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Seabridge Gold: Recent Acquisition Is A Testament To Being Undervalued

Apr. 06, 2021 5:21 AM ETSeabridge Gold Inc. (SA), SEA:CA6 Comments

Summary

  • If the recently expanded higher grade Iron Cap deposit is successful this would be a dramatic improvement in project economics.
  • After-tax NPV estimates increased 80%, and the projected payback period shrank from 6.4 years to 4.0 years.
  • Recent acquisition has a large potential to significantly increase KSM's proven and probable reserves.
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Seabridge Gold (NYSE:SA) recently closed the acquisition of the Snowfield Property, a large gold resource immediately adjacent to Seabridge's 100%-owned KSM gold-copper project. The acquisition could have a significant positive impact on project economics at KSM. We maintain our BUY rating and price target of $30.00 in the short term based on bullion prices.

Current Highlights

  • Seabridge recently closed its previously announced acquisition of the Snowfield Property from Pretium Resources Inc. (PVG). The Snowfield Property hosts a large gold resource immediately adjacent to Seabridge's 100%-owned KSM gold-copper project in northeast British Columbia, Canada. The acquisition enables exciting new development opportunities for KSM which could have a significant positive impact on project economics.
  • A KSM Preliminary Economic Assessment (PEA) filed last year confirms the potential for a dramatic improvement in project economics by incorporating the recently expanded, higher grade Iron Cap deposit into mine plans. The PEA economic projections, if achieved, would rank KSM among the best large-scale producing mines in the world.
  • The PEA estimates an after-tax NPV of US$6.0 billion, an increase of ~80%, from US$3.4 billion in the 2016 PEA using a base case three-year average price assumption of US$1,340/oz gold, US$2.80/lb copper, and foreign exchange rate of US$0.76 per C$1.00, at a 5% discount rate. It also estimates after-tax IRR of 14%, an improvement of 40%, from the 10% in the 2016 PEA and shrinking the projected payback period from 6.4 years to 4.0 years, only 9% of projected mine life.
  • We maintain both our BUY rating and our price target of $30.00.

Primary Risks

  • SA is highly levered to the price of gold.
  • A JV of the KSM project is dependent on favorable market conditions.

Seabridge Acquires Snowfield Property from Pretium

Seabridge Gold Inc. recently closed its previously announced acquisition of the Snowfield Property from

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Analyst’s Disclosure: I am/we are long SA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (6)

Z
And another year gone.....another year gone.....another year bites the dust.
Z
Hey avoid......Seabridge Gold has been "discovering" and reporting "probable" deposits and even "proven" ore of great magnitude for nearly TWO decades. Rudi Fronk pitched his wares at a conference I attended 16 years ago.....same shitake, different day. How long have you actually followed this company? If you know the track record as well as those of us with some real hindsight, you would not be fooled by the endless rhetoric of a loser CEO who as of this writing still has not mined one ounce from the ground....in all this time. How do you keep a company afloat without any product? Who pays the bills? Who gets stuck every time they issue more stock or swap shares for another "potential" hole in the ground? How about the off the wall financial gymnastics they engage in to kick the can down the road for another year or two? SA just can't seem to find a suitor or should I say sucker? If it's not the POG isn't high enough, then it's the competition that fails to see the hidden value. Blah blah blah. At the end of the day, they can't go it alone....and they can't find a buyer because the imbedded costs are monumental. It does not matter one iota what your break even is if you have to construct an entire world around which to dig, process, move and sell the gold. But hey.....hang in there.
Z
The only thing SA has proven is that it is adept at separating money from investors. Once again, SA has never mined an ounce....has had secondaries every time the price rises over $15 and never, ever makes money. Make an investment in a company worth your time and effort. There are much better alternatives....GOLD, NEM to name two. They even pay dividends...oh yeah, and they actually mine gold.
A
@Zephyr512, SA will never mine an ounce of gold. They are an explorer, not a producer - discover the deposits, prove up the resources, then sell to a major. The Newmonts and Barricks do not perform grass roots exploration; they only search for additional metal deposits on the claims held near existing mines. Investors need to know the difference.
Tippman profile picture
@Avoid the Herd Yes I get your point: but I am somewhat sceptical
about the huge Capex for KSM (5 billion Dollars) and SA's wish that potential JV partners fork up 90% of the Capex bills, while SA remains
owner of 30% of the revenues? That's hard to sell IMHO.

I think of risks: gletchers, snow, ice, weather
conditions. Potential JV Parners must think of those risks: What if
the Capex costs exceed the projected 5 billion??? For example: 20% !!!
From that perspective paying an amount for the 70% KSM deposit
PLUS 90% from total Capex (like SA wants) sounds like "not acceptable" for a major copper or major gold miner.... Even though they might calculate
a lower payement for the 70% KSM deposit (by reducing the 20%
Capex from the transaction price). So I am sceptical about those
issues: but still I consider to buy some shares.
terryongarland profile picture
One suspects the fair valuation of this nugget won't be realized for a bit..which is means patience..and most don't have the patience to sit on relative dead money..but I have.. more patience than brains.
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