Get a lot for a little with Seabridge Gold, Inc. (USA) (SA)

However, no matter how good this number sounds, it does not assign any value to the copper, silver and molybdenum contained in the proven and probable resources of KSM and Courageous Lake.  Adding those resources at 7.45% of current value as shown above, would add another $2,819,340,750, or $64.89 per share to the fair value of this company’s resources bringing, the potential value to $179.73 per share.  This represents an approximate increase of 1,334% from today’s $12.50 per share price!  Do I expect Seabridge Gold to reach $179.73/share?  No, but my point is that the case can be made.  Do I think Seabridge could become a 10-bagger in the next three to five years from this level?  I certainly believe that is possible.

To add a bit of confidence to my evaluation, I can look to the recent actions of gold royalty streaming company Royal Gold, Inc USA) (NASDAQ:RGLD). Royal Gold is in the business of purchasing the right to buy a percentage of the future mine production from early stage gold projects, and they are one of the best in the world at this.  They provide cash that is needed by the exploration or mining company to move their project forward now, in exchange for the right to purchase an agreed upon percentage of future production at a discounted price.  They are truly experts in assessing the future prospects of exploration companies like Seabridge.  On December 13, 2012, Royal Gold increased its existing stake in Seabridge Gold by 1,004,491 shares at a price of $17.92 per share, which increased its total position to 2,023,491 shares with an average cost of Canadian $23.72 per share.  The price paid was well above recent share price of around $12.50.

We have in front of us a situation where one of the most successful gold mining companies in the world has established a value of undeveloped mineral assets in the ground that would result in a price for Seabridge Gold that is over 10 times today’s share price and the actual share price purchases of one of the top gold royalty streaming businesses at a price 90% higher than today’s price.  While there are never any guarantees, Seabringe Gold certainly looks like an opportunity to get a lot for a little!

The article Get a lot for a little with Seabridge Gold originally appeared on Fool.com and is written by Ken McGaha.

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