– By Alberto Abaterusso
If retail investors’ predictions are right, 2019 will be an amazing year for gold. If you have a bullish gold sentiment for the coming year, I suggest you look for publicly traded gold producers with stock prices that are more volatile than the precious metal.
Seabridge Gold Inc. (SA) may be an appealing opportunity.
While gold bullion has only gained 1% this year, bringing the cumulative average to $1,268.50 an ounce as of Dec. 28, Seabridge Gold has climbed over 10%.
The stock has also beaten the VanEck Vectors Gold Miners Exchange-Traded Fund (GDX) by 25% so far this year. The ETF is a vehicle through which investors can gain exposure to precious metals through investments in the gold industry.
Seabridge Gold is a Toronto-based development-stage company. It acquires and explores gold ore properties located in North America that would be accretive in terms of resources. The company is also interested in exploring copper and silver resources, but gold remains its main target. The exploration projects with potential to upgrade resources to the upper category of mineral reserves are financed by the company.
When these projects reach production stage, they are sold to other established producers or joint ventured with the most well-known companies in the industry for mine construction and production. The company does this to limit risk and dilute shares in order to optimize gold ownership. If the company had to build the mine itself, it would have to enact equity issuance, which would increase the volume of shares outstanding and reduce the value of each share in terms of represented gold reserves.
The company has total proven and probable reserves of 45.3 million ounces of gold, 10,155 million pounds of copper, 183 million ounces of silver and of 207 million pounds of molybdenum.
The miner holds a 100% interest in the Kerr-Sulphurets-Mitchell in British Columbia, Canada, which is one of the world’s largest undeveloped gold projects with proven and probable reserves totalling 38.8 million ounces of gold and 10.2 billion pounds of copper. Estimates are based on a preliminary feasibility study issued on Sept. 19, 2016. The company has received all the necessary environmental approvals for the development of the project.
The company also owns the Iskut properties, which are located in British Columbia, and the Courageous Lake project, which is situated in the northwest territories of Canada.
The existence of some catalysts, such as higher volume of reserves per share and the obtainment of critical production permits which make the projects more attractive for sale or partnering, may trigger stock appreciation in a rising gold market.
These catalysts can be acquired on the New York Stock Exchange at a price of $12.5 per share, which is not cheap because, as you can see below, the stock is trading above the 200-day simple moving average line and over the 50- and 100-day lines.
The 14-day relative strength index of 54.38 suggests the stock is neither oversold nor overbought. The closing share price on Friday was 22.5% off the 52-week low of $10.2 and 22.4% below the 52-week high of $15.3. The price-book ratio is 2.65 compared to an industry median of 1.74.
Wall Street recommends buying the stock with an average target price of $17.96 per share.
During the third quarter, Arnold Van Den Berg reduced his position by 2.71% to 1,101,648 shares.
Disclosure: I have no positions in any securities mentioned in this article.
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This article first appeared on GuruFocus.