Seabridge Gold Inc.'s (SEA:TSX; SA:NYSE.MKT) KSM project in British Columbia (B.C.) was deemed "substantially started" by the provincial government, an achievement toward which the company spent significant resources, reported RBC Capital Markets analyst Michael Siperco in a July 26 research note.
"The receipt of 'substantially started' status, in our view, is a significant permitting derisking event for KSM and a catalyst for the stock as management continues to seek a larger partner for development of the +US$7 billion gold-copper project in B.C.," Siperco wrote.
Compelling Return Potential
RBC maintained its target price of US$30 per share on the Ontario-based mining company, trading at about US$15.38 per share at the time of the report, noted the analyst. The difference between these prices implies a 95% potential return for investors.
The investment bank also continues to rate Seabridge Outperform, Siperco wrote, based on the assumptions the company secures a partner and a feasibility study confirms KSM's economic potential.
Significance of the Designation
Seabridge having the 'substantially started" designation for KSM means the environmental assessment certificate (EAC) for it will remain valid for the project's life, explained Siperco. This period, according to the most recent prefeasibility study of KSM, is at least 33 years.
The status also further de-risks KSM, Siperco pointed out, making the project more attractive to companies interested in partnering with Seabridge on further developing it "with an option to acquire control." In a partner, Seabridge is looking for a senior producer that can fund KSM through a feasibility study and to a construction decision.
A partner like this, the analyst added, could "validate the project, the latest updated studies and the work done to date at site while providing a path for Seabridge investors to participate in future potential upside if a positive construction decision is made."
Accordingly, Siperco highlighted that Seabridge successfully finding a partnership to advance KSM is an event that should catalyze Seabridge's stock.
Criteria Met in Plenty of Time
Siperco noted that Seabridge met the requirements at KSM for the "substantially started" status well before the deadline of July 2026.
One of the three primary criteria for the designation is "total expenditures on construction activities," he wrote. The mining company spent more than CA$800 million (CA$800M) at the site since being granted the EAC for KSM in 2014. Of this amount, about CA$400M went toward construction of road access and a permanent camp and toward early environmental work.
The other two criteria are "Indigenous support for the project" and "physical disturbance from permanent infrastructure."
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- 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.
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Disclosures for RBC Capital Markets, Seabridge Gold Inc., July 26, 2024
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