Seabridge Gold Inc.'s (SEA:TSX; SA:NYSE.MKT) recently updated mineral resource estimates for its Mitchell and East Mitchell (previously Snowfield) deposits are expected to improve the project economics of KSM and, thus, increase its appeal to potential joint venture (JV) partners, reported Singular Research analyst Jim Marrone in an April 22nd research note.
The next step for KSM is a preliminary feasibility study (PFS) that incorporates the updated resource estimates and, for the first time, East Mitchell. The completed report is anticipated in June 2022.Marrone noted the Canadian mining company added 12,000,000 ounces (12 Moz) of gold in the Measured and Indicated categories and reduced Inferred gold resources by 0.2 Moz since its previous, December 2020, resource estimate.
Together, the two deposits are "expected to create a single, very large, open-pit mining opportunity with improved economic projections."
Marrone highlighted the PFS will likely reflect the synergies between Mitchell and its upper continuation, East Mitchell. Together, the two deposits are "expected to create a single, very large, open-pit mining opportunity with improved economic projections."
As such, the mine plan will likely include an increase in Proven and Probable gold reserves and better grades in the first production years, Marrone indicated. Underground block cave development will likely come later in the plan, thereby deferring the need to pay the high capex associated with it.
"These expected gains, along with higher metal prices, are expected to help offset the impact of inflation on materials and labor costs, in the updated PFS," added Marrone.
The analyst also pointed out that the expected benefits to KSM by including East Mitchell in the PFS and mine plan "are further impetus of a potential JV partner." Now is an ideal time for JVs to be effected, given the belief a bull gold market is starting and given the large producers have depleted reserves but robust balance sheets.
"The value of [KSM] will ultimately be realized via a JV with a major mineral producer," commented Marrone. "While progress at Seabridge will remain slow and steady towards a JV, the direction continues to be positive."
On Seabridge, Singular has a Buy rating and price target of $30 per share versus its current share price around $18.79 per share. This target reflects Singular's belief the mining company warrants trading at an enterprise value: ounce of 30x in the intermediate term, versus its current roughly 20x, given recent operational developments and the potential for higher gold prices.
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