In a May 19 research report from B Riley analyst Lucas N. Pipes, Seabridge Gold Inc.'s (SEA:TSX; SA:NYSE.MKT) estimated rating was updated in light of Q1 results for the company's KSM project as well as a reported royalty agreement with Sprott.
With this, Pipes reiterated his Buy rating on the stock and US$60 target price.
KSM Royalty Agreement
The royalty agreement was made to advance the current progress of Seabridge's "substantially started" KSM project. In accordance with the royalty arrangement, Sprott will extend the payment of US$150 million to KSM. Consequently, KSM will confer upon Sprott a 1.2% net smelter royalty pertaining to its project.
This agreement is the second made between KSM and Sprott. Pipes commented that this showcases Sprott's optimism in the project and opens the door for future prospective partnerships.
Pipes noted, "We believe the progress on the ground will further de-risk the development pathway and enhance the efforts for a comprehensive partnership agreement at KSM."
Necessary Capital Provided
US$225 million had previously been raised from Sprott and Ontario Teacher's Pension Plan. This additional US$150 million gives Seabridge the necessary capital to garner "substantially started" status for KSM. This is happening a lot sooner than the June 2026 EAC deadline.
This status will give KSM "long-term validity" for its Environmental Assessment Certificate (EAC).
"We believe these efforts strengthen the attractiveness of the KSM project during joint venture discussions by securing the EAC, further minimizing project risks, and expediting the construction schedule," Pipes noted.
Quarter One Results
Pipes also noted Seabridges Q123 results.
He stated, "As a pre-production company, we would note G&A expense of CA$3.9M versus CA$4.6M YoY, capital spending of CA$42.8M versus CA$10.1M YoY, and a treasury of CA$37.6M in cash and roughly CA$1.3M in short-term deposits."
Structure and Predictions
In his report, Lucas N. Pipes reiterated his US$60 target price.
His research also shared current market data on the company.
- Price: US$13.75, with a 52-week range between US$10.03 and US$16.18
- Price Target: US$60
- Market Cap: US$1,122.6 million
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- Katherine DeGilio wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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Disclosures for B. Riley Securities, Seabridge Gold Inc., May 19, 2023
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