Chairman and CEO Rudi Fronk discussed taking on a partner to advance its flagship KSM project during a recent webinar hosted by B. Riley Securities, reported analyst Lucas Pipes in an April 20 research note.
"We believe the market is currently short on development projects (especially of size), and market interest/mergers and acquisitions are heating up," both of which bode well for Seabridge and KSM, Pipes wrote.
Significant Projected Return
B. Riley reiterated its Buy rating and US$60 per share price target on Seabridge, which is currently trading at about US$14.46 / CA$19.54 per share, noted Pipes. The price difference implies a sizable potential gain of 367%.
"While the lack of partnership at KSM has been an overhang for the stock, we believe the asset is now ripe for third-party validation," Pipes commented.
The analyst presented the key takeaways from the session with Seabridge.
Largest Undeveloped Gold Project
Seabridge's KSM, in British Columbia (B.C.), "is in a league of its own," Pipes described. The project is the world's largest undeveloped gold project by reserves and resources and with substantial copper byproduct credits. Specifically, Proven and Probable (2P) reserves at KSM are 47,300,000 ounces (47.3 Moz) of gold and 7,300,000,000 pounds of copper.
"We believe there is a very limited number of similar developments today, especially with both resources under one roof," Pipes commented.
The after-tax net present value discounted at 5% (NPV5%) is an estimated US$7.9 billion ($7.9B) for KSM in the base case outlined in the 2022 prefeasibility study, using US$1,742 per ounce gold and US$3.53 per pound copper prices.
The after-tax NPV5% is US$11B using spot prices near US$2,000 per ounce gold and US$4 per pound copper are used.
"Overall, while we believe the size of the KSM project limits the universe of potential partners to about a dozen global players, we expect that the economies of scale, exposure to multiple cycles, and tier 1 jurisdiction make for very attractive net economics, underpinning strong interest in the opportunity," wrote Pipes.
Ready for Partnership
According to CEO Fronk, the Ontario, Canada-based mining firm would like a partner to fund a bankable feasibility study for optionality in KSM, Pipes relayed. The analyst purported the most likely path forward thereafter, were the feasibility study executed, would be the partner buying into majority ownership over time.
Also of note, Seabridge has taken major steps over the past few years to make KSM more attractive to prospective partners, noted Pipes, and during the recent Seabridge-B. Riley event, Fronk discussed what those were.
One was the acquisition of Snowfield, now called East Mitchell, in 2020 to reduce KSM mine capex.
The second effort was getting KSM fully permitted.
The third was advancing KSM enough to earn the "substantially started" designation. With this status, permits, including environmental assessment approvals, do not expire and, instead, remain valid through the life of the project under B.C. law.
The work Seabridge did in this regard included installing roads, power infrastructure, and camps.
Other Seabridge Projects
KSM is not Seabridge's only project. It has four other attractive assets: 3 Aces in the Yukon, Iskut in B.C., Snowstorm in Nevada, and the most promising, according to B. Riley, Courageous Lake in the Northwest Territories.
Courageous Lake has about 6.5 Moz of 2P reserves in a single open pit, and an update to the prefeasibility study is slated for this year.
"The focus is a smaller and less capital-intensive mine plan," added Pipes.
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1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures For B Riley Securities, Seabridge Gold Inc., April 20, 2023
Important Information This report has been prepared by B. Riley Securities, Inc. (“B. Riley Securities”) and may be distributed by its affiliates and subsidiaries as third-party research pursuant to FINRA Rule 2241. National Holdings Corporation, parent company to National Securities Corporation (“National Securities”), is a subsidiary of B. Riley Financial, Inc., which is the parent company to B. Riley Securities and its affiliate B. Riley Wealth Management, Inc. (“B. Riley Wealth”). As such, each of National Securities and B. Riley Wealth may distribute B. Riley Securities research pursuant to Rule 2241 and by mutual agreement. B. Riley Securities, B. Riley Wealth, and National Securities are broker-dealer registered with the SEC and are members of FINRA, SIPC, and the NASDAQ stock market. The principal business address of B. Riley Securities is 11100 Santa Monica Blvd., Suite 800, Los Angeles, CA 90025. The principal business address of B. Riley Wealth is 40 S. Main Street, Suite 1800, Memphis, TN 38103. The principal business address of National Securities is 200 Vesey Street, 25th Floor, New York, NY 10281. Company-Specific Disclosures B. Riley Securities, Inc. or any of its affiliates, expects to receive or intend to seek compensation for investment banking services from Seabridge Gold Inc. in the next 3 months. B. Riley Securities, Inc. or any of its affiliates, has received compensation for investment banking services from Seabridge Gold Inc. in the past 12 months. Seabridge Gold Inc. currently is, or within the past 12 months was, a client of B. Riley Securities, Inc. The services provided were Investment Banking Services. For up-to-date B. Riley Securities, Inc. company disclosures, please click on the following link or paste the URL in a web browser: https://brileysecurities.bluematrix.com/sellside/Disclosures.action. General Disclosures Information about the Research Analyst Responsible for this report: The primary analyst(s) covering the issuer(s), Lucas N. Pipes, CFA, certifies (certify) that the views expressed herein accurately reflect the analyst's personal views as to the subject securities and issuers and further certifies that no part of such analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in the report. The analyst(s) responsible for this research report has received and is eligible to receive compensation, including bonus compensation, based on B. Riley Securities, Inc.’s overall operating revenues, including revenues generated by its investment banking activities. Information about B. Riley Securities, Inc.’s Conflicts Management Policy: B. Riley Securities, Inc.’s Research conflicts management policy is available at: https://brileyfin.com/conflicts-managementpolicy/. Information about investment banking: In the normal course of its business, B. Riley Securities, Inc. or any of their affiliates seek to perform investment banking and other services for various companies and to receive compensation in connection with such services. As such, investors should assume that B. Riley Securities, Inc., or any of their affiliates intend to seek investment banking or other business relationships with the companies covered in their research reports. Information about our recommendations, holdings and investment decisions:
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