Up 800% on My Favorite Gold Stock... Hundreds More to Come
By Dr. Steve Sjuggerud
Tuesday, May 19, 2009
We're up over 800% in shares of Seabridge Gold since I first recommended it to a few thousand subscribers back in 2005.
Even if you didn't buy back then, shares of Seabridge could easily double from here. Let me explain...
Last week, I spoke with Seabridge President Rudi Fronk. Seabridge has come a long way since I first recommended it. Back then, it was trading for less than $10 per ounce of gold in the ground. Gold was selling for around $650. You could hardly go wrong...
The idea had problems, though. Seabridge's gold was "uneconomic" to mine. In other words, it would have cost Seabridge more to mine the gold than the company could sell it for. The gold price had to rise by a few hundred dollars and Seabridge had to find more gold in the surrounding area to really make it worthwhile for a major gold mining company.
Since then, everything has gone right for Seabridge...
The price of gold has soared. And little Seabridge Gold has grown its gold resources exponentially. The company's KSM project is now the "largest undeveloped gold mine in the world, if you remove the projects that are more copper-dominated," according to Rudi. With 61 million ounces of gold in the ground and 11 billion pounds of copper, Seabridge is now "the largest gold deposit ever found in Canada."
At the current price of gold and the size of the deposit now, it is "economic." It's worth it to get the gold out of the ground.
This is a big deal... But the stock is still cheap. Seabridge is now trading for around $15 per ounce of gold in the ground. Even though the company has significantly more value, the shares aren't a whole lot more expensive than they were when I first recommended it, based on the dollars you pay for an ounce of gold in the ground.
Rudi is looking to 2010 to be Seabridge's "endgame." Seabridge will complete its pre-feasibility work then, which takes out all the guesswork for a potential acquirer. The ideal situation for us would be a simple buyout by a major gold compnay like Barrick or Newmont.
"The majors are up against a wall right now," Rudi says. "Majors are now actively looking for advanced-stage projects which provide a number of characteristics." Here's a sample of what the majors are looking for:
- Size. "Companies like Barrick and Newmont need size. KSM is about as big as it gets."
- A safe jurisdiction. "Canada is probably the best place to be to develop projects in today's world."
- Mine life – that's how long a mine will continue to produce. "Our current mine life is expected to be 30+ years... but that could increase."
- Low cash costs. "The average cost for majors is $400+ per ounce. KSM will be below $300 per ounce."
- Reasonable paybacks. "Majors want projects where they can get their money back in less than one-third of the mine's life. We're easily able to demonstrate that at current commodity prices."
If gold stays at current levels or higher, I expect someone will buy out Seabridge for at least $50 per share – twice the current price.
Hopefully, that will happen in 2010. In the meantime, Seabridge is busy dressing itself up for sale. It's been selling off "non-core" assets (raising $30 million), it's continuing to increase its resources, and its converting resources to reserves.
If you own Seabridge Gold, continue holding. If you took advantage of my initial recommendation, you could potentially make a 2,000% gain...
If you don't yet own shares and you're looking for an inexpensive way (yes, inexpensive... you're buying gold in the ground for $15 per ounce) to own gold with significant upside potential, consider buying Seabridge Gold today.
Your upside is roughly 100%. If the price of gold keeps going up, it's even higher than that.
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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ONE OF THE GREAT STOCK MARKET MOVES OF ALL TIME
Not many Americans saw it, but yesterday's trading produced one of the most amazing stock market moves of the last decade. Indian stocks, as a whole, jumped 17%. This is a year's worth of gains in just one day.
Why the jump? India just finished a major round of elections. Those elections favored people who believe in the sprit of free minds and free markets… rather than people who believe governments should rule and regulate every transaction in the country.
Thirty years ago, India's economy was hopeless. Entrepreneurs had to go through unbelievable amounts of red tape to get a business off the ground. Government regulations glued up the system to the point that folks could hardly go to the bathroom without filling out a form or talking to a bureaucrat. But things are changing here in a good way… as yesterday's giant move shows.
Bravo to India. As we mentioned in this "hedged trade" column, Asian countries are generally making things easier for the productive members of society to achieve their dreams. Europe and America are generally making things harder for their producers through high regulation, high taxes, and generous handouts to welfare slugs. Stay long Asia versus the West!
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Platinum and palladium prices could see a further significant recovery after last year's slump, according to Johnson Matthey, the precious metals refiner.
In its widely followed annual report on the platinum and palladium markets released on Monday to coincide a week of industry related events in London, Johnson Matthey said it expected platinum to trade between a low of $950 and a high of $1,350 a troy ounce over the next six months while palladium was forecast to trade between $180 and $280.
Worldwide automotive demand for palladium fell 3.6 per cent to 4.38m ounces last year but total palladium consumption saw a marginal increase of 0.2 per cent to 6.85m ounces in 2008.
Growth in China's jewellery market played a vital part in bolstering demand for both metals last year.
China's demand for palladium jewellery jumped 30 per cent last year to 650,000 ounces, pushing worldwide jewellery demand up 19.6 per cent to 855,0000 ounces.
– Financial Times
Forget gold. If you want to know how China is fleeing the dollar, look at copper, iron ore, and oil.
Last month, China imported record amounts of copper and iron ore. Oil imports increased 14% year-over-year. As Bloomberg reports:
"It's part of an overall desire to decrease its exposure to dollar assets," said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong…
China fears the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause "higher inflation and a weaker dollar," he said.
– The Daily Crux
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