Gold Co. Says It's Never Had This Much Interest in a Joint Venture

Source: Streetwise Reports 08/28/2023

This company has begun a formal process to search for suitable companies to partner with, and several have put boots on the ground at the explorer’s projects.

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) Chairman and Chief Executive Officer Rudi Fronk said that he has never been more confident in securing a joint venture partner at its 100% owned KSM project in northern British Columbia.

The company recently engaged RBC Capital Markets to lead a formal process for the search, with several companies doing due diligence, including many that have put boots on the ground at the project.

“It’s about to happen, people,” Fronk said on a recent webinar for Amvest Capital. “Our expectation is that we will have deal terms negotiated with one of these companies within the next six to nine months.”

Fronk said one of the reasons SEA trades at a discount to peers is because the company has talked about a deal for years and has yet to find a partner.

“I’m willing to take the other side of that bet,” said Fronk, who owns 1.49% or 1.21 million shares of the company. “Which I have, being a major shareholder in Seabridge.”

Analyst Lucas N. Pipes of B. Riley Securities noted that KSM is the world’s largest undeveloped gold project by reserves and resources. Pipes said the company has “a clear vision for a potential partnership agreement,” rating the stock a Buy with a target price of CA$60 per share.

The goal of the company is to secure a joint-venture project for its flagship KSM project in British Columbia, which is in one of the world’s best mining jurisdictions with good government infrastructure, including green hydroelectric power.

Analyst Lucas N. Pipes of B. Riley Securities noted in a research note that KSM is the world’s largest undeveloped gold project by reserves and resources.

Pipes said the company has “a clear vision for a potential partnership agreement,” rating the stock a Buy with a target price of CA$60 per share.

“The market is currently short on development projects, and market interest/M&A is heating up,” Pipes wrote. “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.”

Fronk agreed. “We’re finally in a world where M&A is picking up again; just look at the deals that are being done by the major companies, Newmont Corp. (NEM:NYSE) going after Newcrest Mining Ltd. (NCM:ASX) and Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE)” acquiring parts of Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE), he said during the webinar.

The Catalyst: More Than a Project

Seabridge recently announced a net profit of CA$9 million in the second quarter, or CA$0.11 per share, compared to CA$19.1 million, or CA$0.24 per share, in the same quarter ending June 30, 2022.

The company also recently announced it had closed on the sale of a US$150 million secured note to Sprott Resource Streaming and Royalty Corp. to complete work at KSM to meet the criteria for “substantially started” status to get its environmental assessment certificate (EAC) there extended indefinitely.

When the note matures, Sprott Streaming will use the principal amount repaid to purchase a 1% net smelter royalty (NSR) on all metals produced at the project, the company said.

KSM’s current deadline for the EAC is July 29, 2026. In deciding whether a project has been “substantially started,” the province decides whether sufficient on-site physical improvements have been made. Work Seabridge has completed includes the building of roads, camps, bridges, and special fish habitats.

“We talk about KSM being a project. In fact, what we have here is a district,” Fronk said.

Proven and probable reserves at KSM’s initial mine total 47.3 million ounces gold (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.

The company also released a preliminary economic assessment (PEA) for separate, underground block cave mines with a small open pit expected to produce an additional 14.3 billion pounds Cu, 14.3 Moz Au, 68.2 Moz silver, and 13.8 million pounds Mo over 39 years.

Copper Adds Value

That copper from both mines and Seabridge’s other products also adds major value to the company, Fronk said.

“We talk a lot about gold as a company,” he said. “But the fact is we also found a lot of copper . . . We actually provide more exposure to copper on a per share basis than the leading copper companies.”

This is important because green energy initiatives are requiring more copper than is being produced, Fronk said.

The world needs more copper for electric vehicles (EVs) and other green technology.

Electric vehicles (EVs) use more than three times as much copper as gas-burning cars. New copper production — and investment in exploration — will be needed to fuel the supply of those vehicles, analysts say. [OWNERSHIP_CHART-700]

An S&P report called copper “one of the most underappreciated critical minerals.”

“Based on industry-wide capital intensity data, we calculate that some US$196 billion of investment will be required,” a market analysis issued by RFC Ambrian last year said.

Billionaire Robert Friedland, founder and executive co-chairman of Ivanhoe Mines Ltd., recently told Bloomberg that he fears copper prices could jump tenfold. “We’re heading for a train wreck here,” he said.

Ownership and Share Structure

About 36% of the company is held by institutional investors. Management, board members, and company insiders own approximately 25%, 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$1.34 billion and has about 82.4 million shares outstanding, with 79.95 million free-floating. It trades in a 52-week range of CA$21.78 and CA$13.83.

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Important Disclosures:

1. Seabridge Gold Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
3. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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( Companies Mentioned: SEA:TSX; SA:NYSE.MKT,
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