The Case for Seabridge Gold

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Those of you who know me know that I've been recommending Seabridge Gold (SA) for some time now. (Just so you know, I hold a substantial amount of this stock) The company is designed to provide a leveraged investment which is tied to the price of gold. Their purpose is to turn cash to gold, rather than the opposite, which is what most miners do.

Let me now present a brief analysis of the value of Seabridge stock. (As of now, it is selling for $29.30 a share, so if you bought it yesterday when I suggested it, you've already made money.) Seabridge owns properties which contain gold and copper. When these holdings are considered at current prices, we find they are worth a rather large sum: about $63 bil. Of course, the problem with resources in the ground is that they have to be extracted and refined, a costly process. But even with very stringent extraction costs of $800 an ounce for gold and $1.80 a pound for copper, we find that the company's resources are worth about $9 bil. If we divide that by the total amount of shares outstanding (about 38 million, including stock options) we get a price per share of $234, a rather far cry from the price of the stock now. Even if we take only the reserves that have been measured, rather than inferred, we get $136.

This company is undervalued by the market, and hence it represents a great opportunity.