Gold Co. Achieves 'Substantially Started' Status for BC Project

Source: Streetwise Reports 07/26/2024

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) announced it has received its “substantially started” designation from the British Columbia government for its 100%-owned KSM project in the province’s Golden Triangle. Analysts say the development is a major derisking milestone for the company.

Seabridge Gold Inc. (SEA:TSX; SA:NYSE.MKT) announced it has received its “substantially started” designation from the British Columbia government for its 100%-owned KSM project in the province’s Golden Triangle.

Seabridge has worked toward fulfilling the requirements needed to earn the designation since acquiring the project in 2001. Its wholly owned subsidiary, KSM Mining ULC, has spent over CA$1 billion advancing KSM, including CA$800 million after its Environmental Assessment Certificate (EAC) was issues in 2014.

Under British Columbia’s Environmental Assessment Act, a project’s EAC expires if it has not been substantially started by its deadline, which was July 29, 2026, for KSM. Now the KSM’s EAC will remain valid for the project’s life.

“This is a significant regulatory milestone for the KSM Project, positioning it to become a multigenerational economic anchor for northwestern B.C.,” said Seabridge Chairman and Chief Executive Officer Rudi Fronk. “This decision provides the regulatory assurance we have needed to move forward with joint venture discussions for the KSM Project.”

Seabridge’s stock went up CA$0.57 on the news.

In an updated research note on Friday, Cantor Fitzgerald analyst Mike Kozak noted the development was positive for the company.

“This is a substantial de-risking milestone for the company as it confirms the validity of the Environmental Assessment Certificate (EAC) over the life of the KSM project,” the firm wrote. “We note that the ‘substantially started’ designation was received comfortably before the July 29, 2026, deadline.”

The firm said it agreed that the milestone de-risks KSM for any possible partnerships.

We “firmly believe that achieving the ‘substantially started’ designation status is the final de-risking event needed for KSM to secure a large-cap joint-venture partner on attractive terms,” wrote Kozak, who reiterated his Buy rating for the stock and a target of CA$45 per share.

A Catalyst for the Stock

At the top of the company’s list of goals for this year is finding a joint venture partner for KSM. The company has noted that RBC Capital Markets is running a formal search process.

Red Cloud Securities Analyst Taylor Combaluzier has described the project as “one of the largest, undeveloped gold-copper projects in the world.” Lucas N. Pipes of B. Riley Securities has written that Seabridge has “a clear vision for a potential partnership agreement.”

In an updated research note on Friday, Cantor Fitzgerald analyst Mike Kozak noted the development was positive for the company.

RBC Capital Markets analyst Michael Siperco wrote on Friday that the designation is based on three key criteria: indigenous support for the project, the physical disturbance from permanent infrastructure, and the total expenditures on construction activities.

“The receipt of ‘substantially started’ status, in our view, is a significant permitting de-risking event for KSM, and a catalyst for the stock as management continues to seek a larger partner for development of the +$7bn gold/copper project in BC,” Siperco wrote.

Siperco noted that finding a partner for KSM is a key catalyst for Seabridge. A senior producer could “provide funding through feasibility and a construction decision, with an option to acquire control,” the analyst noted. “A partner with the capability and balance sheet to advance the project to feasibility and a construction decision could, in our view, validate the project, the latest updated studies, and the work done to date at site, while providing a path for Seabridge investors to participate in future potential upside if a positive construction decision is made.”

Based on that assumption, Siperco rated the stock Outperform, Speculative Risk with a US$30 per share price target.

The Catalyst: US$3,000 Gold?

Gold hit its highest price ever of US$2,483.35 last week, and many believe it is already in a bull market. It stood at US$2,382.70 Friday.

Some experts, like Bloomberg Senior Commodity Strategist Mike McGlone, have predicted that it will only be “a matter of time” before gold hits US$3,000.

Having a major effect is the increasing role of central banks buying the metal. The World Gold Council’s 2024 Central Banks Gold Reserves Survey showed four in five respondents expected reserve managers to increase their gold holdings in the next year, the website reported, according to a report by Stockhead on June 18.

According to analysts at J.P. Morgan, the “bull case for gold remains intact.”

“Gold’s resurgence has come earlier than expected, as it further decouples from real yields,” said Gregory Shearer, head of base and precious metals strategy at J.P. Morgan. “We have been structurally bullish (on) gold since the fourth quarter of 2022, and with gold prices surging past $2,400 in April, the rally has come earlier and has been much sharper than expected. It has been especially surprising given that it has coincided with Fed rate cuts being priced out and U.S. real yields moving higher due to stronger labor and inflation data in the U.S.”

More Catalysts Coming

Seabridge has more than just KSM in its vault. It recently announced its first mineral resource estimate (MRE) for the Bronson Slope deposit at its 100%-owned Iskut project 30 kilometers by air from KSM in the Golden Triangle. [OWNERSHIP_CHART-700]

It found an Inferred Resource of 517.3 million tonnes (Mt) at 0.33 grams per tonne gold (g/t Au) for 5.4 million ounces (Moz), 0.09% copper (Cu) for 1.06 billion pounds, and 2.7 g/t silver (Ag) for 45 Moz.

The company continues to drill this summer at Iskut and also at its 3 Aces Project in Southeastern Yukon.

Ownership and Share Structure

Reuters provided a breakdown of the company’s ownership and share structure, where management and insiders own approximately 3% of the company. According to Reuters, CEO and Chairman Rudi P. Fronk owns 1.41%.

Reuters reports that institutions own about 55% of the company. According to Reuters, Friedberg Mercantile Group Ltd. owns 13.34%, National Bank of Canada owns 5.15%, Van Eck Associates Corp. owns 4.2%, Kopernik Global Investors, L.L.C. owns 3.71%, Paulson & Co. Inc. owns 2.36%, and Sprott Asset Management L.P. owns 2.24%.

According to Reuters, there are 87.69 million shares outstanding, while the company has a market cap of CA$1.92 billion and trades in a 52-week range of CA$12.62 and CA$23.

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2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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( Companies Mentioned: SEA:TSX; SA:NYSE.MKT, )