Seabridge to spin out Northwest Territories gold project

[Ben Graham]

Seabridge Gold (TSX: SEA) (NYSE: SA) intends to spin out its wholly owned subsidiary that owns the Courageous Lake project in Canada’s Northwest Territories, one of its two advanced projects, and take it public.

The move, says Seabridge’s chairman and CEO Rudi Fronk, would unlock what the company views as a “valuable” asset that has been “overshadowed for too long” by the bigger KSM project in British Columbia.

According to the company, Courageous Lake is one of the largest undeveloped gold projects in Canada. Its contained gold inventory in the measured and indicated category is estimated at 11 million oz. (145.2 million tonnes at an average grade of 2.36 grams per tonne), plus another 3.3 million oz. in the inferred category (40.6 million tonnes at 2.52 g/t). The reported resources include 2.8 million oz. of proven and probable reserves, contained within 33.9 million tonnes at 2.6 g/t — one of the highest grades for open pit gold projects in the country.

The spin-out, to be named Valor Gold, will focus on advancing the project through exploration, engineering and permitting, Seabridge said. Shares of the subsidiary will be distributed to Seabridge shareholders and listed on at least one major stock exchange, it added.

12-plus-year gold mine

In February 2024, Seabridge released an updated preliminary feasibility study for Courageous Lake that outlined a potential open-pit gold mine with average annual production of 201,000 oz. over an approximate 12.6-year mine life.

Using a low gold price of $1,850/oz. as the base case, the project’s after-tax net present value (at 5% discount rate) came in at $523 million, with an internal rate of return of 20.6% and payback of 2.8 years. At a higher price of $2,500/oz., the NPV increases to $1.1 billion, the IRR rises to 38.2%, while the payback period drops to 1.6 years.

Alongside the PFS, the company also published a new preliminary economic assessment that evaluated a conceptual expansion of the Courageous Lake open pit beyond the PFS mine plan, which used less than 30% of the estimated M&I gold resource.

“The PEA includes inferred resources requiring more drilling as well as additional engineering work to qualify as a PFS. However, we are confident that the PEA reflects the potential for a greatly extended mine life,” it said at the time.

Further upside

In its press release Tuesday, Seabridge highlighted the upside potential for Courageous Lake with the inclusion of satellite pits nearby such as the Walsh Lake deposit, which has an inferred resource of 4.13 million tonnes at 4.18 g/t containing 555,000 oz. of gold. Of the approximate 500 km² land package, less than 15% has been explored to date, the company noted.

“We have always believed, as we have shown in our recent studies, that Courageous Lake is a valuable project with enormous additional district potential in a Tier 1 jurisdiction,” Fronk stated in a press release Tuesday.

“We also believe that Courageous Lake is being attributed little to no value in the price of Seabridge shares today,” he added.