Mining Co. Raises $100M, Well-Funded Through 2025
Research Report

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) completed a financing for $100 million ($100M), which it will spend on its KSM gold-copper-silver-molybdenum project in northwest British Columbia (B.C.), reported RBC Capital Markets Analyst Michael Siperco in a Feb. 19 research note.

"Funding is in place to continue early works, including items that could make the project increasingly attractive to a partner, the key catalyst for the stock," Siperco wrote.

153% Uplift Possible

RBC maintained its Outperform on Seabridge, noted Siperco. This rating assumes that the mining company will land a partner, that KSM's permits are extended and that the upcoming feasibility study confirms the project's economic potential.

Also unchanged is RBC's target price on Seabridge, of $30 per share. The analyst explained that the target reflects a 50% discount to its modeled $5.4 billion net present value discounted at 8% on KSM, based on $2,200 per ounce gold and $4 per pound copper. Were spot metal prices used instead, RBC's net asset value and implied target price would be 75%-plus higher.

In comparison to the target, Seabridge is trading now at about $11.85 per share. Thus, the target implies a potential return for investors of 153%.

"We see a potentially improving macro/investment environment (with a renewed global focus on resources) as supportive for the stock, with significant leverage to still higher prices ahead of further project advancement," the analyst wrote.

Plans for New Funds

Seabridge's recent $100M financing consisted of an $80M bought deal in which 6.5 million (6.5M) shares were sold and a $20M private placement in which 1.6M shares were sold to a strategic investor. This new shareholder now owns 2% of the company.

The Canadian explorer intends to apply the $100M toward the $150M it plans to spend on KSM, on power supply, early project engineering required for the feasibility study and ongoing project costs.

"This capital essentially brings forward future capex, which we model as a credit to Seabridge in potential partnership scenarios, offsetting the dilution in our valuation," explained Siperco, who noted the financing diluted Seabridge's shares by about 9%.

The planned additional spending on KSM is a continuation of the roughly $400M expended between 2021 and 2023 so the project could earn a substantially started status, which it did last year. However, this designation, ensuring permits remain valid for the project's mine life, now is being disputed. Until the issue is resolved, KSM will maintain the status.

"Our view is that KSM qualifies under the government's criteria even if it needs to requalify, and [we] see potential positive momentum in terms of Canadian/B.C. government focus on infrastructure and resource development," Siperco commented.

Cashed Up For 2025

Seabridge has about $175M in available cash, between the financing and cash on hand, plus another $100M available to it under the at-the-market facility renewed in January.

This total is sufficient, purported Siperco, to fund the company's activities throughout the year.

Significance of Securing Power

The analyst pointed out that Seabridge securing power for KSM benefits it immensely. A switching station would ensure power via the northwest transmission line and would supply grid power to KSM before and during construction.

The budget for power supply to KSM, albeit in the 2022 prefeasibility study, is $121M. Already Seabridge has paid BC Hydro $107M as of Q3/24.

What to Watch For

Seabridge is seeking a partner that would provide funding through feasibility study and construction decision. Success in this regard would be "the key catalyst" for the company's stock, wrote Siperco.

Progress on work related to the feasibility study and on optimizing KSM, expected on an ongoing basis, also could boost Seabridge's share price. The same holds for exploration results from its Iskut and 3 Aces projects.