Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) intends to spin out its 100%-owned Courageous Lake gold project in Canada's Northwest Territories into a new entity called Valor Gold, reported Cantor Fitzgerald Analyst Mike Kozak in a Dec. 16 research note. On the news, Cantor raised its target price on the Canadian explorer-developer by 4%.
"This is a smart move by Seabridge," Kozak wrote.
22% Implied Return
Cantor's new target price on Seabridge is CA$48 per share (CA$48/share), up from CA$46/share, noted the analyst. In comparison, the junior miner was trading at about CA$39.26/share at the time of Kozak's report.
From the mining company's CA$39.26/share price, the return to the new target is 22%.
Seabridge remains a Buy.
The company has 104.8 million shares outstanding. Its market cap is US$3 billion. Its 52-week range is US$9.40–31.35.
Estimated Value US$400–800M
Kozak highlighted that Seabridge's KSM project in northern British Columbia, one of the world's largest gold-copper projects, is overshadowing Courageous Lake. Within Valor Gold, Courageous Lake likely would generate significant value, particularly because gold prices are at all-time highs. Cantor's preliminary estimate of the project's value is US$400–800 million.
The analyst noted that shares of the spinco would be distributed to Seabridge holders. Valor Gold likely would be listed publicly in the future.
Economics at US$1,850/oz Au
Kozak reiterated Courageous Lake's economics. According to a January 2024 prefeasibility study (PFS), the project was estimated to return a US$523M after-tax net present value discounted at 5% and a 21% internal rate of return, at a gold price of US$1,850 per ounce (US$1,850/oz). Payback would be 2.8 years.
The PFS outlined Courageous Lake as a 7,500 ton per day (ore) open-pit operation, producing an average of 201,000 ounces (201 Koz) of gold per year over a 12.6-year life of mine, at a US$999/oz all-in sustaining cost. Initial capex was estimated at US$747M.
Large Scale of Project
The analyst also highlighted Courageous Lake's size. The project has Proven and Probable reserves of 2,800,000 ounces (2.8 Moz) of 2.6 grams per ton (2.6 g/t) gold. The Measured & Indicated resource is 11 Moz of 2.4 g/t gold. The Inferred resource is 3.3 Moz of 2.5 g/t gold.
Plus, there is the Inferred resource of the satellite nonrefractory Walsh Lake deposit, which is 600 Koz of 4.2 g/t gold.
"While its ore is refractory in nature, Courageous Lake is one of Canada's largest and highest-grade open-pit gold projects," Kozak wrote.
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