Analyst Says PEA Adds Considerable Value to KSM


Seabridge Gold Inc.’s copper-rich expansion at its KSM project in the Golden Triangle gets one analyst to raise his target price for the company.

Seabridge Gold Inc.’s (SEA:TSX; SA:NYSE.MKT) new preliminary economic assessment (PEA) laying out a copper-rich expansion to its KSM project in British Columbia will provide “considerable value” to the company, Red Cloud Securities analyst David Talbot wrote in an Aug. 4 research note.

As a consequence, Talbot maintained his Buy rating on the stock and raised his target price from CA$49.60 to CA$51 per share.

“This add-on project requires minimal infrastructure capital, as roads and other infrastructure, including a mill, would have already been built,” Talbot wrote.

The PEA covers the Iron Cap and Kerr deposits, part of Seabridge’s 100%-owned Golden Triangle project that also includes three other deposits covered by a preliminary feasibility study (PFS) released in June. It has a post-tax net present value at a 5% discount rate of $5.8 billion, an internal rate of return of 18.9%, and payback of 6.2 years. It also adds an additional 39 years to the existing 33-year life of KSM.

“While KSM is a world-class deposit, we believe it would likely need investment from a senior miner/strategic to help Seabridge overcome the capital spend and associated financial risk,” Talbot wrote. “Additional resources and potential production from copper-rich underground deposits help provide optionality to any potential partner.”

The 33-year PFS is to be followed by the 39-year PEA, but the analyst said it was likely some high-grade copper production “might be pulled forward to be blended with earlier production.”

The average annual production for the PEA is estimated at 368,000 ounces gold (Au), 366 million pounds copper (Cu), 1.8 million ounces silver (Moz Ag), and 0.4 million pounds molybdenum (Mo).

Initial capex for the PEA is estimated at $1.5 billion, with sustaining capital of $12.8 billion over the 39 years of the mine.

Development of the initial Iron Cap block cave will likely start in 2051, and open pit construction at Kerr could begin a year later, Talbot said.

The analyst said he based his Buy rating and increased target price on Red Cloud’s net asset value per share (NAVPS) estimate of CA$72.70 (formerly CA$62.03).

The NAVPS and target are predicated on the development of KSM, a successful joint-venture arrangement, project financing, and production by the first quarter of 2029, Talbot wrote.

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