How would you feel if someone offered to sell you $100 worth of minerals for $0.54? I know, if it sounds too good to be true, it probably is. Well, probably is not exactly the same thing as always and today you are going to learn how to do exactly that. Okay, maybe not exactly that; it could actually be better than that! Based upon current pricing, Seabridge Gold, Inc. (USA) (NYSE:SA) offers just such an opportunity today.
Over the past year, the prices of junior mining companies and exploration companies have been punished mercilessly. While there was a correction in the price of gold from over $1900 per ounce to around $1550 per ounce, many of the small companies that populate this space saw share prices slashed by 50% or more as fear overcame greed in the mining and exploration segment of the market. Famous billionaire investor Jim Rogers says you have to be willing to buy when there is blood in the streets. That is the opportunity now at our feet.
Today, Seabridge Gold, Inc. (USA) (NYSE:SA) is knocking on our door and we need to let it in! Seabridge has two major properties currently under extensive exploration: KSM (Kerr, Sulphurets, Mitchell) and Courageous Lake. Just take a look at these startling numbers:
- Proven and probable reserves of 44.7 million ounces of gold
- Proven and probable reserves of 9,888 million pounds of copper
- Proven and probable reserves of 191 million ounces of silver
- Proven and probable reserves of 213 million pounds of molybdenum
This represents one of, if not the largest, undeveloped gold resources in the world located in a mining friendly region, in this case, Canada. To find this kind of resource in a politically stable area presents a golden opportunity for us! The value of these in-the-ground resources are as follows:
44.7 million ounces of gold at $1,500/ounce: $67,050,000,000
9.888 billion pounds of copper at $3.00/pound: $29,664,000,000
191 million ounces of silver at $30/ounce: $5,730,000,000
213 million pounds of molybdenum at $23,000/ton: $2,449,500,000
Total Proven and Probable Value: $104,893,500,000
Yes, that is billions with a “b!” What is truly astonishing is that the current market capitalization of Seabridge Gold is currently only $569,000,000. That’s right, we can buy this company for $0.54/$100 of proven and probable resources in the ground. It just doesn’t get much better than this!
Building a mine, however, is a risky proposition and contains a great many uncertainties that cannot be known prior to being encountered. In many cases that would be an additional concern; in the case of Seabridge, not so much. Seabridge Gold has no intention of building a mine; it plans to sell itself once the resource is fully established, and this is how we will get paid as investors. But how do we know what price to expect from the sale of an undevloped mineral deposit?
Cerro Castle was a non-producing exploration company that was acquired by the large mining concern, Barrick Gold Corporation (USA) NYSE:ABX). Barrick is a very successful mine operator and, like the vast majority of the large miners, needs to add new resources to its portfolio of mines to maintain production levels. At the time of this acquisition, gold was trading at around $1,100/ounce; right now the price is hovering just above $1550/ounce, 40% higher than 2010. If you were to take the price to resource value that Barrick paid for Cerro Castle, it would result in a 7.45% valuation of assets in the ground. If we were to apply that valuation to Seabridge’s 44.7 million ounces with today’s $1,500/ounce gold price, we would value the KSM and Courageous Lake gold resources of Seabridge at approximately $4.99 billion. That would result in a fair valuation of Seabridge’s 43,450,000 shares of $114.84/share.