Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) announced preparations are underway for drill testing of its comprehensive exploration model at its 100%-owned 3 Aces project in the Yukon Territory.
The company plans to complete about 7,500 meters of core and reverse circulation drilling and geophysical surveys at the project, which Seabridge acquired in 2020.
"Previous operators defined discrete zones of high-grade gold but encountered challenges connecting and extending these zones," Chairman and Chief Executive Officer Rudi Fronk said. "Our team has recognized structural controls that may be able to resolve the continuity issue. Last season's work gave us confidence in the grade controls predicted by our exploration model, and we are looking forward to expanding that understanding and moving towards resource delineation."
The company received its exploration permit for the project from the Yukon government last fall. Weather conditions and a mandated cutoff date meant the company was only able to drill four holes for about 1,200 meters of the 1,500 to 1,800 meters it had planned.
Jim Rickards, editor of the Strategic Intelligence newsletter, called KSM "one of the most attractive gold-copper acquisition targets in the world."
Seabridge has high hopes for the project. "Our expectation is that over time, we will be able to deliver a high-grade gold resource with grades significantly higher than our existing gold resources at our other projects" at 3 Aces, Fronk has said.
The company believes the project could host higher-grade gold than its massive flagship project, KSM, in British Columbia’s Golden Triangle. Jim Rickards, editor of the Strategic Intelligence newsletter, called KSM "one of the most attractive gold-copper acquisition targets in the world."
The company recently announced it was raising US$150 million from Sprott Resource Streaming and Royalty Corp. in exchange for a 1.2% net smelter return (NSR) royalty on production at KSM.
The money will be used to complete work at the site to meet the criteria for "substantially started" status to get its environmental assessment certificate (EAC) there extended indefinitely.
Seabridge said it had engaged a leading mining industry bank to assist joint venture negotiations.
"We are reiterating our Buy rating as we believe Seabridge could see a significant re-rating if it signs an agreement with a JV partner," wrote Roth Capital Partners analyst Joe Reagor in a May 17 research note. Reagor set a price target of US$33.
The Catalyst: A Possible World-Class Deposit
Historical drilling at 3 Aces focused on a 13-kilometer-square region known as the Central Core Area. Good widths of high-grade gold were discovered, but not enough of the continuity needed for a resource estimate.
In last year's drilling at the site, Hole 3A22-355 intersected 3.53 grams per tonne gold (g/t Au) over 22.5 meters, Seabridge said, including 11.97 g/t Au over 5.2 meters. The remaining three holes all assayed for less than 1 g/t Au, the best intercept being 0.96 g/t Au over 1.8 meters in hole 3A22-357.
The 35,700-hectare project consisting of more than 1,700 claims is in a readily accessible part of the southeastern Yukon.
"We are reiterating our Buy rating as we believe Seabridge could see a significant re-rating if it signs an agreement with a JV partner," wrote Roth Capital Partners analyst Joe Reagor.
The company said it believes the project could be "consistent with some of the biggest and richest gold deposits in the world."
Seabridge's exploration model for the project predicts high-grade gold localized in the limbs of second-order folds (F2), preferentially at the contacts between thick phyllite sequences and coarse interbedded sandstones and conglomerates. Multiple F2 synforms and antiforms have been identified in the Central Core Area that has not been systematically evaluated, offering numerous opportunities to expand higher-grade gold distribution.
Four different target areas — Spades, Hearts, Hearts West, and Clubs — will be drill tested to evaluate different settings where the company's model predicts gold continuity.
Seabridge said it will also resume reclamation activities at the site focusing on exploration roads and environmental monitoring of wildlife management, water sampling, and baseline conditions in the area.
KSM Increases Attractiveness for JVs
The money from Sprott will be used to complete work at KSM to meet the criteria for "substantially started" status to get its environmental assessment certificate (EAC) there extended indefinitely. It also will enable the company to complete a switching station and work needed to connect to BC Hydro's electricity lines for the construction and operation of the mine.
Proven and probable reserves at KSM's initial mine total 47.3 million ounces (Moz) Au, 7.3 billion pounds copper (Cu), 160 Moz silver (Ag), and 385 million pounds of molybdenum (Mo), with average production over a 33-year mine life of 1.03 Moz Au, 178 million pounds Cu, 3 Moz Ag, and 4.2 million pounds Mo, a preliminary feasibility study (PFS) found.
"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," B Riley Securities analyst LucasPipes wrote.
The company also released a preliminary economic assessment (PEA) for a separate, underground block cave mine with a small open pit. That mine is expected to produce 14.3 billion pounds Cu, 14.3 Moz Au, 68.2 Moz silver, and 13.8 million pounds Mo over 39 years.
"This capital raise is strategically designed to propel the KSM project forward while maintaining shareholder value without share dilution, which aligns with Seabridge’s established approach of offering the most favorable leverage in the industry to gold (> 2 ounces of gold per share) and one of the world’s leading to copper (> 600 pounds of copper per share)," wrote B Riley Securities analyst Lucas Pipes in a May 19 research update.
Pipes maintained a Buy rating on the stock with a US$60 per share price target.
Streetwise Ownership Overview*
Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT)
"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 wrote.
Ownership and Share Structure
About 36% of the company is held by institutional investors, according to Reuters, including Pan Atlantic Bank and Trust with 7.69% or 6.25 million shares, National Bank of Canada with 5.68% or 4.62 million shares, and FCMI Financial Corp. with 5.11% or 4.16 million shares.
Management, board members, and company insiders own approximately 30%, the company said. Fronk owns 1.49% or 1.21 million shares, according to Reuters. The rest is retail.
It has a market cap of CA$1.49 billion and has about 82.4 million shares outstanding, with 68.85 million free-floating. It trades in a 52-week range of CA$21.78 and CA$13.83.
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- Seabridge Gold Inc. is a billboard sponsor of Streetwise Reports and has paid SWR a sponsorship fee between US$3,000 and US$5,000.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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