SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of
November 2018
Commission File Number 1-32135
SEABRIDGE GOLD INC.
(Name of Registrant)
106 Front Street East, Suite 400, Toronto, Ontario, Canada M5A 1E1
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _________________
SEABRIDGE GOLD INC.
(the “Company”)
See the Exhibit Index hereto for a list of the documents filed herewith and forming a part of this Form 6-K.
Exhibits 99.1, 99.2 and 99.3 hereto are incorporated by reference (as exhibits) to the Company’s registration statement Form S-8 (File No. 333-211331), as may be amended and supplemented.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Seabridge Gold Inc. | ||
(Registrant) | ||
By: /s/Chris Reynolds | ||
Name: Chris Reynolds | ||
Title: VP Finance and CFO |
Date: November 14, 2018
EXHIBIT INDEX
EXHIBIT 99.1
SEABRIDGE GOLD INC.
INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018
SEABRIDGE GOLD INC. | |
Interim Condensed Consolidated Statements of Financial Position |
|
(Expressed in thousands of Canadian dollars) |
Note | September 30, 2018 | December 31, 2017 | |
Assets | |||
Current assets | |||
Cash and cash equivalents | 4 | 3,475 | 4,049 |
Short-term deposits | 4 | 7,042 | 12,056 |
Amounts receivable and prepaid expenses | 5 | 2,527 | 622 |
Investments | 6 | 6,508 | 6,861 |
19,552 | 23,588 | ||
Non-current assets | |||
Mineral interests | 7, 8 | 387,378 | 358,135 |
Reclamation deposits | 9 | 1,205 | 1,185 |
Total non-current assets | 388,583 | 359,320 | |
Total assets | 408,135 | 382,908 | |
Liabilities and shareholders’ equity | |||
Current liabilities | |||
Accounts payable and accrued liabilities | 8 | 10,020 | 3,961 |
Flow-through share premium | 10 | 958 | 2,230 |
Provision for reclamation liabilities | 9 | 1,657 | - |
12,635 | 6,191 | ||
Non-current liabilities | |||
Deferred income tax liabilities | 14 | 23,421 | 18,598 |
Provision for reclamation liabilities | 9 | 6,735 | 2,481 |
Total non-current liabilities | 30,156 | 21,079 | |
Total liabilities | 42,791 | 27,270 | |
Shareholders’ equity | 10 | 365,344 | 355,638 |
Total liabilities and shareholders’ equity | 408,135 | 382,908 |
Subsequent event (Notes 10 and 15)
The accompanying notes form an integral part of these interim condensed consolidated financial statements.
SEABRIDGE GOLD INC. |
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
(Expressed in thousands of Canadian dollars except common share and per common share amounts) |
The accompanying notes form an integral part of these interim condensed consolidated financial statements.
SEABRIDGE GOLD INC. |
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity |
(Expressed in thousands of Canadian dollars except number of shares) |
Number of Shares | Share Capital | Warrants | Stock-based Compensation | Contributed Surplus | Deficit | Accumulated Other Comprehensive Income (loss) | Total Equity | ||||||||
As at December 31, 2017 | 57,677,118 | 405,930 | 3,275 | 16,549 | 36,040 | (106,651) | 495 | 355,638 | |||||||
Adjustment on initial application of IFRS 9 - as restated (Note 3) | - | - | - | - | - | 2,268 | (2,268) | - | |||||||
Share issuance | 1,150,000 | 15,652 | - | - | - | - | - | 15,652 | |||||||
Share issuance costs | - | (338) | - | - | - | - | - | (338) | |||||||
Deferred tax on share issuance costs | - | 90 | - | - | - | - | - | 90 | |||||||
Stock-based compensation | - | - | - | 4,226 | - | - | - | 4,226 | |||||||
Exercise of options | 542,631 | 8,748 | - | (1,989) | - | - | - | 6,759 | |||||||
Shares - Restricted Share Units | 65,000 | 854 | - | (854) | - | - | - | - | |||||||
Other comprehensive loss | - | - | - | - | - | - | (773) | (773) | |||||||
Net loss for the period | - | - | - | - | - | (15,910) | - | (15,910) | |||||||
As at September 30, 2018 | 59,434,749 | 430,936 | 3,275 | 17,932 | 36,040 | (120,293) | (2,546) | 365,344 | |||||||
As at January 1, 2017 | 54,321,797 | 360,650 | - | 14,751 | 31,728 | (96,364) | 593 | 311,358 | |||||||
Share issuance | 2,200,000 | 30,712 | - | - | - | - | - | 30,712 | |||||||
Share issuance costs | - | (2,616) | - | - | - | - | - | (2,616) | |||||||
Deferred tax on share issuance costs | - | 687 | - | - | - | - | 687 | ||||||||
Stock-based compensation | - | - | - | 5,912 | - | - | - | 5,912 | |||||||
Share issuance - acquisition of Snowstorm | 700,000 | 10,073 | - | - | - | - | - | 10,073 | |||||||
Warrant issuance - acquisition of Snowstorm | - | - | 3,275 | - | - | - | - | 3,275 | |||||||
Exercise of options | 180,984 | 2,839 | - | (683) | - | - | - | 2,156 | |||||||
Exercise of warrants | 1,587 | 30 | - | (15) | - | - | - | 15 | |||||||
Expired options | - | - | - | (2,827) | 2,827 | - | - | - | |||||||
Shares - RSUs | 62,750 | 656 | - | (656) | - | - | - | - | |||||||
Other comprehensive loss | - | - | - | - | - | - | (412) | (412) | |||||||
Net loss for the period | - | - | - | - | - | (5,081) | - | (5,081) | |||||||
As at September 30, 2017 | 57,467,118 | 403,031 | 3,275 | 16,482 | 34,555 | (101,445) | 181 | 356,079 |
The accompanying notes form an integral part of these interim condensed consolidated financial statements.
SEABRIDGE GOLD INC. |
Interim Condensed Consolidated Statements of Cash Flows |
(Expressed in thousands of Canadian dollars) |
Three months ended September 30 | Nine months ended September 30 | ||||
2018 | 2017 | 2018 | 2017 | ||
Operating Activities | |||||
Net loss | (2,831) | (1,535) | (15,910) | (5,081) | |
Items not affecting cash: | |||||
Stock-based compensation | 947 | 2,345 | 4,226 | 5,912 | |
Provision for environmental rehabilitation | - | - | 7,348 | - | |
Gain on disposition of mineral interests | - | - | - | (2,183) | |
Other income - flow-though shares | (2,943) | (3,065) | (5,354) | (4,243) | |
Income tax expense | 3,416 | (128) | 4,913 | 441 | |
Equity loss of associate | 19 | 34 | 110 | 79 | |
Gain (loss) on investments | - | 417 | - | (309) | |
Finance expense and other income | 22 | (27) | 41 | 22 | |
Changes in working capital items: | |||||
Amounts receivable and prepaid expenses | 28 | 289 | (1,905) | (407) | |
Accounts payable and accrued liabilities | 2,460 | 2,001 | 5,489 | 1,969 | |
Environmental rehabilitation costs incurred | (1,136) | - | (1,503) | - | |
Net cash (used in) provided by operating activities | (18) | 331 | (2,545) | (3,800) | |
Investing Activities | |||||
Mineral interests | (17,178) | (9,572) | (28,654) | (17,764) | |
Acquisition of Snowstorm Exploration LLC | - | - | - | (979) | |
Investment of short-term deposits | (46) | (53) | (12,193) | (28,053) | |
Investment in associate | (530) | - | (530) | (409) | |
Redemption (investment) of reclamation deposits | - | (5) | (15) | 892 | |
Redemption of short-term deposits | 15,207 | 6,989 | 17,207 | 13,680 | |
Cash proceeds from sale of investments | - | 28 | - | 887 | |
Net cash used in investing activities | (2,547) | (2,613) | (24,185) | (31,746) | |
Financing Activities | |||||
Share issuance | - | (19) | 19,397 | 35,114 | |
Exercise of options | 77 | 1,148 | 6,759 | 2,170 | |
Net cash from financing activities | 77 | 1,129 | 26,156 | 37,284 | |
Net (decrease) increase in cash and cash equivalents during the period | (2,488) | (1,153) | (574) | 1,738 | |
Cash and cash equivalents, beginning of the period | 5,963 | 4,537 | 4,049 | 1,646 | |
Cash and cash equivalents, end of the period | 3,475 | 3,384 | 3,475 | 3,384 |
The accompanying notes form an integral part of these interim condensed consolidated financial statements.
SEABRIDGE GOLD INC.
Notes to the Interim Condensed Consolidated Financial Statements
For the nine months ended September 30, 2018 and 2017
(in Canadian dollars)
1. | Reporting entity |
Seabridge Gold Inc. is comprised of Seabridge Gold Inc. (“Seabridge” or the “Company”) and its subsidiaries (Seabridge Gold (NWT) Inc., Seabridge Gold Corp., SnipGold Corp. and Snowstorm Exploration LLC) are engaged in the acquisition and exploration of gold properties located in North America. The Company was incorporated under the laws of British Columbia, Canada on September 4, 1979 and continued under the laws of Canada on October 31, 2002. Its common shares are listed on the Toronto Stock Exchange trading under the symbol “SEA” and on the New York Stock Exchange under the symbol “SA”. The Company is domiciled in Canada, the address of its registered office is 10th Floor, 595 Howe Street, Vancouver, British Columbia, Canada V6C 2T5 and the address of its corporate office is 106 Front Street East, 4th Floor, Toronto, Ontario, Canada M5A 1E1.
2. | Statement of compliance and basis of presentation |
These interim condensed consolidated financial statements were prepared using the same accounting policies and methods as those described in the consolidated financial statements for the year ended December 31, 2017 except for the adoption of IFRS 9 Financial Instruments (IFRS 9), IFRS 15 Revenue from Contracts with Customers (IFRS 15) and amendments to IFRS 2 Share-based payments (IFRS 2) which were adopted on January 1, 2018. The change in accounting policies are also expected to be reflected in the Company’s consolidated financial statements as at and for the year ending December 31, 2018.
These interim condensed financial statements are prepared in compliance with International Accounting Standard 34, Interim Financial Reporting (IAS 34). Accordingly, certain information and disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards have been omitted or condensed. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2017.
3. | New accounting standards |
a) | Accounting standards recently adopted |
New standards and amendments to standards that have been adopted in preparing these interim condensed consolidated financial statements are:
IFRS 9, Financial instruments, introduced new requirements for the classification and measurement of financial assets, additional changes to financial liabilities and a new general hedge accounting standard. The mandatory effective date is for annual periods beginning on or after January 1, 2018 and the Company applied IFRS 9 on the effective date. IFRS 9 did not impact the Company's classification and measurement of financial assets and liabilities except for investments in equity securities as described below.
The Company designated its investment in equity securities as financial assets at fair value through other comprehensive income ("FVTOCI"), and are recorded initially at fair value. Subsequent changes in fair value will be recognized in other comprehensive income (loss) only and will not be transferred into income (loss) upon disposition. As a result of this change, the Company reclassified $2.3 million of impairment losses recognized in prior years on certain equity securities which continue to be owned by the Company as at January 1, 2018 from opening deficit to accumulated other comprehensive income (loss) on January 1, 2018. As a result of adopting IFRS 9, the net change in fair value of the equity securities, including realized and unrealized gains and losses, if any, is now presented as an item that will not be reclassified subsequently to net earnings in the consolidated statements of comprehensive income (loss). Realized gains and losses on securities derecognized prior to January 1, 2018 have not been restated in comparative periods. As the Company does not have any hedges, the revised approach to hedge accounting had no effect on the financial statements.
IFRS 15, Revenue from contracts with customers (“IFRS 15”) replaced IAS 18 Revenue, IAS 11 Construction contracts, and some revenue-related interpretations. The new standard was applied on January 1, 2018. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue at either a point in time or over time. The model features a five-step analysis of transactions to determine when and how much revenue should be recognized. New estimates and judgmental thresholds were introduced, which may affect the amount and/or timing of revenue recognized. The application of the new standard had no impact on the interim condensed consolidated financial statements as at September 30, 2018.
IFRS 2, Share-based payments amendments (“Amendments to IFRS 2”). The Amendments to IFRS 2 clarify the classification and measurement of share-based payments for cash-settled share-based payment transactions and for share-based payment transactions with net settlement features for withholding tax obligations and for any modifications to the terms and conditions of a share-based payment transaction that changes its classification from cash-settled to equity-settled. The Company adopted the amendments on January 1, 2018 and had no impact on the interim condensed consolidated financial statements as at September 30, 2018.
b) | New accounting standards not yet adopted |
IFRS 16, Leases (“IFRS 16”) will replace IAS 17 Leases. The new standard requires lessees to recognize assets and liabilities for most leases. Application of the standard is mandatory for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted, provided the new revenue standard, IFRS 15 has been applied or is applied at the same date as IFRS 16. The Company plans to apply IFRS 16 on the effective date. The Company is evaluating the impact of the changes to its financial statements based on the characteristics of any contracts in its consolidated financial statements and expects to report detailed quantitative and qualitative information on the impact on transition as the effective date approaches.
4. | Cash and cash equivalents and short-term deposits |
($000s) | September 30, 2018 | December 31, 2017 |
Cash and cash equivalents | 3,475 | 4,049 |
Short-term deposits | 7,042 | 12,056 |
10,517 | 16,105 |
All of the cash and cash equivalents are held in a Canadian Schedule I bank. Short-term deposits consist of Canadian Schedule I bank guaranteed deposits and are cashable in whole or in part with interest at any time to maturity.
5. | Amounts receivable and prepaid expenses |
($000s) | September 30, 2018 | December 31, 2017 |
HST | 835 | 265 |
Prepaid expenses and other receivables | 1,692 | 357 |
2,527 | 622 |
6. | Investments |
($000s) | January 1, 2018 | Dispositions | Fair value through other comprehensive loss | Loss of associates | Additions | September 30, 2018 | |||||||||
Equity investments | 3,433 | - | (773) | - | - | 2,660 | |||||||||
Investment in associate | 3,428 | . | - | (110) | 530 | 3,848 | |||||||||
6,861 | - | (773) | (110) | 530 | 6,508 | ||||||||||
($000s) | January 1, 2017 | Dispositions | Gain on disposition | Loss of associates | Impairment | Additions | Other comprehensive loss | December 31, 2017 | |||||||
Available-for-sale investments | 2,765 | (1,426) | 718 | - | (680) | 2,154 | (98) | 3,433 | |||||||
Investment in associate | 1,896 | - | - | (106) | - | 1,638 | - | 3,428 | |||||||
4,661 | (1,426) | 718 | (106) | (680) | 3,792 | (98) | 6,861 |
The Company holds common shares of several mining companies that were received as consideration for optioned mineral properties and other short-term investments, including one gold exchange traded receipt. These financial assets are recorded at fair value of $2.7 million (December 31, 2017 - $3.4 million) on the interim condensed consolidated statement of financial position. During 2017 the Company received common shares of two mining companies in return for the disposition of mineral properties. These common shares had a fair value of $2.2 million at the time of receipt. In 2017 a $0.7 million expense was recorded on the consolidated statement of operations and comprehensive loss to reflect an impairment to those investments. At September 30, 2018 the Company revalued its holdings in its investments and recorded a fair value reduction of $0.8 million on the statement of comprehensive loss.
The Company holds an 8.53% interest in Paramount Gold Nevada Corp. (“Paramount”) for which it accounts using the equity method on the basis that the Company has the ability to exert significant influence through its representation on Paramount’s board of directors. During the nine months ended September 30, 2018, the Company recorded its proportionate share of the net loss of an investment in an associate accounted for on the equity basis of $0.1 million (September 30, 2017 – $0.1 million) within equity loss of associate on the interim condensed consolidated statement of operations and comprehensive income (loss). During 2017 the Company purchased 883,200 common shares and 51,600 warrants of the associate for $1.6 million. Each warrant allowed the Company to purchase one common share of the associate for US$2.00 per share until February 14, 2018 and allows for the same purchase at US$2.25 within the period February 15, 2018 to February 13, 2019, when they expire. In the first quarter of 2018, the option to purchase the common shares at US$2.00 lapsed and the Company did not purchase additional shares. At September 30, 2018 the carrying value of the Company’s investment in the associate was $3.8 million (December 31, 2017 - $3.4 million).
In the currrent quarter, the Company purchased
320,000 units of the associate for US$1.25 per unit. Each unit consists of one common share and one warrant to purchase one-half
of a common share of the associate. Each warrant has a two-year term and is exercisable at US$1.30 in the first twelve months and
US$1.50 in the following twelve months.
7. | Mineral Interests |
Mineral interest expenditures on projects are considered as exploration and evaluation and their related costs consist of the following:
($000s) | Balance, | Expenditures / Acquisitions | Recoveries | Balance, |
January 1, 2018 | 2018 | 2018 | September 30, 2018 | |
KSM | 248,561 | 21,745 | - | 270,306 |
Courageous Lake | 69,587 | 3,557 | - | 73,144 |
Iskut | 25,221 | 2,839 | - | 28,060 |
Snowstorm | 13,995 | 1,102 | - | 15,097 |
Grassy Mountain | 771 | - | - | 771 |
358,135 | 29,243 | - | 387,378 | |
($000s) | Balance, | Expenditures / Acquisitions | Recoveries | Balance, |
January 1, 2017 | 2017 | 2017 | December 31, 2017 | |
KSM | 233,662 | 14,899 | - | 248,561 |
Courageous Lake | 68,702 | 885 | - | 69,587 |
Iskut | 19,795 | 7,311 | (1,885) | 25,221 |
Snowstorm | - | 13,995 | - | 13,995 |
Grassy Mountain | 771 | - | - | 771 |
322,930 | 37,090 | (1,885) | 358,135 |
Continued exploration of the Company’s mineral properties is subject to certain lease payments, project holding costs, rental fees and filing fees.
a) KSM (Kerr-Sulphurets-Mitchell)
In 2001, the Company purchased a 100% interest in contiguous claim blocks in the Skeena Mining Division, British Columbia. The vendor maintains a 1% net smelter royalty interest on the project, subject to maximum aggregate royalty payments of $4.5 million. The Company is obligated to purchase the net smelter royalty interest for $4.5 million in the event that a positive feasibility study demonstrates a 10% or higher internal rate of return after tax and financing costs.
In July 2009, the Company agreed to acquire various mineral claims immediately adjacent to the KSM property for further exploration and possible mine infrastructure use. The terms of the agreement required the Company to pay $1 million in cash, issue 75,000 shares and pay advance royalties of $100,000 per year for 10 years commencing on closing of the agreement. The property is subject to a 4.5% net smelter royalty from which the advance royalties are deductible. The purchase agreement closed in September 2009, with the payment of $1 million in cash, the issuance of 75,000 shares valued at $2,442,750 and the payment of the first year’s $100,000 advance royalty.
In February 2011, the Company acquired a 100% interest in adjacent mineral claims mainly for mine infrastructure purposes for a cash payment of $675,000, subject to a 2% net smelter returns royalty on these adjacent claims. In 2011 and 2012, the Company completed agreements granting a third party an option to acquire a 2% net smelter royalty on all gold and silver production sales from KSM for a payment equal to the lesser of $160 million or US$200 million. The option is exercisable for a period of 60 days following the announcement of receipt of all material approvals and permits, full project financing and certain other conditions for the KSM Project.
b) Courageous Lake
In 2002, the Company purchased a 100% interest in the Courageous Lake gold project from Newmont Canada Limited and Total Resources (Canada) Limited (“the Vendors”) for US$2.5 million. The Courageous Lake gold project consists of mining leases located in Northwest Territories of Canada.
c) Iskut
On June 21, 2016, the Company purchased 100% of the common shares of SnipGold Corp. (“SnipGold”) which owns the Iskut Project, located in northwestern British Columbia.
In 2017, the Company entered into an agreement with Colorado Resources Ltd. (“Colorado”) whereby Colorado agreed to purchase SnipGold’s 49% interest in the KSP Project (“KSP”) which adjoins the Iskut Project. The transaction resulted in Colorado owning a 100% interest in the KSP Project upon the payment to the Company of $1.0 million in cash, 2,000,000 Colorado common shares, with a fair value of $0.8 million, and a 2% net smelter return (“NSR”) on the property. Half of the NSR can be repurchased at any time for $2.0 million. The disposition was recorded as a derecognition of the carrying value of KSP in 2017.
d) Snowstorm
On June 7, 2017, the Company purchased 100% of the common shares of Snowstorm Exploration LLC (“Snowstorm”) which owns the Snowstorm Project, located in northern Nevada. On the acquisition date, the Company issued 700,000 common shares, with a fair value of $14.39 per share and 500,000 common share purchase warrants with a fair value of $6.55 per common share purchase warrant for a combined fair value of $13.3 million. The common share purchase warrants are exercisable for four years from the date of acquisition, at $15.65 per share. In addition the Company has agreed to make a conditional cash payment of US$2.5 million if exploration activities at the Snowstorm Project result in defining a minimum of five million ounces of gold resources compliant with National Instrument 43-101 and a further cash payment of US$5.0 million on the delineation of an additional five million ounces of gold resources. The Company incurred $1.0 million of acquisition costs. Based on the relative fair values of the net assets acquired, $14 million was added to mineral interests on the statement of financial position.
e) | Other Nevada Projects |
In the first quarter of 2017, the Company disposed of its leasehold interest in the Castle Black Rock Project and received 1,500,000 common shares of Columbus Gold Corp., with a fair value of $1.4 million. All historical costs related to the Castle Black Rock Project had been recovered or impaired in years prior to 2017 and there was no carrying value recorded for the project at the time of receipt of the payment. As such, the fair value of the common shares received was recorded as a gain on the disposition of mineral interests on the consolidated statement of operations and comprehensive loss in 2017.
f) Grassy Mountain
In 2000, the Company acquired an option on a 100% interest in mineral claims located in Malheur County, Oregon, USA.
In April 2011, the Company announced that an agreement had been reached to option the Grassy Mountain Project to Calico Resources Corp. (“Calico”) which was subsequently amended in 2013. In the original agreement, in order to exercise the option, Calico was to issue to the Company (i) two million of its common shares following TSX Venture Exchange approval; (ii) four million of its common shares at the first anniversary, and (iii) eight million of its shares when the project received the principal mining and environmental permits necessary for the construction and operation of a mine. The Company received the first two million common shares of Calico in 2011 and a value of $740,000 was recorded as a reduction to the carrying value of the mineral properties. In February 2013, the agreement was amended to allow for an accelerated exercise of the option and Calico issued 6,433,000 common shares and 4,567,000 special warrants to acquire a 100% interest in the Grassy Mountain Project. Each special warrant was exercisable to acquire one common share of Calico for no additional consideration. The fair value of the shares and special warrants reduced the carrying value of the mineral properties at the time of receipt of the securities. During 2013 and 2014, the Company elected to convert all of the special warrants into common shares. Following the de-recognition of the Grassy Mountain net assets, in 2013, a residual net book value of $771,000 has been retained within mineral properties on the basis of a net profits interest on the project, discussed below.
In July 2016 Calico was acquired by Paramount through a plan of arrangement. Per the original agreement with Calico, after the delivery of a National Instrument 43-101 compliant feasibility study on the project, Paramount must either grant the Company a 10% net profits interest or pay the Company $10 million in cash, at the sole election of the Company.
8. | Accounts payable and accrued liabilities |
($000s) | September 30, 2018 | December 31, 2017 |
Trade payables | 7,178 | 1,773 |
Trade and other payables due to related parties | 92 | 74 |
Non-trade payables and accrued expenses | 2,750 | 2,114 |
10,020 | 3,961 |
In 2014 and 2015, the Company received $8.5 million related to the application for refund under the British Columbia Mineral Exploration Tax Credit program, for spending in 2010 and 2011. During 2016, upon the completion of an audit of the application by tax authorities, the Company was assessed $3.6 million, including accrued interest, for expenditures related to the application that the tax authority has categorized as not applicable to the recovery program. The Company recorded a $3.6 million provision within non-trade payables and accrued expenses on the consolidated statement of financial position as at December 31, 2016, with a corresponding increase to mineral interests. In 2017 the Company filed an objection to the reassessment and paid one-half of the accrued balance while the objection is reviewed.
9. | Provision for reclamation liabilities |
($000s) | September 30, 2018 | December 31, 2017 |
Beginning of the period | 2,481 | 3,510 |
Revised Johnny Mountain Mine closure | 7,348 | - |
Derecognition of Red Mountain | - | (1,039) |
Expenditures incurred | (1,503) | - |
Accretion | 66 | 10 |
End of the period | 8,392 | 2,481 |
Provision for reclamation liabilities - current | 1,657 | - |
Provision for reclamation liabilities - long-term | 6,735 | 2,481 |
8,392 | 2,481 |
The Company estimates reclamation liabilities based on independent studies or agreements with government bodies for each project, using current restoration standards and techniques. The ultimate cost to be incurred, however, is uncertain. The September 30, 2018 estimate of future rehabilitation costs expected to be incurred between 2018 and 2027 has been discounted at 2% (December 31, 2017 – 1.6%). The Company has placed a total of $1.2 million (December 31, 2017 - $1.2 million) on deposit with financial institutions that are pledged as security against the reclamation liability.
At the end of March 2018, the Company filed an updated reclamation and closure plan for the Johnny Mountain mine site, and charged $7.3 million of rehabilitation expenditures to the interim condensed consolidated statement of operations and comprehensive loss. The Johnny Mountain Mine site was acquired, along with the Iskut Project, during the Snip Gold acquisition in 2016. Expenditures are expected to be incurred over the next five years and include the estimated costs for the closure of all adits and vent raises, removal of the mill and buildings, treatment of landfills and surface water management as well as ongoing logistics, freight and fuel costs. For the nine months ended September 30, 2018 reclamation expenditures amounted to $1.5 million. Undiscounted future cash outflows are estimated at $10.2 million over the five years.
10. | Shareholders’ equity |
The Company is authorized to issue an unlimited number of preferred shares and common shares with no par value. No preferred shares have been issued or were outstanding at September 30, 2018 or December 31, 2017.
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and development of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business.
The properties in which the Company currently has an interest are in the exploration stage; as such the Company is dependent on external financing to fund its activities. In order to carry out the planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties that would be accretive and meaningful to the Company. The Company is not subject to externally imposed capital requirements.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the three months ended September 30, 2018. The Company considers its capital to be share capital, stock based compensation, contributed surplus and deficit.
a) | Equity financings |
In April 2017, the Company completed two equity financings. For the first financing, the Company issued 1,100,000 common shares at a price of C$14.30 per common share for aggregate gross proceeds of $15.7 million. For the second financing, the Company issued 1,100,000 flow-through common shares at a price of $20.00 per flow-through share for aggregate gross proceeds of $22 million. Share issuance costs of $2.7 million were incurred in relation to the two offerings and have been included in equity. The Company committed to renounce its ability to deduct qualifying exploration expenditures for the equivalent value of the gross proceeds of the flow-through financing and transfer the deductibility to the purchasers of the flow-through shares. The effective date of the renouncement was December 31, 2017. At the time of issuance of the flow-through shares, a $7 million premium was recognized as a liability on the statement of financial position with the balance recorded as share capital. At each reporting period, as qualifying expenditures are incurred, the liability is being reduced on a proportionate basis and income is being recognized on the statement of operations and comprehensive loss. Since the closing of the financing and to September 30, 2018, based on qualifying expenditures incurred, the full $7 million premium was recognized through other income on the consolidated statement of operations and comprehensive loss.
In December 2017, the Company issued 200,000 flow-through common shares at a price of $16.72 per flow-through share for aggregate gross proceeds of $3.3 million. The Company committed to renounce its ability to deduct qualifying exploration expenditures for the equivalent value of the gross proceeds of the flow-through financing and transfer the deductibility to the purchasers of the flow-through shares. The effective date of the renouncement was December 31, 2017. At the time of issuance of the flow-through shares, a $0.6 million premium was recognized as a liability on the statement of financial position with the balance recorded as share capital. Since the closing of the financing and to September 30, 2018, based on qualifying expenditures incurred, $0.5 million was recognized through other income on the consolidated statement of operations and comprehensive loss. As at September 30, 2018, the Company has a remaining commitment of $0.4 million related to this financing.
In May 2018, the Company closed a flow-through financing and issued 1,150,000 at $17.16 per common share for gross proceeds of $19.7 million. The Company committed to renounce its ability to deduct qualifying exploration expenditures for the equivalent value of the gross proceeds of the flow-through financing and transfer the deductibility to the purchasers of the flow-through shares. The effective date of the renouncement will be December 31, 2018. Since the closing of the financing and to September 30, 2018, based on qualifying expenditures incurred, $3.2 million was recognized through other income on the consolidated statement of operations and comprehensive loss. As at September 30, 2018, the Company has a remaining commitment of $4.3 million related to this financing.
b) | Acquisitions – shares, warrants and options issuances |
In June 2017, the Company acquired all of the issued and outstanding shares of Snowstorm Exploration LLC. in exchange for the issuance of 700,000 common shares and 500,000 common share purchase warrants exercisable for four years at $15.65 per share. In addition, Seabridge has agreed to pay the vendor (i) a conditional cash payment of US$2.5 million if exploration activities at Snowstorm result in defining a minimum of five million ounces of gold resources compliant with National Instrument 43-101; and (ii) a further cash payment of US$5.0 million on the delineation of an additional five million ounces of gold resources. The Company also incurred $1.0 million of acquisition costs. The fair value of the total consideration at the closing date of the acquisition and additional costs totaling $14.3 million has been allocated to the fair value of the assets acquired. All financial assets acquired and financial liabilities assumed were recorded at fair value. The fair value of the common share purchase warrants was estimated on the date of acquisition using a Black Scholes option pricing model with the following assumptions: dividend yield 0%; expected volatility 62%, risk-free rate of return 0.87%; and expected life of four years.
c) | Stock options and Restricted share units |
The Company provides compensation to directors and employees in the form of stock options and RSUs.
Pursuant to the Share Option Plan, the Board of Directors has the authority to grant options, and to establish the exercise price and life of the option at the time each option is granted, at a price not less than the closing price of the common shares on the Toronto Stock Exchange on the date of the grant of such option and for a period not exceeding five years. All exercised options are settled in equity.
Pursuant to the Company’s RSU Plan, the Board of Directors has the authority to grant RSUs, and to establish terms of the RSUs including the vesting criteria and the life of the RSU. The life of the RSU is not to exceed two years.
Stock option and RSU transactions were as follows:
Options | RSUs | Total | ||||||
Weighted Average Exercise Price ($) | Amortized Value of options ($000s) | Amortized Value of RSUs ($000s) | Stock-based Compensation ($000s) | |||||
Outstanding January 1, 2018 | 3,618,509 | 11.34 | 15,758 | 127,750 | 791 | 16,549 | ||
Exercised option or vested RSU | (542,631) | 12.46 | (1,989) | (65,000) | (854) | (2,843) | ||
Expired | - | - | - | - | - | - | ||
Amortized value of stock based compensation | - | - | 3,507 | - | 719 | 4,226 | ||
Outstanding September 30, 2018 | 3,075,878 | 11.15 | 17,276 | 62,750 | 656 | 17,932 | ||
Exercisable at September 30, 2018 | 1,235,323 | |||||||
Options | RSUs | Total | ||||||
Weighted Average Exercise Price ($) | Amortized Value of options ($000s) | Amortized Value of RSUs ($000s) | Stock-based Compensation ($000s) | |||||
Outstanding January 1, 2017 | 3,701,595 | 11.76 | 14,653 | 125,500 | 98 | 14,751 | ||
Granted | 605,000 | 13.14 | - | 65,000 | 136 | 136 | ||
Exercised option or vested RSU | (190,984) | 11.87 | (752) | (62,750) | (656) | (1,408) | ||
Expired | (497,102) | 16.47 | (4,312) | - | - | (4,312) | ||
Amortized value of stock based compensation | - | - | 6,169 | - | 1,213 | 7,382 | ||
Outstanding December 31, 2017 | 3,618,509 | 11.34 | 15,758 | 127,750 | 791 | 16,549 | ||
Exercisable at December 31, 2017 | 1,721,287 |
The outstanding share options at September 30, 2018 expire at various dates between December 2018 and December 2022. A summary of options outstanding, their remaining life and exercise prices as at September 30, 2018 is as follows:
Options Outstanding | Options Exercisable | ||
Exercise price | Number | Remaining | Number |
outstanding | contractual life | Exercisable | |
$12.91 | 99,800 | 1 months | 99,800 |
$8.00 | 50,000 | 3 months | 50,000 |
$10.36 | 400,000 | 6 months | 400,000 |
$9.72 | 50,000 | 9 months | 50,000 |
$9.00 | 425,000 | 1 year 9 months | - |
$11.13 | 350,000 | 2 years 3 months | 350,000 |
$13.52 | 100,000 | 2 years 6 months | 100,000 |
$17.16 | 50,000 | 2 years 8 months | 50,000 |
$17.14 | 50,000 | 2 years 11 months | - |
$10.45 | 865,833 | 3 years 3 months | 105,278 |
$13.14 | 605,000 | 4 years 3 months | - |
$6.30 | 30,245 | 5 months to 2 years 5 months | 30,245 |
3,075,878 | 1,235,323 |
In the nine months ended September 30, 2018, 542,631 options were exercised for proceeds of $6.8 million and 65,000 RSUs vested. In total, 607,631 common shares were issued.
Subsequent to the quarter-end, 131,739 options to purchase common shares of the Company were exercised for $1.6 million of proceeds.
In December 2017, 605,000 five-year options with an exercise price of $13.14, to purchase common shares of the Company, with a fair value, at the date of the grant, of $4.1 million, were granted to members of the Board of Directors and management. Of these, 300,000 options were granted to board members that were subject to shareholder approval. At the end of the second quarter of 2018, and upon the approval of by shareholders the fair value was re-estimated. Vesting of these options is subject to the Company entering into a major transaction on one of the Company’s two core assets or other transformative transaction. The remaining 305,000 options were granted to members of management and vest over a three year period. The fair value of these options is being amortized over the service life of the options.
In March 2016, 100,000 five-year options, with an exercise price of $13.52 and in August 2016, 50,000 options, with an exercise price of $17.14, to purchase common shares of the Company were granted to members of management. The options had a fair value, at the grant date, of $0.7 million and $0.4 million respectively and vest over a two-year period.
In May 2016, 50,000 five-year options, with an exercise price of $17.16, to purchase common shares of the Company were granted to a new director of the Company. The options had a fair value of $0.5 million and vest upon the Company entering into a major transaction on one of the Company’s two core assets or other transformative transaction.
In December 2016, 890,833 five-year options with an exercise price of $10.45, to purchase common shares of the Company, with a fair value, at the date of the grant, of $4.9 million, were granted to members of the Board of Directors and management. The 575,000 options granted to board members were subject to shareholder approval which was obtained on June 27, 2017 at which time the fair value was re-estimated. Vesting of these options is subject to the Company entering into a major transaction on one of the Company’s two core assets or other transformative transaction. The remaining 315,833 options were granted to members of management and vest over a three year period. The fair value of these options is being amortized over the service life of the options.
Also in 2016, in conjunction with the acquisition of SnipGold, 54,968 stock options and 1,587 warrants with a combined fair value, at the date of the grant, of $0.6 million and has been included in the costs of the net assets acquired.
In 2016, the Board granted 125,500 RSUs to members of management. The fair value of the grants, of $1.3 million, was estimated as at the grant date and is being amortized over the expected service period of the grants. The expected service periods vary from three to eleven months from the date of the grant depending on certain corporate objectives being met. In 2016, 183,250 RSUs vested and were exchanged for common shares of the Company. In 2017, 62,750 RSUs, of the 125,500 RSUs outstanding at the time, vested and were exchanged for common shares of the Company.
d) | Basic and diluted net loss per common share |
For the three and nine months ended September 30, 2018 and 2017 basic and diluted net loss per common share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding for the period. At September 30, 2018 there were 3,075,878 stock options and 62,750 RSU’s (December 31, 2017 – 3,618,509 and 127,750 respectively) which were excluded from the calculation of diluted loss per share, on the basis of the conclusion that their inclusion would be anti dilutive.
11. | Fair value of financial assets and liabilities |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts, volatility measurements used to value option contracts and observable credit default swap spreads to adjust for credit risk where appropriate), or inputs that are derived principally from or corroborated by observable market data or other means.
Level 3: Inputs are unobservable (supported by little or no market activity).
The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
The Company’s financial assets and liabilities as at September 30, 2018 and December 31, 2017 are cash and cash equivalents, short-term deposits, amounts receivable, equity investments, and accounts payable and accrued liabilities. Other than investments, the carrying values approximate their fair values due to the immediate or short-term maturity of these financial instruments and are classified as a Level 1 measurement. The Company’s equity investments are measured at fair value based on quoted market prices and are classified as a level 1 measurement.
The Company's financial risk exposures and the impact on the Company's financial instruments are summarized below:
Credit Risk
The Company's credit risk is primarily attributable to short-term deposits, and receivables included in amounts receivable and prepaid expenses. The Company has no significant concentration of credit risk arising from operations. Short-term deposits consist of Canadian Schedule I bank guaranteed notes, with terms up to one year but are cashable in whole or in part with interest at any time to maturity, for which management believes the risk of loss to be remote. Management believes that the risk of loss with respect to financial instruments included in amounts receivable and prepaid expenses to be remote.
Liquidity Risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2018, the Company had a cash and cash equivalents of $3.5 million and short-term deposits of $7 million (December 31, 2017 - $4 million and $12.1 million, respectively) for settlement of current financial liabilities of $11.7 million (December 31, 2017 - $4 million). In May 2018, the Company closed a flow-through financing and issued 1,150,000 at $17.16 per common share for gross proceeds of $19.7 million. As the Company does not generate cash inflows from operations, The Company is dependant upon external sources of financing to fund its exploration projects and on-going activities. If required, the Company will seek additional sources of cash in 2018 to cover its proposed exploration and development programs at its key projects, in the form of equity financings and from the sale of non-core assets. Subsequent to the quarter-end, the Company announced that it has agreed to issue one million common shares, at a price of $14.00 per share, for gross proceeds of $14 million. The short-term deposits consist of Canadian Schedule I bank guaranteed deposits and are cashable in whole or in part with interest at any time to maturity. The Company's financial liabilities primarily have contractual maturities of 30 days and are subject to normal trade terms. The Company’s ability to fund its operations and capital expenditures and other obligations as they become due is dependent upon market conditions.
Market Risk
(a) Interest Rate Risk
The Company has no interest-bearing debt. The Company's current policy is to invest excess cash in Canadian bank guaranteed notes (short-term deposits). The short-term deposits can be cashed in at any time and can be reinvested if interest rates rise.
(b) Foreign Currency Risk
The Company's functional currency is the Canadian dollar and major purchases are transacted in Canadian and US dollars. The Company funds certain operations, exploration and administrative expenses in the United States on a cash call basis using US dollar currency converted from its Canadian dollar bank accounts held in Canada. Management believes the foreign exchange risk derived from currency conversions is not significant to its operations and therefore does not hedge its foreign exchange risk. As at September 30, 2018 the Company had no foreign currency denominated financial instruments.
(c) Investment Risk
The Company has investments in other publicly listed exploration companies which are included in investments. These shares were received as option payments on certain exploration properties the Company owns. In addition, the Company holds $2.2 million in a gold exchange traded receipt that is recorded on the statement of financial position in investments. The risk on these investments is significant due to the nature of the investment but the amounts are not significant to the Company.
12. | Corporate and administrative expenses |
Three months ended September 30 | Nine months ended September 30 | ||||
($000s) | 2018 | 2017 | 2018 | 2017 | |
Employee compensation | 713 | 670 | 2,419 | 2,235 | |
Stock-based compensation | 947 | 2,345 | 4,226 | 5,912 | |
Professional fees | 394 | 133 | 878 | 549 | |
Other general and administrative | 310 | 423 | 1,368 | 1,486 | |
2,364 | 3,571 | 8,891 | 10,182 |
13. | Related party disclosures |
During the nine months ended September 30, 2018, other than compensation paid to key management personnel, a private company controlled by an officer was paid $0.15 million (2017 - $0.15 million) for legal services rendered. During the current quarter the same private company controlled by the officer was paid $50,000 (2017 - $50,000). The transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
14. | Income taxes |
In the nine months ended September 30, 2018, the Company recognized income tax expense of $4.9 million (2017 - $0.4 million) reflecting the deferred tax liabilities arising from exploration expenditures, which are capitalized for accounting purposes but are renounced for tax purposes as well as current tax arising from the sale of non-core mineral interests. The renounced expenditures relate to the flow-through share issuance in April 2017, December 2017 and May 2018. The tax expense is partially offset by the tax recovery resulting from the loss in the current nine-month period. In the three months ended September 30, 2018, the Company recognized income tax expense of $3.4 million (2017 - $0.1 million recovery) reflecting the current quarter’s capitalized versus renounced treatment of exploration expenditures. The tax expense is partially offset by the tax recovery resulting from the loss in the current three-month period.
15. | Subsequent event |
Subsequent to the quarter-end, the Company announced that it has agreed to issue one million common shares, through a non-brokered private placement, at a price of $14.00 per share, for gross proceeds of $14 million. The private placement is expected to close on or about November 23, 2018 and is subject to customary closing conditions. The Company has granted the private placees an option to increase the size of the private placement by an additional 250,000 common shares, exercisable until December 24, 2018, at the same price.
EXHIBIT 99.2
SEABRIDGE GOLD INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018
SEABRIDGE GOLD INC.
Management’s Discussion and Analysis
The following is a discussion of the results of operations and financial condition of Seabridge Gold Inc. and its subsidiary companies for the three and nine months ended September 30, 2018 and 2017. This report is dated November 13, 2018 and should be read in conjunction with the audited consolidated financial statements and management’s discussion and analysis for the year ended December 31, 2017 and the Company’s Annual Information Form filed on SEDAR at www.sedar.com. Other corporate documents are also available on SEDAR and EDGAR as well as the Company’s website www.seabridgegold.net. As the Company has no operating projects at this time, its ability to carry out its business plan rests with its ability to sell projects or to secure equity and other financings. All amounts contained in this document are stated in Canadian dollars unless otherwise disclosed.
The interim condensed consolidated financial statements for the three and nine months ended September 30, 2018 and the comparative periods ended September 30, 2017 have been prepared by the Company in accordance with IAS 34 Interim Financial Reporting.
Company Overview
Seabridge Gold Inc. is a company engaged in the acquisition and exploration of gold properties located in North America. The Company’s objective is to provide its shareholders with exceptional leverage to a rising gold price. The Company’s business plan is to increase its gold ounces in the ground but not to go into production on its own. The Company will either sell projects or participate in joint ventures towards production with major mining companies. During the period 1999 through 2002, when the price of gold was lower than it is today, Seabridge acquired 100% interests in eight advanced-stage gold projects situated in North America. Two of those eight remain Seabridge’s principal projects. the KSM (Kerr-Sulphurets-Mitchell) property located in British Columbia and the Courageous Lake property located in the Northwest Territories. In 2016, the Company acquired 100% of the common shares of SnipGold Corp. (“SnipGold”) and its 100% owned Iskut Project, in British Columbia. In 2017, the Company purchased 100% of Snowstorm Exploration LLC and its Snowstorm Project in Nevada. Seabridge’s common shares trade in Canada on the Toronto Stock Exchange under the symbol “SEA” and in the United States on the New York Stock Exchange under the symbol “SA”.
Results of Operations
The Company incurred a $2.8 million net loss for the three months ended September 30, 2018 or $0.05 per share compared to a net loss of $1.5 million or $0.03 per share for the comparative period ended September 30, 2017.
For the nine months ended September 30, 2018, the Company incurred a net loss of $15.9 million or $0.27 per share, compared to a net loss of $5.1 million ($0.09 per share) in the comparative period of 2017.
In the current quarter ended September 30, 2018, deferred tax expense and corporate and administrative expenses, including stock-based compensation, were the most significant items contributing to the loss. In the nine-month period, ended the same date, environmental rehabilitation costs, corporate and administrative expenses, including stock-based compensation and deferred tax expense were the most significant items contributing to losses. Other income reported for flow-through shares offset some of these expenses in the current quarter and on the nine-month year-to-date basis. These and other items are discussed further below.
For the three months ended September 30, 2018, corporate and administrative expenses of $2.4 million were incurred compared to $3.6 million reported in the third quarter of 2017. Cash compensation of $0.7 million incurred in the current quarter is comparable to $0.7 million in the comparative period of 2017. Corporate, non-project related staffing levels have remained consistent between the current and comparative periods. Cash compensation is not expected to vary significantly from current levels as no significant additions to staffing levels are currently anticipated. Stock-based compensation costs, comprising stock options and RSUs dropped to $0.9 million from $2.3 million in the third quarter of 2017 as the fair value of options granted late in 2017 had a relatively short estimated vesting period and a significant portion of the expense was incurred prior to the start of the current quarter.
For the nine-month period ending September 30, 2018, cash compensation of $2.4 million is marginally higher than the $2.2 million incurred in the comparative 2017 period, while the stock-based compensation of $4.2 million is 29% lower than the $5.9 million in the comparative 2017 period. Given there remains $1.4 million of fair value related to stock-based compensation to be expensed, the Company expects this expense to decrease in the fourth quarter and into 2019.
The Company’s stock-based compensation expenses related to stock options and restricted share units are illustrated on the following tables:
Number of options | Exercise price ($) | Grant date fair value ($000s) | Expensed prior to 2017 ($000s) | Expensed in 2017 ($000s) | Expensed in 2018 ($000s) | Remaining balance to be expensed ($000s) | |
Options granted | |||||||
December 21, 2015 | 365,000 | 11.13 | 1,959 | 1,756 | 203 | - | - |
March 24, 2016 | 100,000 | 13.52 | 684 | 493 | 165 | 26 | - |
August 11, 2016 | 50,000 | 17.14 | 438 | 114 | 235 | 89 | - |
December 19, 2016 | 890,833 | 10.45 | 6,159 | 149 | 5,356 | 358 | 296 |
December 14, 2017 | 605,000 | 13.14 | 4,303 | - | 210 | 3,035 | 1,058 |
2,512 | 6,169 | 3,508 | 1,354 | ||||
Number of RSUs | Grant date fair value ($000s) | Cancelled prior to 2017 ($000s) | Expensed prior to 2017 ($000s) | Expensed in 2017 ($000s) | Expensed in 2018 ($000s) | Remaining balance to be expensed ($000s) | |
RSUs granted | |||||||
December 19, 2013 | 235,000 | 2,267 | 24 | 2,243 | - | - | - |
December 9, 2014 | 272,500 | 2,624 | - | 2,624 | - | - | - |
December 31, 2015 | 94,000 | 1,046 | - | 1,046 | - | - | - |
December 19, 2016 | 125,500 | 1,311 | - | 98 | 1,213 | - | - |
December 14, 2017 | 65,000 | 854 | - | - | 136 | 718 | - |
24 | 6,011 | 1,349 | 718 | - |
Subsequent to the quarter end, 50,000 options to acquire common shares of the Company were granted to a new member of the Board of Directors and the fair value attributed to that grant will be expensed in the fourth quarter and into 2019.
In the current quarter, other corporate and administrative costs, including professional and advisory fees, of $0.7 million were marginally higher than the comparable period of 2017 ($0.6 million) as well as on a nine-month basis with costs increasing from $2 million, in 2017, to $2.2 million in 2018. The Company continues to incur professional and advisory fees as it seeks a joint venture partner for its KSM project. The Company does not anticipate significant increases in general and administrative costs for the remainder of 2018 or into 2019, from current levels.
The Company recognized $2.9 million of other income in the current quarter of 2018 and $5.4 million on a nine-month year-to-date basis related to the flow-through share premium recorded on financings completed in April and December of 2017 and May 2018 (discussed below). In the comparative periods of 2017, the Company recognized $3.1 million of other income in the third quarter and $4.2 million on a nine-month year-to-date basis related to the flow-through share premium recognized on a flow-through financing completed in April 2017.
In the current quarter, the Company incurred $1.1 million of rehabilitation costs that were recorded as a reduction to the short-term provision for reclamation liabilities on the interim condensed consolidated statement of financial position as at September 30, 2018. In the first quarter of 2018, the Company charged $7.4 million of rehabilitation costs to the statement of operations and comprehensive loss related to the filing of a Johnny Mountain Mine reclamation report in British Columbia in that quarter. The report estimates the full closure at approximately $9.1 million with costs expected to be incurred over five years. Significant costs include estimates of the closure of all adits and vent raises, removal of the mill and buildings, treatment of landfills and surface water management as well as ongoing logistics, freight and fuel costs. Current quarter spending entailed the demolition of portals and sealing of vent raises, the relocation of certain waste burial sites, overall drainage work and the cleaning and clearing of the mill for future dismantling.
In 2017 IDM exercised its option to acquire the Red Mountain Project and the Company derecognized approximately $1.0 million of accrued reclamation liabilities. The Company released a reclamation deposit of $1.0 million into cash and according to underlying purchase agreements made a third-party payment of $0.3 million. The derecognition of the reclamation liability net with the third-party payment resulted in a $0.8 million gain on the statement of operations and comprehensive loss in 2017. Also in 2017, the Company disposed of its leasehold interest in the Castle Black Rock project and received 1,500,000 common shares of Columbus Gold Corp., with a fair value of $1.4 million as payment. All historical costs related to Castle Black Rock had been recovered or impaired in prior years and there was no carrying value recorded for the project at the time of receipt of the payment. The fair value of the common shares received was recorded as a gain on the disposition of mineral interests on the statement of operations and comprehensive loss. The Company did not dispose of any mineral interests in the nine-month period ended September 30, 2018.
The Company holds equity investments in common shares of several mining companies that were received as consideration for optioned mineral properties, and other short-term investments, including one gold exchange traded receipt. The Company also holds one investment in an associate that is accounted for on the equity basis. In the current quarter, the company recognized $19,000 of losses (2017 - $34,000) in the associate and $0.1 million (2017 - $0.1 million) on a nine-month year-to-date basis.
In the nine months ended September 30, 2018, the Company recognized income tax expense of $4.9 million (2017 - $0.4 million) reflecting the deferred tax liabilities arising from exploration expenditures, which are capitalized for accounting purposes but are renounced for tax purposes. The renounced expenditures relate to the flow-through share issuances in April 2017, December 2017 and May 2018. The tax expense is partially offset by the tax recovery resulting from the loss in the current nine-month period. In the three months ended September 30, 2018, the Company recognized income tax expense of $3.4 million (2017 - $0.1 million recovery) reflecting the current quarter’s capitalized versus renounced treatment of exploration expenditures. The tax expense is partially offset by the tax recovery resulting from the loss in the current three-month period.
Quarterly Information
Selected financial information for the last eight quarters ending September 30, 2018 is as follows:
(unaudited)
Quarterly operating results ($000s) | 3nd Quarter Ended September 30, 2018 | 2nd Quarter Ended June 30, 2018 | 1st Quarter Ended March 31, 2018 | 4th Quarter Ended December 31, 2017 |
Revenue | - | - | - | - |
Loss for period | (2,831) | (2,403) | (10,676) | (5,206) |
Basic loss per share | (0.05) | (0.04) | (0.18) | (0.09) |
Diluted loss per share | (0.05) | (0.04) | (0.18) | (0.09) |
Quarterly operating results ($000s) | 3nd Quarter Ended September 30, 2017 | 2nd Quarter Ended June 30, 2017 | 1st Quarter Ended March 31, 2017 | 4th Quarter Ended December 31, 2016 |
Revenue | - | - | - | - |
Loss for period | (1,535) | (1,715) | (1,831) | (2,598) |
Basic loss per share | (0.03) | (0.03) | (0.03) | (0.05) |
Diluted loss per share | (0.03) | (0.03) | (0.03) | (0.05) |
The current quarter loss is marginally higher than the second fiscal quarter related to a significant jump in deferred tax expense. The loss for the first quarter of 2018 includes a significant increase in the provision for environmental rehabilitation at Johnny Mountain. The fourth quarter of 2017 includes significant environmental rehabilitation costs, administrative costs related to bonus remuneration and additional stock-based compensation for year-end option and RSU awards, as well as increased deferred tax expense. In the other three quarters of 2017, the Company incurred less deferred tax expense than in the current year and therefore had lower net losses and the majority of those losses comprised administrative expenses offset by varying income related to the flow through share premiums.
Mineral Interest Activities
In the first nine months of 2018 the Company added an aggregate of $29.2 million of expenditures that were attributed to mineral interests. Cash expenditures were made at KSM (74%), Courageous Lake (12%), Iskut (10%) and the remainder for Snowstorm.
Spending at KSM on a nine-month year-to-date basis was $21.7 million. The Company commenced an exploration program in the second fiscal quarter to complete 21,000 meters of drilling to test the down plunge projection of the high-grade core zone of the Iron Cap deposit, to the west of the current resource, and to evaluate the relative positioning of the Iron Cap resources. The program also entails additional geotechnical and confirmation drilling to help refine parameters for the deposits. The first two holes completed in the current drilling program and reported subsequent to the quarter end, intersected gold and copper mineralization with grades exceeding the KSM resource average. Based on the drilling program completed in 2017, the Company updated its mineral resource estimate for the Iron Cap deposit in the first quarter of 2018. Iron Cap is one of four large gold/copper porphyry deposits within the KSM Project. The updated resource estimate incorporated all drilling completed to 2016 and 2017. The update increased both the size of the resource and the grade of that resource.
The Company is also continuing work on the site of what will become a year-round camp at KSM to support ongoing exploration. The work entails small scale logging on approximately nine hectares of timber in the Mitchell Valley. The site could also facilitate prompt commencement of much larger work programs that would be required to advance any development of the project, once a joint venture partner is obtained.
At Courageous Lake, the Company completed a planned winter drilling program using two core rigs entailing 7,200 meters of drilling over 36 holes and was designed as an initial drill test of seven targets reporting historical gold occurrences to determine which ones had sufficient grade, strike and width within 200 meters of surface to potentially replicate the Walsh Lake Deposit. The program successfully identified two new gold zones, Olsen and Marsh Pond, with widths and grades suggesting they could make a contribution to project resources. The program also found two other target zones that, with additional work, could potentially contribute to the resource base. Spending at Courageous Lake on a nine-month year-to-date basis was $3.6 million.
At the Iskut Project, an exploration program commenced in the second quarter and continued through the current quarter. The objective of the program is to test the current model of the Quartz Rise lithocap and evaluate the potential for discovery of an intermediate sulfidation epithermal deposit. A 3,000 meter drill program over 12 holes was planned and completed subsequent to the quarter end that may provide a reasonable prediction on the size potential of the lithocap. Spending at Iskut on a year-to-date basis was $2.8 million.
The Company incurred $1.1 million at its Snowstorm Project in Nevada completing a targeted exploration program designed to define drill targets by the end of 2018.
Liquidity and Capital Resources and Subsequent Events
The Company’s working capital position, excluding the flow-through share premium, at September 30, 2018, was $7.9 million, down from $19.6 million at December 31, 2017. Cash and short-term deposits at September 30, 2018 totaled $10.5 million versus $16.1 million at December 31, 2017. Cash resources, including cash and cash equivalents and short-term deposits, have decreased as the Company has incurred significant exploration costs at its core projects, environmental rehabilitation costs at Johnny Mountain and corporate and administrative costs, reducing cash balances.
Subsequent to the quarter-end, the Company announced that it has agreed to issue one million common shares, through a non-brokered private placement, at a price of $14.00 per share, for gross proceeds of $14 million. The private placement is expected to close on or about November 23, 2018 and is subject to customary closing conditions. The Company has granted the private placees an option to increase the size of the private placement by an additional 250,000 common shares, exercisable until December 24, 2018, at the same price.
In May 2018, the Company closed a flow-through financing and issued 1,150,000 common shares at $17.16 per common share for gross proceeds of $19.7 million. The Company committed to renounce its ability to deduct qualifying exploration expenditures for the equivalent value of the gross proceeds of the flow-through financing and transfer the deductibility to the purchasers of the flow-through shares. The effective date of the renouncement will be December 31, 2018.
In the first nine months of 2018, 542,631 options to purchase common shares of the Company were exercised for proceeds of $6.8 million and subsequent to the quarter end an additional 131,739 options to purchase common shares of the Company were exercised for proceeds of $1.6 million.
In December 2017, the Company issued 200,000 flow-through common shares at a price of $16.72 per flow-through share for aggregate gross proceeds of $3.3 million. Proceeds of this financing are being used to fund the 2018 Courageous Lake winter drill program and follow up of the results.
Also, in April and May 2017, the Company closed two financings for gross proceeds of $37.7 million. The first financing was a public offering of 1,100,000 common shares at a price of $14.30 per common share raising gross proceeds of $15.7 million. The second was a financing whereby a syndicate of underwriters purchased 1,100,000 flow-through common shares at a price of $20.00 per flow-through common share for gross proceeds of $22 million.
As at September 30, 2018, the Company has a commitment of $4.7 million remaining to spend on qualifying expenditures for December 2017 and May 2018 flow-through financings.
During the current quarter, operating activities, including working capital adjustments, used $18,000 compared to a source of $0.3 million in the similar period in 2017. In the current quarter, $1.1 million of rehabilitation expenditures were made. No comparable payments were made in the third quarter of 2017. In the first quarter of 2017, the Company deposited $1.8 million with tax authorities along with an objection to a reassessment of 2010 and 2011 refunds received under the British Columbia Mineral Exploration Tax Credit program. It is anticipated that the objection will be reviewed in 2018. The balance of the re-assessment remains recorded within accounts payable and accrued liabilities on the statement of financial position as at September 30, 2018. Operating activities in the near-term are not expected to deviate significantly from the current quarter.
Also during the current quarter, the Company purchased 320,000 units of an investment in an associate for US$1.25 per unit. Each unit consists of one common share and one warrant to purchase one-half of a common share of the associate. Each warrant has a two-year term and is exercisable at US$1.30 in the first twelve months and US$1.50 in the following twelve months.
The Company will continue its objective of advancing its major gold projects, KSM and Courageous Lake, and to further explore the Iskut Project to either sell or enter into joint venture arrangements with major mining companies. The Company may also continue to dispose of certain non-core investments deemed no longer strategic to the Company.
Outlook
In the fourth quarter of 2018, the Company will complete and analyze the results of the exploration and drilling programs it commenced, at KSM and Iskut, and follow up on results of its completed exploration program at Courageous Lake. In addition to that work at Iskut, the Company will plan for the environmental rehabilitation work, to be carried out in 2019, related to the closure of the Johnny Mountain Mine. A relatively small exploration program continues to be conducted at the Company’s new Snowstorm Project.
For KSM, the Company will complete the exploration program that is following up on the results of the 2017 drilling at Iron Cap as well as continue to pursue a joint venture partner for the project.
For Iskut, the Company will complete the exploration program designed with the objective of testing the current understanding of the Quartz Rise lithocap and evaluate the potential for discovery of an epithermal deposit.
Based on results from current drilling and exploration programs at KSM, Iskut and Courageous Lake, follow-up work may be planned for 2019.
Internal Controls Over Financial Reporting
The Company’s management under the supervision of the Chief Executive Officer and Chief Financial Officer are responsible for designing adequate internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management is responsible for establishing and maintaining adequate internal controls over financial reporting. The control framework used is Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Changes to Internal Controls Over Financial Reporting
There was no change in the Company’s internal controls over financial reporting that occurred during the period beginning on July 1, 2018 and ended on September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
Disclosure Controls and Procedures
Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is recorded, processed, summarized and reported within the time periods specified in the rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated and communicated to management as appropriate, to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation of the design of the disclosure controls and procedures as of September 30, 2018, that they are appropriately designed and effective and that since the December 31, 2017 evaluation, there have been no material changes to the Company’s disclosure controls and procedures.
Limitations of controls and procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any internal controls over financial reporting and disclosure controls and procedures, no matter how well designed, can have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control system are met.
Shares Issued and Outstanding
At November 14, 2018, the issued and outstanding common shares of the Company totaled 59,566,488. In addition, there were 2,994,839 stock options, 62,750 RSUs and 500,000 warrants outstanding. Assuming the conversion of all of these instruments outstanding, there would be 63,123,377 common shares issued and outstanding.
Related Party Transactions
During the nine months ended September 30, 2018, other than compensation paid to key management personnel, a private company controlled by an officer was paid $150,000 (2017 - $150,000) for legal services rendered. During the current quarter the same private company controlled by the officer was paid $50,000 (2017 - $50,000). The transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
Changes in Accounting Standards Implemented or Not Yet Adopted
Accounting standards recently adopted
IFRS 9, Financial instruments, introduced new requirements for classification and measurement of financial assets, additional changes to financial liabilities and a new general hedge accounting standard. The mandatory effective date is for annual periods beginning on or after January 1, 2018 and the Company applied IFRS 9 on the effective date. IFRS 9 did not impact the Company's classification and measurement of financial assets and liabilities except for equity securities as described below.
The Company designated its equity securities as financial assets at fair value through other comprehensive income ("FVTOCI"), and are recorded initially at fair value. Subsequent changes in fair value will be recognized in other comprehensive income (loss) only and will not be transferred into income (loss) upon disposition. As a result of this change, the Company reclassified $2.3 million of impairment losses recognized in prior years on certain equity securities which continue to be owned by the Company as at January 1, 2018 from opening deficit to accumulated other comprehensive income (loss) on January 1, 2018. As a result of adopting IFRS 9, the net change in fair value of the equity securities, including realized and unrealized gains and losses, if any, is now presented as an item that will not be reclassified subsequently to net earnings in the consolidated statements of comprehensive income (loss). Realized gains and losses on securities derecognized prior to January 1, 2018 have not been restated in comparative periods. As the Company does not have any hedges, the revised approach to hedge accounting had no effect on the financial statements.
IFRS 15, Revenue from contracts with customers (“IFRS 15”) replaced IAS 18 Revenue, IAS 11 Construction contracts, and some revenue-related interpretations. The new standard was applied on January 1, 2018. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue at either a point in time or over time. The model features a five-step analysis of transactions to determine when and how much revenue should be recognized. New estimates and judgmental thresholds were introduced, which may affect the amount and/or timing of revenue recognized. The application of the new standard had no impact on the interim condensed consolidated financial statements as at September 30, 2018.
IFRS 2, Share-based payments amendments (“Amendments to IFRS 2”). The Amendments to IFRS 2 clarify the classification and measurement of share-based payments for cash-settled share-based payment transactions and or for share-based payment transactions with net settlement features for withholding tax obligations and or for any modifications to the terms and conditions of a share-based payment transaction that changes its classification from cash-settled to equity-settled. The Company adopted the amendments on January 1, 2018.
New accounting standards not yet adopted
IFRS 16, Leases (“IFRS 16”) will replace IAS 17 Leases. The new standard requires lessees to recognize assets and liabilities for most leases. Application of the standard is mandatory for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted, provided the new revenue standard, IFRS 15 has been applied or is applied at the same date as IFRS 16. The Company plans to apply IFRS 16 on the effective date. The Company is evaluating the impact of the changes to its financial statements based on the characteristics of any contracts in place before the effective date and expects to report additional details on the anticipated impact, if material, in the fourth quarter.
Critical Accounting Estimates
Critical accounting estimates used in the preparation of the consolidated financial statements include the Company’s estimate of recoverable value of its mineral properties and related deferred exploration expenditures, the value of stock-based compensation, asset retirement obligations and deferred income tax. All of these estimates involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control.
The factors affecting stock-based compensation include estimates of when stock options and compensation warrants might be exercised and the stock price volatility. The timing for exercise of options is out of the Company’s control and will depend upon a variety of factors, including the market value of the Company’s shares and financial objectives of the stock-based instrument holders. The Company used historical data to determine volatility. However, the future volatility is uncertain.
The recoverability of the carrying value of mineral properties and associated deferred exploration expenses is based on market conditions for minerals, underlying mineral resources associated with the properties and future costs that may be required for ultimate realization through mining operations or by sale. The Company is in an industry that is dependent on a number of factors including environmental, legal and political risks, the existence of economically recoverable reserves, the ability of the Company and its subsidiaries to obtain necessary financing to complete the development, and future profitable production or the proceeds of disposition thereof.
The provision for asset retirement obligations is the best estimate of the present value of the future costs of reclaiming the environment that has been subject to disturbance through exploration activities or historical mining activities. The Company uses assumptions and evaluates technical conditions for each project that have inherent uncertainties, including changes to laws and practices and to changes in the status of the site from time-to-time. The timing and cost of the rehabilitation is also subject to uncertainty. These changes, if any, are recorded on the statement of financial position as incurred.
The Company has net assets in Canada and the United States and files corporate tax returns in each. Deferred tax liabilities are estimated for tax that may become payable in the future. Future payments could be materially different from our estimated deferred tax liabilities. We have deferred tax assets related to non-capital losses and other deductible temporary differences. Deferred tax assets are only recognized to the degree that it shelters tax liabilities or when it is probable that we will have enough taxable income in the future to recover them.
Risks and Uncertainties
The risks and uncertainties are discussed within the Company’s most recent Annual Information Form filed on SEDAR at www.sedar.com, and the Annual Report on Form 40-F filed on EDGAR at www.sec.gov/edgar.shtml.
Forward Looking Statements
The consolidated financial statements and management’s discussion and analysis and any other materials included with them, contain certain forward-looking statements relating but not limited to the Company’s expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate”, “may” and “will” or similar words suggesting future outcomes, or other expectations, beliefs, estimates, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information may include reserve and resource estimates and expected changes to them, estimates of future production and related financial analysis, unit costs, costs of capital projects and timing of commencement of operations, and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results.
Potential shareholders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
EXHIBIT 99.3
Seabridge Gold Inc.
Report to Shareholders
Quarter Ended September 30, 2018
Recent Highlights
· 2018 KSM exploration drilling successfully extends Iron Cap Deposit
· Geotechnical, waste characterization and reserve confirmation drilling indicate KSM block model performing well
· $14 million non-brokered private placement secured in November
2018 KSM Drill Program
In June, Seabridge commenced a 26,700 meter drill program at its 100% owned KSM project located in northwestern British Columbia, Canada. The principal objectives for this years’ program at KSM were to: (i) test the down plunge projection of the high grade core zone of the Iron Cap Deposit to the west of the current resource; (ii) evaluate the relative positioning between Iron Cap resources and the currently planned alignment of the Mitchell-Treaty Tunnel (“MTT”); and (iii) undertake additional geotechnical, waste characterization and model confirmation drilling to help refine engineering parameters for the deposits and to ensure that the project is ready for final feasibility when a partner is secured.
Iron Cap Drill Hole (IC-18-75) Returns 583 Meters of 0.59 gpt Gold and 0.41% Copper
16,500 meters in 14 holes were drilled this year at Iron Cap. Due to its proximity to the MTT and its higher grade, Iron Cap could potentially improve KSM’s economics by mining it before the Kerr deposit. The 2018 program successfully tested the down plunge projection of the Iron Cap core zone, assessed the distribution of post-mineral intrusions on the south end of the Iron Cap deposit and obtained data for the re-alignment of the proposed MTT to avoid conflicts with mining operations. Our expectation from this years’ program is that we will extend and improve our resource model for Iron Cap, which is on course to becoming one of the best deposits in the KSM complex. A new resource estimate should be completed in the first quarter of the new year.
Results from two holes on the Iron Cap target are:
2018 Iron Cap Drill Results
Hole ID |
Hole Length (meters) |
From (meters) |
To (meters) |
Thickness (meters) |
Gold Grade (g/T) |
Copper Grade (%) |
Silver Grade (g/T) |
IC-18-74 | 855.4 | 802.5 | 855.4 | 52.9 | 0.70 | 0.34 | 3.7 |
IC-18-74B | 1687.8 | 837.5 | 872.0 | 34.6 | 0.46 | 0.43 | 11.2 |
967.1 | 1199.3 | 232.2 | 0.30 | 0.25 | 1.0 | ||
1270.3 | 1354.1 | 83.8 | 0.42 | 0.29 | 1.1 | ||
1412.2 | 1508.1 | 95.9 | 0.38 | 0.35 | 1.2 | ||
IC-18-75 |
1662.1
including including |
878.3 | 914.3 | 36.1 | 0.54 | 0.39 | 1.3 |
991.6 | 1574.3 | 582.7 | 0.59 | 0.41 | 1.4 | ||
1063.3 | 1158.3 | 95.0 | 0.84 | 0.62 | 1.1 | ||
1192.3 | 1250.2 | 57.9 | 1.00 | 0.44 | 1.5 |
The drill holes reported above were designed to test down plunge and across the Iron Cap deposit. Intervals reported are approximately normal to the strike of the mineralized zone, however hole orientations vary as collar locations are restricted due to topography. Additional drilling is required to confirm this thickness, which is anticipated as development progresses.
The results of the remaining 12 holes drilled this year at Iron Cap are expected to be announced in the coming weeks.
106 Front Street East, Suite 400, Toronto, OntarioM5A 1E1, Canada
Telephone: (416) 367-9292 Facsimile: (416) 367-2711 www.seabridgegold.net
Confirmation Drilling Substantiates Reserve Model
Five holes totaling 1,746 meters were sited to confirm the mineral reserves in those areas where production would likely begin. Drill holes in the Mitchell, Sulphurets and Kerr deposits confirmed block grades comparable to model predictions. Results include:
2018 Mineral Reserve Confirmation Drill Results
Hole ID |
Hole Length (meters) |
From (meters) |
To (meters) |
Thickness (meters) |
Gold Grade (g/T) |
Copper Grade (%) |
Silver Grade (g/T) |
M-18-132 | 380 | 5.9 | 380 | 374.1 | 0.84 | 0.20 | 3.36 |
M-18-133 | 54 | 5.5 | 54 | 48.5 | 0.86 | 0.18 | 2.63 |
M-18-134 | 381 | 4.5 | 381 | 376.5 | 0.79 | 0.27 | 5.49 |
K-18-53 |
501
Including |
70.7 | 205.0 | 134.3 | 0.26 | 0.41 | 1.78 |
275.1 298.0 |
498.0 362.7 |
222.9 64.7 |
0.28 0.48 |
0.51 1.06 |
1.94 2.24 |
||
S-18-80 | 430 | 106.7 | 164.0 | 57.3 | 0.41 | 0.21 | 0.45 |
193.7 | 272.4 | 78.7 | 0.78 | 0.36 | 0.74 | ||
283.8 | 310.0 | 26.2 | 0.80 | 0.07 | 0.46 | ||
324.5 | 348.0 | 23.5 | 0.93 | 0.04 | 1.39 | ||
367.0 | 430.0 | 63.0 | 0.57 | 0.05 | 0.70 |
The drill holes reported above were designed to test specific zones within KSM’s mineral reserves and were not designed to test true thicknesses of the deposits. Each of the reported holes ended in mineralization.
Waste Characterization Drilling
A total of 12 drill holes orientated into the margins of the Mitchell and Sulphurets deposits have been completed totaling 4,919 meters. These holes were designed to test an updated block model of waste types on the margins of the deposits. Additional analytical work is continuing on these drill holes, however initial inspection indicates the block model is performing well. The updated block model did not capture several narrow un-mineralized intrusions encountered in this drilling. These occurrences will be included when the model is modified and are expected to reduce the volume of potentially acid-generating waste rock.
Geotechnical Drilling
Nine geotechnical drill holes have been completed totaling 3,609 meters of drilling. The work focused on evaluating the material properties of fractures and faults on the planned pit high-walls. Results will be used to plan additional work for the Mitchell and Sulphurets deposits. Hydrogeological pump tests were abandoned for this season, in part due to the exceptionally dry weather.
Financial Results
During the three-month period ended September 30, 2018 Seabridge posted a net loss of $2.8 million ($0.05 per share) compared to a loss of $1.5 million ($0.03 per share) for the same period last year. During the 3 rd quarter, Seabridge invested $17.2 million in mineral interests, primarily at KSM and Iskut, compared to $9.6 million during the same period last year. At September 30, 2018, net working capital was $7.9 million compared to $19.6 million at December 31, 2017.
In November 2018, Seabridge secured a non-brokered private placement of 1,000,000 shares at $14.00 per share for gross proceeds of $14.0 million. The proceeds from the financing will be used to fund general working capital requirements and a 2019 drill program at the Company’s 100% owned Snowstorm Project located in Nevada. The private placement is expected to close on or about November 23, 2018.
On Behalf of the Board of Directors,
/S/ “Rudi P. Fronk”
Chairman and Chief Executive Officer
Toronto, Canada
November 14, 2018
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