a Lisims government, the Tahltan central government and the Gitxsan hereditary chiefs office, as well as the village of Hazelton, the district of New Hazelton, the town of Smithers, the district of Stewart, the city of Terrace, (and) the regional district of Kitimat-Stikine, all expressing strong support for a positive SS determination for the KSM project."

"Seabridge's application for a substantially started determination was widely supported by the communities of Northwest British Columbia, including indigenous communities," said Seabridge Chairman and Chief Executive Officer Rudi Fronk. "TSKLH were provided the relevant information early and participated in the province's review process, including submitting comments for the province's consideration. TSKLH may not agree with the ultimate substantially started determination, but Seabridge is confident that there is ample evidence that the determination was reasonable."

Fronk added, "Seabridge plans to participate in defending the validity of the substantially started determination and will be conferring with its legal counsel on the ways in which it may do so."

Analyst Michael Siperco of RBC Capital Markets, in an updated research note on November 25, wrote that the "challenge of KSM's 'substantially started' status is not, in our view, a significant risk to the project or the designation. Until resolved, however, it could impact the timing of a potential partnership agreement for the development of the +$6bn gold/copper project in B.C."

Designation Remains in Place During Review

Seabridge announced this summer that it had received the "Substantially Started" designation from the British Columbia government for KSM, a major milestone for the company.

Analyst Michael Siperco of RBC Capital Markets, in an updated research note on November 25, wrote that the "challenge of KSM's 'substantially started' status is not, in our view, a significant risk to the project or the designation. 

The company has worked toward fulfilling the requirements needed to earn the designation since acquiring the project in 2001 and spent more than CA$1 billion advancing KSM, including CA$800 million after its Environmental Assessment Certificate (EAC) was issued in 2014.

The designation is "unaffected by the petition and will remain in place if the province successfully defends the SS determination," Seabridge said.

Even if the challenge was successful, "a typical order in these circumstances would require the EAO to return to its substantially started determination process, either to expand consultation of TSKLH or reconsider the reasons for its determination, and then a fresh determination would be issued. The company is advised that a final decision on the TSKLH petition could take a year or more," the company said.

Analyst: Company Catalyst Remains Finding KSM Partner

In its petition, TSKLH alleged the province failed to consult them on the SS determination and wants the designation rescinded.

"The company does not have access to the record of consultation between the province and TSKLH and is, therefore, unable to offer a fully informed view on the merits of TSKLH's claims of the province's failure to: (i) fulfill the duty to consult; or (ii) conduct its process for arriving at the SS determination with procedural fairness," Seabridge said in its release.

However, the company noted information in the petition materials revealed that TSKLH received the application for SS and the draft report on the application and made a detailed submission expressing its view on the application to the government last summer.

"We have a high degree of confidence that Seabridge and KSM have satisfied the  requirements for the substantially started designation, and that even if this dispute between the province and this particular indigenous group results in a restart of that process, KSM should again receive the designation on the same basis, with the support of the three largest indigenous groups affected by the project (The Nisg a'a Lisims government, the Tahltan Central Government, and the Gitxsan Hereditary Chiefs)," wrote Siperco for RBC, who rated the stock Outperform, Speculative Risk with a US$30 per share price target.

"In our view, the key catalyst for the company remains finding a partner for the development of KSM," the analyst continued.

In a management discussion of its latest quarterly results, Seabridge said it "continues its pursuit of a joint venture agreement on the KSM Project with a suitable partner on terms advantageous to the company, since it does not intend to build or operate the project alone."

Big Picture: Gold Steady, Still Predicted to Rise

Safe-have demand for gold softened this week on optimism from a possible ceasefire in the Middle East, according to Sherin Elizabeth Varghese, writing for Reuters. However, at the same time, declines were limited by concern over developments in Ukraine and U.S. President-Elect Donald Trump's tariff plans.

Spot gold was steady at US$2,627.50 per ounce Tuesday morning, erasing earlier losses, including a "dramatic US$100 plunge" on Monday when the yellow metal retreated from a three-week high, according to the report. U.S. gold futures gained 0.4% to rise to US$2,628.00, she wrote.

"It's probably some realization that a ceasefire between Israel and Hezbollah only modestly mitigates overall geopolitical risks, certainly there's some optimism there," said Peter Grant, vice president and senior metals strategist at Zaner Metals, according to Reuters.

Declining interest rates and persistent geopolitical risks are expected to keep driving gold prices higher through 2025, analysts at UBS said, reported Investing.com.

"These elements are set to reinforce gold's status as a safe-haven asset while also benefiting from broader economic conditions anticipated in the coming year," Investing.com's Navamya Acharya wrote.

Writing for MarketWatch, Cam Hui this week noted that for 2025, he was "reiterating my bullish call on gold — even, and over U.S. stocks.

"Going back to 1980, there have been several distinct gold bull-bear cycles," Hui wrote. "Gold now is tracing out saucer-shaped multi-year bases against different regional stock indices. The gold/Dow ratio is the weakest owing to the strength of U.S. stocks, but it is nevertheless distinctive. The Gold/EAFE ratio is poised for a relative breakout, and the gold/emerging-markets ratio has marginally broken out of a 12-year base."

Hui continued, "These technical patterns argue for a bullish commitment to gold for 2025 and beyond for all investors in all major currencies from an asset allocation perspective."

Ownership and Share Structure

Reuters provided a breakdown of the company's ownership and share structure, where management and insiders own approximately 3% of the company. According to Reuters, CEO and Chairman Rudi P. Fronk owns 1.38%.

Reuters reports that institutions own about 50% of the company. According to Reuters, Friedberg Mercantile Group Ltd. owns 12.86%, National Bank of Canada owns 4.92%, Van Eck Associates Corp. owns 4.11%, Kopernik Global Investors, L.L.C. owns 3.35%, and Paulson & Co. Inc. owns 2.28%.

According to Reuters, there are 90.98 million shares outstanding, while the company has a market cap of CA$1.84 billion and trades in a 52-week range of CA$12.62 and CA$28.39.