Seabridge Gold (Amex:SA) -Why the Majors are saying ‘No’ while Wall St. is saying ‘Yes’.


There are now hundreds of junior gold mining companies throughout the world, doing extensive drilling. It is really getting challenging to look at every project.  Best practices for investors are to stick to companies that have partnerships, earn-ins and drilling agreements with major mining companies.

However, there aren't many with zero gold reserves and a billion dollar market cap.

And then there's Seabridge Gold. (AMEX:SA)

Seabridge claims that its KSM prospect is sitting on "one of the five largest undeveloped gold projects in the world"…. sound good?  [  ] In this report, Citron will explore why no major mining companies have partnered with them and test the credibility of their claims.

Seabridge is a junior mining company whose stock has been jacked up since 2005 on a series of clever promotions and hype.  In the opinion of Citron it is all based upon a premise that is fraudulent to US investors.

While much has been published on Seabridge over the years, in a series of articles Citron will put forward the definitive piece of research that will prove what the major companies already know about Seabridge:  it is a bridge to nowhere.

The Big Kahuna – KSM

Seabridge acquired KSM from Placer Dome for just hundreds of thousand of dollar in stock in 2001.  This prospect had been owned and poked by many of the majors going back to 1961.  Enter Seabridge, which then enlists the following players, ups its estimates, pays some promoters and off to the races it goes.

Michael Lechner:  The Billion Dollar Man

The resource analysis of the Seabridge Gold's KSM project is headed by Michael Lechner of Resource Modeling Inc (RMI) of Tucson Arizona.  It is important to note that Seabridge has increased KSM's resource "estimates" by over 1300% during Lechner's engagement, even though they have only drilled only 40% of the holes on the project, which has been poked by many of the majors as early as 1961.  So who is RMI?  A picture is worth a 1000 words.

The address for Mr. Lechner’s operation on filings was 1960 W. Muirhead Loop, Tucson AZ.   We encourage shareholders to look at the office of RMI and see where these billion dollar claims are coming from.,-Tucson-AZ.—_rb/

Yes, this is the world headquarters of Resource Modeling Inc.

When analyzing a potential gold find, the feasibility study is as important as the resource estimate in determining the economic value of the resource.  There's lots of gold and other minerals in places where the cost of extraction simply renders it uneconomical.  Seabridge's reassuring message to investors describes how KSM is located in safe and predictable Canada, not some foreign country.  What it doesn't state is that the property is extremely remote and largely located under a glacier.  The capital investment needed to extract any gold from the site is daunting indeed – the price tag is in the billions.  Extraction would require them to drill miles-long underground tunnels just to gain access the site, plus hydroelectric dams and roads…and that's before establishing the mining and milling facilities.

The feasibility study for KSM was produced by a company named Moose Mountain.  There is not much record of Moose Mountain before 2007, as they went by their old name:  GR Technical Services.  GR was involved in one of the largest feasibility study flops ever in the gross underestimate of a notorious project called Galore Creek.  After shareholder lawsuits and serious damage to its reputation, GR did the obvious thing….they changed their name. 

In May of 2007, Novagold partnered with a Teck Cominco on a potentially huge mine – Galore Creek — based on work done by GR Technical.  In August of 07, GR Technical changed its operating name to Moose Mountain and in November of 07, the new feasibility study done by the big-business partner found that GR grossly underestimated costs at Galore Creek – so much so that the project was cancelled.  Shares of Novagold tanked — but who cares?  By then, they were already Moose Mountain……needless to say Lechner's estimates were also involved in this debacle.

The possible reason Seabridge has not found a partners is that the majors are becoming a lot more skeptical of feasibility studies by juniors and their one-man shop consultants, as many large projects have been misrepresented during the recent gold rush.

Abullah Arik- Is this kosher??

In their most recent offering, Seabridge stated that it was raising money in order to develop their project at Courageous Lake (easier than going back to the KSM story).  The study at Courageous Lake was done according to filings by “Michael Lechner and Abdullah Arik who are both independent of Seabridge.”

But wait …we have never seen Arik work with Lechner before — only on this project.  So who does he really work for??  Concurrently in other SEC filings we see that Arik’s real employer is Mintec, where he still works.  Mintec’s CEO is none other than Fred Banfield — a director and a significant shareholder of Seabridge.  This type of shenanigan is normally reserved for OTC stocks … but if you don't get caught, that makes it legal?  The National Instrument 43-101 is a strict guideline for how public companies can disclose scientific and technical information about mineral projects on bourses supervised by the Canadian Securities Administrators.  NI 43-101 clearly describes independent qualified persons and when they are required.  Here is the link to the regulations:

The Promotion

Seabridge claims that it is has more gold ownership per share than any listed company.  This claim is at the basis of their whole promotion of Seabridge's stock.  This claim is ILLEGAL.

US Securities law strictly specifies the rules under which companies can claim the asset value of in-the-ground resources Yet, on its website, and promotional TV advertisements produced for the company and broadcast on US investors, it has flaunted the law in the most misleading way imaginable, without any disclaimer whatsoever.

Seabridge's "proven reserves", the only term legal to claim value of an in-ground resource to US investors, is zero.  This is not a technicality!  The company has never done sufficient work either on the resource (asset) or feasibility (cost) side to claim extractable resources with certainty to meet the legal standard.   

The company has been so blatant in committing this deception on investors that they even took a commercial on CNBC (so typical of a stock promotion) making that misleading and fraudulent claim.

Due to the lack of independent analyst coverage, Seabridge has been largely dependent on promotional companies to get stock sold to investors.  One of their largest promoters has been Stansberry Investment Research, who has written a multitude of promotions on Seabridge for the past 4 years.

It should be noted that the SEC has sued Porter Stansberry, and its parent Agora for engaging and an “ongoing scheme to defraud public investors by disseminating false information in several internet newsletters…”

Seabridge's promotional claim extends to EVERY single piece of marketing material put forward by the company which reiterates that one line so prevalent that it is the company's tag line “More Gold Ownership Per Share”This line is false and fraudulent by its very nature.  Ever since people were selling shares in the Brooklyn Bridge, securities laws have required companies to demonstrate that an asset is monetizable to claim an asset value.  Seabridge's corporate presentation of itself has gone for years in laughing in the regulators faces as they claim ownership in something that is nothing more than an inferred resource.  CEO Rudi Fronk knows what the company is doing is wrong as he told Forbes Magazine in 2007 that the SEC has “forced” the company to state that they have no knows reserves.

With that, we ask Wall St. and the SEC, ”How many companies do you know whose corporate slogan is an illegal claim to investors?”

As of now, no one has “bought” this story except shareholders as they still don’t have a JV, buyout, or any respectable Wall St. coverage.

Is the gig finally up?

Seabridge CEO Rudi Fronk and the company's mouthpieces have for years talked about a partnership or buyout.  It goes back to as far as 2006 when gold was in the $600s per ounce and Agora touted Seabridge in June of 2006:

“It plans to partner with a major mining firm, who will take the financial risk. Seabridge Gold couldn’t identify who that partner is, but it said it has confidentiality agreements with four majors for this project (sic) The major mining firms wouldn’t be interested unless this is potentially a major gold mine.”

Fronk also told Bloomberg in 2008 that he seeks a sale or a partnership with another gold company.

And in a last ditch effort before he had to go to the street for more money, Fronk begs in in 2009  “Somebody Take Us Out”

We are now in 2010 — and still no partner or buyout.  This leads us to believe that the majors think the same thing as Citron — that the resource at KSM is uneconomical regardless of what the claims company might tell shareholders.  Please, there is no reason for the company  or any of their mouth pieces to go into the various media outlets and defend the company….all they have to do is get a partner….we won’t be holding our breaths.

We'll have more to say about this story at is unfolds.