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, Financial) 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.
(Source: Investor presentation)
The KSM project has a Net Present Value of $4.5 billion.
Courageous Lake Project
Courageous Lake is Canada’s second largest undeveloped gold reserve with 6.5 million ounces of gold.
(Source: Investor presentation)
Courageous Lake has a Net Present Value of $303 million.
(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.
(Source: Investor presentation)
2.1 Insider Ownership
Seabridge's insiders own over 30% of the shares.
(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.
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.
(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.
(Source: Investor presentation)
6. Competition
Seabridge is ranked among world’s top ten gold companies by reserves.
(Source: Investor presentation)
Seabridge’s enterprise value is $9 per ounce of gold reserves, which compares favorably to its peers.
(Source: Investor presentation)
7. Risks
I believe the two main risks are the price of gold and the fact that Seabridge has no revenues.
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.
(Source: Investor presentation)
Disclosure: The author is long SA.
