Fronk eyes majors to develop northwestern bonanza

Seabridge Gold’s KSM project is one of the world’s largest undeveloped deposits

Rudi Fronk’s Seabridge Gold owns one of the largest undeveloped gold projects in the world.

The KSM project comprises four large gold-copper porphyry deposits — Kerr, Sulphurets, Mitchell and the newest, Iron Cap — located in the “Golden Triangle” of northwestern B.C.

How big is KSM?

When ranked alongside established miners on the basis of gold reserves, the deposits rank far ahead of company totals for intermediate gold producers such as Yamana, Agnico-Eagle and New Gold.

KSM contains proven and probable reserves of 38.2 million ounces of gold, 10 billion pounds of copper, 190 million ounces of silver and 210 million pounds of molybdenum.

The challenge?

The deposits are located in the mountain wilds of remote B.C. and a mine would cost an estimated $5.3 billion to build, a big pill to swallow for all but the world’s largest miners. And many of those are still dealing with the after-effects of indigestion from costly, big-ticket purchases that didn’t work out when metals prices fell.

“It requires one of the largest mining companies in the world, in our view, to come in and do it right,” said Fronk, Seabridge’s chairman and CEO. “If I look at the landscape of potential partners for Seabridge and KSM, I’d say it’s probably less than 10 companies.

“It’s a small universe, which also makes it difficult to try and get the right transaction done.”

The federal government gave KSM its environmental stamp of approval last month (it already had provincial environmental approval).

A green light for the mine would be a major boost to employment: there would be 2,000 construction jobs and more than 1,000 annual direct jobs.

Developing KSM has been a long-term project for Fronk, a mining engineer who formed Seabridge in 1999 after coming to the conclusion that gold — then trading at US$260 an ounce — was undervalued. Fronk began assembling and developing gold properties, selling some along the way to finance development of the company’s flagship project.

The goal now, Fronk said, is to form a joint venture with a major that would be the operator and take over a majority interest in the project.

One recent development that expands the universe of potential suitors is the discovery of higher-grade zones beneath the Kerr and Iron Cap zones that have sparked interest among large base metals miners, according to Fronk.

Fronk said he has also fielded inquiries from Asian entities, which have taken an interest in partnering on North American gold projects.

Seabridge’s neighbour, Pretium Resources, is developing the high-grade Brucejack underground gold project and recently secured an $81-million financing from Zijin Mining, China’s largest gold producer.

The rising gold price also bodes well for Seabridge, Fronk said, since mergers and acquisitions tend to pick up in a rising gold environment. The price of gold has declined steadily since hitting a high of about US$1,900 an ounce in 2011, but has increased more than seven per cent this month, to US$1,293 an ounce.

On Monday, Seabridge announced it has formed a geotechnical review board to examine the company’s water storage dam and tailings management — an issue that came to the forefront last year with the failure of the tailings dam at Imperial Metals’ Mount Polley mine.

Fronk said the bear market in gold over the past four years reminds him of Seabridge’s formative years in 1999-2002, when gold was out of favour and traded for under US$325/oz.

“It’s almost time to start buying things again, if you believe gold is going higher again, which we do,” Fronk said.