"We believe Seabridge provides investors with ownership in one of the most strategically compelling and prolific copper‐gold projects in the world, the KSM project in BC, at one of the lowest market caps per ounce to the investor," analyst Don MacLean wrote in an Oct. 26 research report on Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT).
Seabridge announced the new PEA for KSM in an Oct. 6 press release. The company also announced discovery of "a previously unknown deposit with initial gold and copper grades among the best found to date on the KSM Project" in an Oct. 18 press release, and on Oct. 26 announced it has identified "a prospective new porphyry copper-gold system with a potentially intact epithermal precious metals zone at its top" at its wholly owned Iskut project, also in British Columbia.
Following release of the new PEA on KSM, Paradigm did a "full model rebuild" of its investment thesis for Seabridge, according to MacLean, noting, "Over the past 3 years, Seabridge has continuously improved its massive KSM project in Northwestern B.C., finding deeper and higher-grade mineralization, derisking it with permitting and operational redesign."
The new PEA, MacLean wrote, "outlines further game-changing improvements."
Among improvements in the economics of the KSM project, as outlined in the Paradigm report, is a boost in the "after-tax IRR from 8.0% to 10.0%. . .a substantial uplift for a mega project." MacLean also noted that KSM's "life-of-mine total cash costs dropped sharply to negative $179/oz from $277/oz, mostly because Deep Kerr's higher proportion of copper boosts project copper credits to $1,328/oz from $795/oz."
In addition, MacLean wrote that, "the shift from 70% open-pit mining (tonnes) to 78% underground block caving [is] transformational."
Arguing that investors should consider owning Seabridge "sooner rather than later," the Paradigm analyst cited the "current gold price setback" as a "buying opportunity," a shortage of "large new undeveloped gold and copper project in safe jurisdictions with attractive economics," and an expectation that 2017 will "offer potentially exciting exploration into a new higher-grade target at KSM."
MacLean also commented on developments at Iskut, stating, "We like the exploration thesis underlying the investment."
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