Impact of New Petitions Against Gold Project 'Neutral,' Analyst Says

Source: Taylor Combaluzier 12/06/2024

The effect of a second petition filed in the British Columbia Supreme Court challenging the “substantially started” (SS) designation of Seabridge Gold Inc.’s (SEA:TSX; SA:NYSE.MKT) KSM Project is “neutral,” Red Cloud Analyst Taylor Combaluzier writes. The analyst says the company plans to aggressively defend itself.”

The effect of a second petition filed in the British Columbia Supreme Court challenging the “substantially started” (SS) designation of Seabridge Gold Inc.’s (SEA:TSX; SA:NYSE.MKT) KSM Project is “neutral” given that it has been combined with an earlier petition that “covers the same ground,” Red Cloud Analyst Taylor Combaluzier wrote in an updated research note on December 3.

This new petition was filed by SkeenaWild Conservation Trust and Southeast Alaska Indigenous Transboundary Commission, which are, according to Combaluzier, public interest advocates and “not private litigants who claim rights or property interests in KSM.”

The same two groups also brought legal challenges to KSM’s environmental certificate a decade ago, he wrote.

“We are optimistic that these challenges will ultimately prove unsuccessful because the arguments by the petitioners were already considered during the SS application phase and the broad discretion the minister has in making an SS determination,” noted Combaluzier, who rated the stock a Buy with a CA$48.50 per share target price, a 146% lift from its close when he wrote. “We note that these challenges have no immediate effect on the SS determination, and a verdict on the matter could take a year or more.”

Minister Has ‘A Lot of Discretion’

The latest petitions are challenging the SS determination as being “unreasonable — not simply incorrect,” he wrote.

“According to the company, the legislation leaves the minister with a lot of discretion to make the SS determination, so there is a high bar to prove the minster’s decision was unreasonable,” the analyst wrote.

The same three petitioners also opposed Seabridge’s application for the SS determination and made similar arguments then, Combaluzier said.

All of the petitions will be combined and heard together in court, and Combaluzier said Seabridge “plans to aggressively defend itself.”

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