Wednesday, June 10, 2009

Volume 3, Issue #49

Also in Today's Issue...

We're up over 1,000% 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 month, 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 company 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 what he had to say about 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 ? nearly 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, increasing its resources, and converting resources to reserves.

If you own Seabridge Gold, continue holding. 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

P.S. I recently put together a report on why you should own gold today and the three best ways to buy into the gold bull market. All three investment are easy to buy and have huge upside potential. To learn more, click here.

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