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Seabridge Gold Looking To Hit Pay Dirt

Oct. 21, 2014 9:57 AM ETSA
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Shares of Seabridge Gold, Inc. (USA) (NYSE: SA) spiked to $11.60 in August, but have since lost most of the spectacular gains they made in the last two months. This comes as quite a disappointment for the company's shareholders who were expecting to see more gains for a stock whose performance has been dismal in the last two years. The fortunes of Seabridge Gold are very much tied to the KSM project, and it is here that the company is exploring for mineral deposits sufficient to convince investors to believe in the potential of this stock.

About Seabridge Gold

Seabridge Gold, Inc. was formally known as Seabridge Resources, Inc. and changed its name to reflect the company's focus on gold mining. The company holds mining rights in an area stretching more than 40,455.3 hectares in parts of British Colombia, Canada. Currently the Kerr-Sulphurets-Mitchell also referred to as KSM is the company's lead project. Some industry experts believe the KSM deposits, reputed to contain both gold and copper bearing ore, could be some of the biggest finds in the world. All activities on the company's properties are currently limited to exploratory drilling and preparation of feasibility studies and there is no actual commercial production taking place. The company is based in Toronto, Canada and was founded in 1971.

Why Shares Were Rallying

In order to predict the future direction of this company's stocks so you can determine the best entry point, you need to understand the main drivers or triggers. Between July and August there was a rally for shares of Seabridge Gold, one not seen since the beginning of this year. Investors seem to have been reacting to a number of things. Firstly, investors were responding to a jump in gold prices following an announcement from the Pentagon that it would be launching airstrikes against ISIS positions in Iraq and Syria. Gold and other precious metals always seem to do well during periods of political uncertainty. However, Seabridge Gold is not currently undertaking any commercial production, and gold prices do not have much effect on the company's fundamentals. An announcement on July 22nd that the company had managed to secure $13.8 million in new funding for exploratory activities in the KSM area excited investors. This is an indication that investors buy into the company's potential, and they are willing to meet the company's cash needs until commercial production begins.

Long Wait for Gold

With all the promising results, investors are in for a long wait before actual gold and copper production begins. We do not know how the market prices will be by then, increasing the risks and uncertainties of this company's stock. A point of reference could be some other listed companies that are mining in the Alaska, Northern Canada regions.

Although it is not generating any revenues, Seabridge Gold has sufficient cash reserves to see it through eight quarters. Institutional investors currently own 35 percent of the stock. Once they begin to see promise in this stock, they may purchase a sizable amount of shares, pushing the price higher and thereby rewarding early investors. For investors interested in taking risks on a long-term opportunity, Seabridge Gold is a good buy.

Analyst's Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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