Seabridge Gold (AMEX:SA)… Did you know this?


“Look around the table.  If you don’t see a sucker, get up, because you’re the sucker” – Amarillo Slim

Dreams of Gold vs Reality of Share Prices

Seabridge’s explicitly advertised and promoted investment premise is that it is a “call option” on the future price of gold.  Citron believes this premise is utterly false.
Aside from all the background noise about stock promotions, Seabridge investors invest in the stock because they hope it will rise in value as the price of gold rises.  As the company has told them, it is a levered play on gold.

But the price of Seabridge stock is not tied to the price of gold, it is tied only to the supply and demand for Seabridge shares.  That places shareholder returns squarely dependent not upon the price of gold, but upon the actions of management and insiders.  This is precisely why the past activities of Seabridge’s insiders are so troubling.  However, the proof is in the pricing.

If we look at the price of Seabridge stock over the last five years, we can see a huge run-up coincident with the bull market in 2007 when gold went from 700 an ounce to 1000, and also with Agoracom’s paid promotion of Seabridge stock.  But for the vast majority of current Seabridge investors who purchased the stock since 2007, their returns are negative relative to gold.

Citron believes the real factors behind these negative returns are the increasing dilution the stock experiences over time as insiders liquidate positions they acquired at very low prices, and more stock enters the public float.

Gold is up 15% – 20% over the last two years …

… but SA is down 20% or more.
(charts by )

Gold Fever?  Or just a cold stock promotion?

Much has been said about the history of Seabridge’s CEO/President Rudi Fronk and the gold company bankruptcies that lurk in his background.  Citron does not indulge in dredging up management background unless it is relevant to the issue at hand.  In this case, we find the information to be compelling because the only thing we can base this company on is the credibility of management.  There is neither revenue nor objective external data points that would allow investors to draw an independent conclusion about its value.

It is widely known that Rudi Fronk’s and James Anthony’s predecessor company to Seabridge was Greenstone Resources.  Big promises, but went bankrupt.  Who cares?  Please read on.

Fronk and Anthony were put into Greenstone by an operator named Ian Park. Mr. Park was the founder of Greenstone and seems to be the Third Musketeer in a group of deals that are unmentioned in the resumes of both Fronk and Anthony.

Prior companies of the Fronk and Anthony cadre:


Participants and roles


I LOV TV Entertainment Ian Park, President
Rudi Fronk and James Anthony directors
I Lov TV Link
Inlet Resources Ian Park, President
James Anthony director
Inlet Resources Link
Masuparia Gold Corp Ian Park, President
James Anthony director
Masapuria Gold Link
New Global Ventures Ian Park, President
Rudi Fronk and James Anthony directors
New Global Ventures Link
Borneo Gold Corp. * Ian Park, President
Rudi Fronk early stage investor.
Borneo Gold Link

* Borneo was particularly notorious because of the involvement of banned in BC stock promoter Wayne Wile.

“Wayne Wile, banned for three years in B.C. and jailed six months in Ontario over a decade ago, caught the attention of Canadian regulators when he worked at Mr. Park’s Borneo Gold in 1996 amid a massive stock run as Borneo made its debut on the Asian board of the TSX Venture Exchange’s predecessor, the Vancouver Stock Exchange.”

That’s five public companies … all gone.

And lastly, Mr. Ian Park was one of the earliest investors in Seabridge right before they bought the rights to the KSM project.
Link to Park’s early stage convertible shares in SA

What makes Mr. Park so interesting is that he holds the dubious distinction of being the only man in Citron’s archives who has been implicated in two separate and distinct companies … BOTH of which were halted by the SEC.

The first of these is Sedona Software (Rennaisance Mining), which claimed to have one of the biggest gold finds in the world back in 2003.  We later find out that Mr. Park was involved in one elaborate stock scam… and that he and his partners were ultimately sued by the SEC.

Mr. Park later headed a company call Sino Silver which was halted by the SEC in 2005 for accuracy of information and unlawful distribution of stock.

The one company that Seabridge’s management can claim to be a “success” is Arizona Star. This was bought in October of 2007, during the height of the recent gold rush. The company was sold mainly for its Cerro Casale project. Arizona took advantage of the window of opportunity that was given to them by panic in the gold markets.

Both Fronk and Anthony were on the board.

Yet, readers should note the following chilling outcome.  The initial feasibility study for Cerro Casale pegged development costs at $1.65 billion; it has now ballooned to over $4 billion. That does not prove the mine is unfeasible, it just tips the risk/reward scale enormously, demonstrating the huge risks that exist in metals mining between “estimates” and reality.  This is a likely reason that the M&A frenzy in Canadian junior miners has chilled.
This troubling track record should bring into clear focus the concerns Citron published regarding Seabridge’s aggressive paid stock promotion to retail investors, including television commercials touting “more gold ownership per share” as it states on the tagline of its website.  (Note:  Citron reiterates its belief that this claim is not legal under US Securites laws.)

Citron is wrong- we issue a mea culpa

In Citron’s initial report we mentioned that only Wall St. has been fooled by the Seabridge story.  We must correct that statement.  It seems like only a handful of investors (and those who bought the private placement) have been fooled.

For a company that says they one of the largest gold deposits in the world that is sitting right in North America – why is there no independent analyst coverage of them?
Consider the state of their analyst coverage.  Bloomberg lists 2 firms. One is Dahlman Rose & Co,,  who just picked up coverage on them 3 weeks ago, just 2 weeks before they did a placement for them …Chinese Wall anyone???

The other analyst listed is Singular Research???  Singular? They are not even members of FINRA — they are more of a paid promo firm.

So is this unusual?  We studied all 5 comparable dual listed Canadian/US Mining Firms by market capitalization.  This is what we found:

Company Market Cap Analysts
Gammon Gold 1.34 Billion 17
Northgate Minerals 904 Million 10
Aurizon Mines 729 Million 12
Frontier Dev Group 574 Million 6
Seabridge 869 Million Zero, none, nada

The bottom line here:  If SA owns a feasible mine, despite Rudi Fronk’s loudly and publicly peddling his prospects since 2007, then where is its partner?  It’s no secret in the industry, which is a very small community.  There simply is not any other valid data point investors can rely upon to value that prospect.
For you media fans, here is another view of those commercials…the shoots that ended up on the cutting room floor


It is the opinion of Citron research that Seabridge is a clear example of a mature stock promo:  the overt manipulation of public perception to sell shares of dubious value.  Its claim of leverage to the price of gold was never true; now that it has diluted and run its story, its share price is leveraged only to its ability to promote its shares.

With regard to selling or partnering its heavily touted mega-prospect KSM, there’s an old gambler’s cliché.  “Look around the table.  If you don’t’ see a sucker, get up, because you’re the sucker.”
Cautious investing to all