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Insiders Are Buying Seabridge Gold

July 12, 2014 | About:
maarnio

maarnio

2 followers

1 The Company

One gold company has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

- The stock is purchased by three or more insiders within one month.

- The stock is sold by no insiders in the month of intensive purchasing.

- At least two purchasers increase their holdings by more than 10%.

Seabridge Gold (SA) is engaged in the acquisition and exploration of gold properties located in North America.

Number of shares

47,081,376

Number of stock options

2,800,000

Fully diluted number of shares

49,881,376

Share price

$9.01

Market cap

$424.2 million

Enterprise value

$405.3 million

Gold reserves

44.7M oz Au

Enterprise value / gold reserves

$9.1 per ounce

Tickers

SA,TSX:SEA

Seabridge is currently trading at a very low enterprise value per gold reserves ratio.

1.1 History

Seabridge acquired eight North American projects from 2000 through 2002 when the gold price was below $350 per ounce. These projects are featured in the following table.

Project

Location

Year

Castle Black Rock

Esmeralda County, Nevada, USA

2000

Grassy Mountain

Malheur County, Oregon, USA

2000

Hog Ranch

Washoe County, Nevada, USA

2000

Kerr-Sulphurets

Skeena Mining Division, British Columbia, Canada

2001

Quartz Mountain

Lake County, Oregon, USA

2001

Red Mountain

Skeena Mining Division, British Columbia, Canada

2001

Courageous Lake

Northwest Territories of Canada

2002

Pacific Intermountain Gold Inc.

Nevada, USA

2002

Seabridge ended up paying less than $1.00 per ounce of resource (using aggregate ounces from all resource categories) and has been paying less than $0.10 per ounce per year in holding costs.

1.2 Business Model

Seabridge’s business plan is to grow gold reserves and resources faster than number of shares. The company’s goal is to sell or partner its projects when they reach the production stage, to limit risk and share dilution. Seabridge is designed to provide its shareholders with exceptional leverage to a rising gold price.

1.3 Projects

Seabridge’s two main projects are the KSM project and Courageous Lake.

KSM Project

The KSM project is one of the largest undeveloped gold projects in the world. KSM’s proven and probable reserves total 38.2 million ounces of gold and 9.9 billion pounds of copper.

nimetön.png

(Source: Investor presentation)

The KSM project has a Net Present Value of $4.5 billion.

nimetön.png(Source: Investor presentation)

Courageous Lake Project

Courageous Lake is Canada’s second largest undeveloped gold reserve with 6.5 million ounces of gold.

nimetön.png

(Source: Investor presentation)

Courageous Lake has a Net Present Value of $303 million.

nimetön.png

(Source: Investor presentation)

2 Management

The CEO Rudi Fronk has over 30 years experience in the gold business. Rudi Fronk has been CEO since 1999. Collectively, Seabridge's management team has over 165 years of industry experience.

nimetön.png

(Source: Investor presentation)

2.1 Insider Ownership

Seabridge's insiders own over 30% of the shares.

nimetön.png

(Source: Investor presentation)

Here is a table of Seabridge’s insider activity during the last 30 days.

Name

Title

Trade Date

Shares Purchased

Current Ownership

Increase InShares

Jay Layman

COO

June 18

341

2,741 shares

+14.2%

R. Brent Murphy

VP

June 30

1,000

4,940 shares

+25.4%

Peter Williams

SVP

July 9

10,750

10,750 shares

from 0 to 10,750

There have been 12,091 shares purchased by insiders during the last 30 days. All three of these insiders increased their holdings by more than 10% each.

Here is a table of Seabridge’s insider activity by calendar month.

Month

Insider buying / shares

Insider selling / shares

July 2014

10,750

0

June 2014

1,341

0

May 2014

0

0

April 2014

0

0

March 2014

1,940

0

February 2014

0

0

January 2014

0

0

December 2013

0

0

November 2013

11,765

0

October 2013

0

0

September 2013

0

0

August 2013

0

0

July 2013

0

0

June 2013

200

250,000

May 2013

100

0

April 2013

300

0

March 2013

100

3,300

February 2013

500

0

January 2013

200

0

There have been 27,196 shares purchased and there have been 253,300 shares sold by insiders since January 2013. There have not been any insider selling since June 2013.

sc.png

3 Financial Summary

3.1 Current Situation

Seabridge reported the first-quarter financial results on May 13 with the following highlights:

Revenue

C$0

Net loss

C$2.4 million

Cash

C$15.0 million

Debt

C$0

On June 25, Seabridge announced a $12 million bought deal financing at a price of $12.00 per share. The financing is expected to close on July 22.

3.2 Historical Developments

Here is a table Seabridge’s earnings since 2003.

Year

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Net income/loss (C$ millions)

-1.3

-1.2

-1.2

-3.3

-5.5

+10.3

-4.7

+4.0

-21.0

-12.2

-12.7

EPS

-0.05

-0.04

-0.04

-0.10

-0.15

+0.28

-0.12

+0.08

-0.48

-0.29

-0.30

Seabridge has only been profitable in 2008 and 2010 due to asset sales.

4 Shares

Here is a table of Seabridge’s number of shares since 2003.

Year

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Number of shares (millions)

26.2

28.9

30.7

33.5

36.0

37.3

37.5

40.1

42.0

43.6

45.7

Seabridge’s number of shares have increased from 26.2 million to 45.7 million between 2003 and 2013. That is a 74% increase. Seabridge’s total measured and indicated resources have grown 578% during the same period.

nimetön.png

(Source: Investor presentation)

5. Outlook

Seabridge plans to carry out an exploration program at KSM for the remainder of 2014. The company is also expecting an Environmental Assessment approval for KSM in mid 2014.

nimetön.png

(Source: Investor presentation)

6. Competition

Seabridge is ranked among world’s top ten gold companies by reserves.

nimetön.png

(Source: Investor presentation)

Seabridge’s enterprise value is $9 per ounce of gold reserves, which compares favorably to its peers.

nimetön.png

(Source: Investor presentation)

7. Risks

I believe the two main risks are the price of gold and the fact that Seabridge has no revenues.

sc.png

The price of gold has been relatively flat for the last 12 months.

8. Conclusion

I believe Seabridge could have 100% upside potential if gold price can climb back above $1,500. There have been three different insiders buying Seabridge and there have not been any insiders selling Seabridge during the last 30 days. The three insiders purchased their shares at prices ranging from $8.71 to $9.33. I believe Seabridge could be a good pick below $9.33 based on the intensive insider buying.

nimetön.png

(Source: Investor presentation)

Disclosure: The author is long SA.

About the author:

maarnio
I have 15 years of investing experience. I have traded stocks, commodities and Forex markets.

Rating: 5.0/5 (1 vote)

Voters:

Comments

AlbertaSunwapta
AlbertaSunwapta - 4 months ago

Which gurus own it?

Please leave your comment:


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