"A joint venture partnership would arguably be the single largest and most important derisking event in Seabridge Gold's history and as such, the upside ahead of a partnering event is potentially massive," noted a Cantor Fitzgerald report.
In a Nov. 1 research note, Cantor Fitzgerald analyst Mike Kozak reported
that the first set of 2021 drill results from
(SEA:TSX - SA:NYSE.MKT)
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Seabridge Gold Inc.'s (SEA:TSX; SA:NYSE.MKT) KSM+Snowfield project returned grades consistent with to higher than the grade of the current resource.
The company undertook the drilling in part to confirm previously modeled grades, particularly those pertaining to the acquired Snowfield project, Kozak explained. Along with placing holes in Snowfield, Seabridge drilled Mitchell. The area targeted in both deposits "will likely comprise the critical early years of open-pit production."
Kozak reported the highlight results from both deposits.
The grade of the existing Measured and Indicated plus Inferred resource at KSM+Snowfield is 0.74 grams per ton gold equivalent (0.74 g/t Au eq), consisting of gold, silver and copper.
In comparison, the grade returned from the one Snowfield hole reported in this batch of five holes, SF-21-05, was 1.4 grams per ton gold equivalent (1.4 g/t Au eq) in 435m interval. Seabridge drilled this hole from surface.
As for the Mitchell holes, grade highlights included 1.31 g/t Au eq over 445m, from surface, in hole M-21-151. Hole M-21-152 returned 1.25 g/t Au eq over 312m, also from surface.
Kozak addressed what these results mean for the upcoming prefeasibility study for KSM+Snowfield, which Seabridge is working on and aims to release in Q2/22. Given that the synergies between KSM and Snowfield are "exceptional," the analyst wrote, the Ontario-based mining company is considering a mine plan that integrates both.
"Snowfield's higher gold grades and lower copper grades relative to KSM's current Proven and Probable reserves should blend well with ore from the Mitchell open pit, and we note that the strip ratio of Snowfield is approximately 0.5:1, well below the open-pit components of KSM that average about 2:1," Kozak noted.
The plan in the works involves mining the lower-risk, at-surface Snowfield deposit first via open pit and then later, tackling the underground KSM block cave component. Cantor estimates that the open-pit operation alone could produce about 1,000,000 ounces per year over the 35 years of estimated mine life.
"This scenario would significantly reduce the capital requirements early in the mine life while preserving optionality on the block cave longer term," Kozak pointed out.
Also, importantly, the mine plan would be more attractive to potential buyers and/or joint venture partners, added Kozak.
"A joint venture partnership would arguably be the single largest and most important derisking event in the company's history and as such, the upside ahead of a partnering event is potentially massive," wrote Kozak, making Seabridge an "excellent risk-reward trade."
As such, Seabridge remains one of Cantor Fitzgerald's Top Picks in the midtier gold space. The financial services firm rates it Buy and gives it a CA$42.50 per share price target. This target indicates a potential 80% return from the current share price of around CA$25.22.