Seabridge Gold was founded in 1999 at the bottom of the gold market. At that time, it took 44 ounces of gold to buy one unit of the DOW Jones Industrial Average, an all-time high for the stock market in terms of gold. It was our view that financial assets, especially equities, were in a bubble, that gold would eventually outperform equities and other assets, and that the gold price would eventually exceed its 1980 high of US$852.
Our goal in establishing Seabridge was to provide exceptional returns to shareholders by maximizing leverage to the gold price in what we perceived would be a rising gold price environment. Our strategy was to optimize gold resources while limiting shares outstanding. This approach provided a simple but effective measure for evaluating dollars spent in terms of gold resources added compared to shares issued.
We decided that our competitive advantage at Seabridge would be to evaluate, acquire, explore and develop gold deposits. From our inception, we determined that Seabridge would not build or operate mines...we would look to partner or sell assets which were ready for production. Building mines adds considerable technical and financial risks and requires a different set of skills and resources. Nor did we wish to undertake grass roots exploration which is very high risk. We therefore narrowed our value-added proposition to three phases which would depend on the gold price...acquiring known deposits, expanding them and defining their economic parameters. In our view, this was a relatively lower risk and less capital-intensive strategy consistent with the goal of optimizing gold ownership while limiting share dilution.
In effect, Seabridge was conceived as a gold-in-the-ground ETF with the value-enhancing potential to expand gold ownership and upgrade the quality of gold resources without equivalent equity dilution, unlike above-ground gold ETFs.
In 1999, it was cheaper to buy ounces in the ground than to explore for them. We therefore set out to buy gold deposits only in North America that were not economic in a low gold price environment. Hundreds of projects were for sale at distressed prices as producers struggled to stay in business. Seabridge chose projects with three main characteristics:
- Existing gold resources with quality work done by reputable companies;
- Upside exploration potential; and
- Low holding costs to conserve cash in the event that a higher gold price was delayed.
From 1999 to 2002, Seabridge acquired nine different North American gold deposits at less than US$1.00 per ounce of resource and holding costs of less than 10 cents per ounce per year.
By 2002, with the gold price on the rise, it was becoming more expensive to acquire existing resources and the cost-benefit equation tilted in favour of exploration. Seabridge's strategy entered its second phase which was to expand its gold resource base by carefully targeted exploration. Seabridge exploration has proved highly successful...over the past 10 years, total measured and indicated gold resources have grown more than 530% compared to only a 62% increase in shares outstanding.
By 2008, it was clear that the gold price had risen sufficiently to make a number of Seabridge's projects potentially economic. Work therefore began work on the third phase of Seabridge's strategy...defining the economics of its projects through engineering studies and upgrading resources to reserves. This effort culminated in reserve definition at both the Courageous Lake and KSM properties, with the focus on the giant KSM project which had emerged as the Company's most important asset. Seabridge engineering studies have validated that KSM is the world’s largest undeveloped gold-copper project with strong economic returns at current metal prices. The project has completed the Environmental Assessment process and is construction ready. The objective is to complete a joint venture with a major producer when market conditions support a favourable deal for Seabridge.
In 2011, gold entered a bear market which eventually drove down equity values and starved junior companies of the capital needed to survive. Every market has its opportunities if you have a clear set of objectives and a flexible strategy. Seabridge continued with its engineering and exploration programs, but also responded to the changing environment by restarting its efforts to increase gold ownership per share by way of acquisitions, a part of its strategy which had been frustrated by high valuations. After reviewing many opportunities, Seabridge acquired the very large Iskut Project in 2016 through the purchase of SnipGold, at an approximate price of $3 per ounce of measured and indicated gold resources. Iskut appears to have outstanding exploration potential for high grade gold deposits.
Seabridge is better positioned today than ever before to profit from the next bull market in gold. Resources per share have never been higher, resources have been successfully converted to reserves, critical production permits have been obtained and a set of very good targets has been acquired and developed for Seabridge’s outstanding exploration team. Once again, in a rising gold market, we expect our share price to outperform the industry based on superior ownership of gold per share.