Form 20-F
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
__
|
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
OR
|
XX
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 for the fiscal year ended December 31, 2005
|
|
OR
|
__
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
For
the transition period from __________ to
_______________
|
|
OR
|
__
|
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Date
of event requiring this shell company report ______________
For
the transition period from __________ to
_______________
|
Commission
file number: 0-50657
Seabridge
Gold Inc.
(Exact
name of Registrant as specified in its charter)
Canada
(Jurisdiction
of incorporation or organization)
172
King Street East, 3rd Floor, Toronto, Ontario CANADA M5A
1J3
(Address
of principal executive offices)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act.
Title
of each class
|
Name
of each exchange on which registered
|
Common
Stock, no par value
|
American
Stock Exchange
|
Common
Stock, no par value
|
TSX
Venture Exchange
|
Securities
registered or to be registered pursuant to Section 12(g) of the
Act.
N/A
(Title
of
Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act.
None
Indicate
the number of outstanding shares of each of the issuer's classes of capital
or
common stock as of the close of the period covered by the annual
report: 32,106,685
Indicate
by check mark if the registrant is a well-known seasoned issuer as defined
in
Rule 405 of the Securities Act
___
Yes xx No
If
this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of
the Securities Exchange Act of 1934.
___
Yes xx
No
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. xx Yes __ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer,, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
one):
Large
accelerated filer ___ Accelerate filer ___ Non-accelerated filer
_xx
Indicate
by check mark which financial statement item the registrant has elected
to follow.
xx Item
17 ____ Item 18
If
this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
___
Yes xx No
(APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS)
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act
of 1934 subsequent to the distribution of securities under a plan confirmed
by a
court.
___
Yes __ No
Seabridge
Gold Inc.
Form
20-F
Annual Report
|
|
PAGE
|
|
|
|
Item
1.
|
|
9
|
Item
2.
|
|
10
|
Item
3.
|
|
10
|
Item
4
|
|
20
|
Item
4A
|
|
63
|
Item
5.
|
|
63
|
Item
6.
|
|
67
|
Item
7.
|
|
77
|
Item
8.
|
|
78
|
Item
9.
|
|
78
|
Item
10.
|
|
80
|
Item
11.
|
|
89
|
Item
12.
|
|
90
|
|
|
|
|
|
|
|
|
|
Item
13.
|
|
90
|
Item
14.
|
|
90
|
Item
15.
|
|
90
|
Item
16A.
|
|
91
|
Item
16B.
|
|
91
|
Item
16C.
|
|
91
|
Item
16D.
|
|
91
|
Item
16E.
|
|
91
|
|
|
|
|
|
|
|
|
|
Item
17.
|
|
92
|
Item
18.
|
|
92
|
Item
19.
|
|
92
|
METRIC
EQUIVALENTS
For
ease
of reference, the following factors for converting metric measurements into
imperial equivalents are provided:
To
Convert from Metric
|
To
Imperial
|
Multiply
by
|
|
|
|
Hectares
|
Acres
|
2.471
|
Meters
|
Feet
(ft.)
|
3.281
|
Kilometers
(km)
|
Miles
|
0.621
|
Tonnes
|
Tons
(2000 pounds)
|
1.102
|
Grams/tonne
|
Ounces
(troy/ton)
|
0.029
|
GLOSSARY
OF TERMS
S.E.C
Industry Guide
|
National
Instrument 43-101
|
|
|
Reserve:
That part of a mineral deposit which could be economically
and
legally extracted or produced at the time of the reserve determination.
The United States Securities and Exchange Commission requires a final
or
full Feasibility Study to support either Proven or Probable Reserves
and
does not recognize other classifications of mineralized
deposits.
|
Mineral
Reserve: The economically mineable part of a Measured or
Indicated Mineral Resource demonstrated by at least a Preliminary
Feasibility study. This study must include adequate information on
mining,
processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can
be
justified.
|
|
|
Proven
Reserves: Reserves for which a quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes;
grade
and/or quality are computed from the results of detailed sampling
and
measurement are spaced so closely and the geologic character is so
well
defined that size, shape, depth, and mineral content of reserves
are well
established.
|
Proven
Mineral Reserve: The economically mineable part of a Measured
Mineral Resource demonstrated by at least a Preliminary Feasibility
study.
This study must include adequate information on mining, processing,
metallurgical, economic and other relevant factors that demonstrate,
at
the time of reporting, that economic extraction is justified.
|
|
|
Probable
Reserves: For which quantity and grade and/or quality are
computed from information similar to that used for proven reserves,
but
the sites for inspection, sampling and measurement are farther apart
or
are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven reserves, is high enough to assume continuity
between points of observation.
|
Probable
Mineral Reserve: The economically mineable part of an indicated,
and in some circumstances, a Measured Mineral Resource, demonstrated
by at
least a Preliminary Feasibility Study. This study must include adequate
information on mining, processing, metallurgical, economic and other
relevant factors that demonstrate, at the time of reporting, that
economic
extraction can be justified.
|
Adularia
- A colorless, moderate- to low-temperature variety of orthoclase
feldspar typically with relatively high barium content.
Andesite
- A dark-colored, fine-grained extrusive rock that, when porphyritic,
contains phenocrysts composed primarily of zoned sodic plagioclase and one
or
more of the mafic minerals.
Argulite
- A variety of asphaltic sandstone
Arkose
- A feldspar-rich sandstone, typically coarse-grained and pink or
reddish, that is composed of angular to subangular grains that may be either
poorly or moderately well sorted; usually derived from the rapid disintegration
of granite or granitic rocks, and often closely resembles granite.
Basalt
- A general term for dark-colored mafic igneous rocks, commonly
extrusive but locally intrusive
Breccia
- A rock in which angular fragments are surrounded by a mass of fine-grained
minerals.
Caldera
- A large, basin-shaped volcanic depression, more or less circular,
the
diameter of which is many times greater than that of the included vent or
vents.
Carbonate
- A sediment formed by the organic or inorganic precipitation from
aqueous solution of carbonates of calcium, magnesium, or iron; e.g., limestone
and dolomite
Cut-off
grade - the lowest grade of mineralized material that qualifies as
reserve in a deposit. It is also used to estimate mineral reserves by including
in the estimates only those assays above the cut-off grade.
Cut
Value - Applies to assays that have been reduced to a statistically
determined maximum to prevent erratic high values from inflating the
average.
Diamond
Drilling - a type of rotary drilling in which diamond bits are used as
the rock-cutting tool to produce a recoverable drill core sample of rock for
observation and analysis.
Diorite
- An intrusive igneous rock.
Drift
- A horizontal underground opening that follows along the length of a vein
or
rock formation.
Environmental
Baseline Study - a geotechnical study that monitors and establishes the
numerous naturally occurring base levels present within a specific
area/environment. These can include; water chemistry, flora and
fauna.
Epithermal
- low temperature hydrothermal process or product.
Fault
- a fracture or break in rock along which there has been movement.
Feasibility
Study - is a definitive study of the viability of a mineral project by
a qualified professional which defines: (1) mining methods, pit configuration,
mine scheduling, mine equipment and all related costing, (2) method of mineral
processing and all related plant, equipment and costing, (3) necessary
determination of all infrastructure required and relevant costs and (4) all
requirements of government and markets for mine operation. A definitive
financial analysis of the mineral project taking into consideration all relevant
factors, which will establish the presence of a Mineral Reserve and the details
of its economic viability.
Geochemistry
- The study of the chemical properties of rocks.
Geophysical
Survey - A scientific method of prospecting that measures the physical
properties of rock formations. Common properties investigated include magnetism,
specific gravity, electrical conductivity and radioactivity.
Grade
- The metal content of rock with precious metals, grade can be expressed as
troy
ounces or grams per tonne of rock.
Granite
- any holocrystalline, quartz-bearing plutonic rock.
Granitic
- Pertaining to or composed of granite.
Hydrothermal
- the products or the actions of heated waters in a rock mass such as a mineral
deposit precipitating from a hot solution.
Indicated
Resource - in reference to minerals means quantity and grade and (or)
quality are computed from information similar to that used for resources, but
the sites for inspection, sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for resources, is high enough to assume continuity between points of
observation.
Inferred
Resource - in reference to minerals, means estimates are based on an
assumed continuity beyond measured and (or) indicated resources, for which
there
is geological evidence. Inferred resources may or may not be supported by
samples or measurements.
Intrusion;
Intrusive - molten rock that is intruded (injected) into spaces that
are created by a combination of melting and displacement.
Kriging
- In the estimation of ore reserves by geostatistical methods, the use of a
weighted, moving-average approach both to account for the estimated values
of
spatially distributed variables, and also to assess the probable error
associated with the estimates.
Lode
- A mineral deposit consisting of a zone of veins, veinlets,
disseminations, or planar breccias; a mineral deposit in consolidated rock
as
opposed to a placer deposit.
Measured
Resources - in reference to minerals, means a quantity is computed from
dimensions revealed in outcrops, trenches, workings, or drill holes; grade
and
(or) quality are computed from the results of detailed sampling. The sites
for
inspection, sampling, and measurement are spaced so closely and the geological
character is so well defined that size, shape, depth and mineral content of
the
resource are well established.
Monzonite
- A granular plutonic rock containing approx. equal amounts of
orthoclase and plagioclase, and thus intermediate between syenite and diorite.
Quartz is minor or absent.
Net
Smelter Return Royalty/ NSR - A phrase used to describe a royalty
payment made by a producer of metals based on gross metal production from the
property, less deduction of certain limited costs including smelting, refining,
transportation and insurance costs.
Patented
- A claim to which a patent has been secured from the U.S. Government,
in compliance with the laws relating to such claims.
Placer
- A deposit of sand or gravel that contains particles of gold, ilmenite,
gemstones, or other heavy minerals of value. The common types are stream gravels
and beach sands.
Porphyry
- Any igneous rock in which relatively large crystals are set in a fine-grained
matrix of rock.
Prefeasability
Study - is a comprehensive study of the viability of a mineral project
that has advanced to a stage where the mining method, in the case of underground
mining, or the pit configuration, in the case of an open pit, has been
established, and where an effective method of mineral processing had been
determined. This Study must include a financial analysis based on reasonable
assumptions of technical engineering, operating, and economic factors, which
are
sufficient for a Qualified Person acting reasonably, to determine if all or
part
of the Mineral Resource may be classified as a Mineral Reserve.
Pyrite
- an iron sulphide mineral (FeS2), the most common naturally
occurring sulphide mineral.
Quartz
- crystalline silica; often forming veins in fractures and faults within
older
rocks.
Quartz
Monzonite - a coarse grained, quartz rich igneous rock usually
occurring as a smaller rock mass associated with major granitic
bodies.
Raise
- A vertical or inclined underground working that has been excavated
from the bottom upward.
Reclamation
- Restoration of mined land to original contour, use, or
condition.
Resource
- Under the Canadian Institute of Mining (“CIM”) standards, Mineral Resource is
a concentration or occurrence of natural, solid, inorganic or fossilized organic
material in or on the earth’s crust in such form and quantity and of such a
grade or quality that it has reasonable prospects for economic extraction.
The
location, quantity, grade, geological characteristics and continuity of a
Mineral Resource are known, estimated or interpreted from specific geological
evidence and knowledge.
A
mineral
resource estimate is based on information on the geology of the deposit and
the
continuity of mineralization. Assumptions concerning economic and operating
parameters, including cut-off grades and economic mining widths, based
on factors typical for the type of deposit, may be used if these factors have
not been specifically established for the deposit at the time of the mineral
resource estimate. A mineral resource is categorized on the basis of the degree
of confidence in the estimate of quantity and grade or quality of the deposit,
as follows:
Measured
Mineral Resource: Under CIM standards, a Measured Mineral Resource is
that part of a Mineral Resource for which quantity, grade or quality, densities,
shape, physical characteristics are so well established that they can be
estimated with confidence sufficient to allow the appropriate application of
technical and economic parameters, to support production planning and evaluation
of the economic viability of the deposit. The estimate is based on detailed
and
reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings
and drill holes that are spaced closely enough to confirm both geological and
grade continuity.
Indicated
Mineral Resource: Under CIM standards, an Indicated Mineral Resource is
that part of a Mineral Resource for which quantity, grade or quality, densities,
shape and physical characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic
parameters, to support mine planning and evaluation of the economic viability
of
the deposit. The estimate is based on detailed and reliable exploration and
testing information gathered through appropriate techniques from locations
such
as outcrops, trenches, pits, workings and drill holes that are spaced closely
enough for geological and grade continuity to be reasonably
assumed.
Inferred
Mineral Resource: Under CIM standards, an Inferred Mineral Resource is
that part of a Mineral Resource for which quantity and grade or quality can
be
estimated on the basis of geological evidence and limited sampling and
reasonably assumed, but not verified, geological and grade continuity. The
estimate is based on limited information and sampling gathered through
appropriate techniques from such as outcrops, trenches, pits, workings and
drill
holes.
Rhyolite
- A group of extrusive igneous rocks, typically porphyritic and
commonly exhibiting flow texture, with phenocrysts of quartz and alkali feldspar
in a glassy to cryptocrystalline groundmass; also, any rock in that group;
the
extrusive equivalent of granite.
Sedimentary
- Formed by the deposition of sediment or pertaining to the process of
sedimentation.
Sediments
- Solid fragmental material that originates from weathering of rocks
and is transported or deposited by air, water, or ice, or that accumulates
by
other natural agents, such as chemical precipitation from solution or secretion
by organisms, and that forms in layers on the Earth's surface at ordinary
temperatures in a loose, unconsolidated form; e.g., sand, gravel, silt, mud,
alluvium.
Sericite
- A fine-grained potassium mica found in various metamorphic rocks.
Silification
- the in situ alteration of a rock, which involves an increase in the proportion
of silica minerals.
Trenching
- the process of exploration by which till is removed from a trench cut from
the
earth’s surface.
Tuff
- A general term for all consolidated pyroclastic rocks.
Unpatented
Claim - Mining claim to which a deed from the U.S. Government has
not been received. A claim is subject to annual assessment work, to maintain
ownership.
Vein
- a thin, sheet-like, crosscutting body of hydrothermal mineralization,
principally quartz.
Volcanics
- those originally molten rocks, generally fine grained, that have
reached or nearly reached the Earth’s surface before solidifying.
Item
1. Identity of Directors, Senior Management and
Advisers
A. Directors
and Senior Management
Table
No.
1
Company
Directors and Senior Officers
As
of
March 15, 2006
Name
|
Position
|
Business
Address
|
|
|
|
James
Anthony
|
Chairman
and Director
|
172
King Street East, 3rd Floor,
Toronto,
Ontario M5A 1J3
Canada
|
|
|
|
Rudi
Fronk
|
President,
Chief
Executive Officer and Director
|
172
King Street East, 3rd Floor,
Toronto,
Ontario M5A 1J3
Canada
|
|
|
|
Frederick
Banfield
|
Director
|
3544
E. Fort Lowell,
Tucson,
Arizona 85716
|
|
|
|
William
Calhoun
|
Director
|
P.O.
Box 90
Silverton,
Idaho 83867
|
|
|
|
Thomas
Dawson
|
Director
|
736
O’Connor Drive
Toronto,
Ontario M4C 3A9
Canada
|
|
|
|
Henry
Fenig
|
Director
|
Suite
250, BCE Place,
181
Bay Street,
Toronto,
Ontario M5J 2T3
Canada
|
|
|
|
Louis
J. Fox
|
Director
|
3200
North Ocean Blvd, #2410
Fort
Lauderdale, Florida 33308
|
|
|
|
Eliseo
Gonzalez-Urien
|
Director
|
10911
Corp Ranch Rd.
Ashland,
Oregon 95720
|
|
|
|
William
Threlkeld
|
Senior
Vice President
|
172
King Street East, 3rd Floor,
Toronto,
Ontario M5A 1J3
Canada
|
|
|
|
Roderick
Chisholm
|
Chief
Financial Officer and Corporate Secretary
|
172
King Street East, 3rd Floor,
Toronto,
Ontario M5A 1J3
Canada
|
B. Advisers
Not
Applicable
C. Auditors
The
Company’s auditor is KPMG LLP, Chartered Accountants, of Suite 3300 Commerce
Court West, Toronto, Ontario, Canada. KPMG was initially appointed on June
4,
2002 for the fiscal year ending December 31, 2002.
Item
2. Offer Statistics
and Expected Timetable
Not
Applicable
As
used
within this Annual Report, the terms “Seabridge”, “the Company”, “Issuer” and
“Registrant” refer collectively to Seabridge Gold Inc, and depending on the
context, its predecessors, subsidiaries and affiliates.
All
currency figures stated herein are in Canadian dollars, unless otherwise
noted.
A. Selected
Financial Data
The
selected financial data of the Company for the Years Ended December 31, 2005,
December 31, 2004 and December 31, 2003 was derived from the financial
statements audited by KPMG LLP, Chartered Accountants, as indicated in its
audit
report which is included elsewhere in this Annual Report. The selected financial
data for the years ended December 31, 2002 and December 31, 2001 was derived
from the audited financial statements of the Company which are not included
in
this Report.
The
selected financial data should be read in conjunction with the financial
statements and other financial information included elsewhere in the Annual
Report.
The
Company has not declared any dividends on its common shares since incorporation
and does not anticipate that it will do so in the foreseeable future. The
present policy of the Company is to retain future earnings for use in its
operations and the expansion of its business.
Table
No.
2 is derived from the financial statements of the Company, which have been
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with US GAAP, except as disclosed
in
a footnote to the financial statements.
Table
No.
2
Selected
Financial Data
($’s
in
000, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Year
|
|
Year
|
|
Year
|
|
Year
|
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
|
12/31/05
|
|
12/31/04
|
|
12/31/03
|
|
12/31/02
|
|
12/31/01
|
|
Interest
Income
|
|
$
|
135
|
|
$
|
83
|
|
$
|
107
|
|
$
|
85
|
|
$
|
24
|
|
Net
Loss
|
|
$
|
1,157
|
|
$
|
1,226
|
|
$
|
1,338
|
|
$
|
1,630
|
|
$
|
456
|
|
Net
Loss Per Share
|
|
$
|
0.04
|
|
$
|
0.04
|
|
$
|
0.05
|
|
$
|
0.10
|
|
$
|
0.04
|
|
Dividends
Per Share
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Weighted
Average Shares (000)
|
|
|
30,682
|
|
|
28,876
|
|
|
26,191
|
|
|
16,212
|
|
|
12,600
|
|
Working
Capital
|
|
$
|
10,603
|
|
$
|
4,220
|
|
$
|
1,886
|
|
$
|
3,819
|
|
$
|
2,582
|
|
Mineral
Properties
|
|
$
|
24,395
|
|
$
|
20,999
|
|
$
|
16,635
|
|
$
|
9,018
|
|
$
|
2,977
|
|
Long-Term
Debt
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
828
|
|
$
|
2,009
|
|
Shareholder’s
Equity
|
|
$
|
35,385
|
|
$
|
25,703
|
|
$
|
19,154
|
|
$
|
12,052
|
|
$
|
3,781
|
|
Total
Assets
|
|
$
|
37,085
|
|
$
|
27,172
|
|
$
|
22,869
|
|
$
|
14,143
|
|
$
|
6,977
|
|
US
GAAP Net Loss
|
|
$
|
5,127
|
|
$
|
6,671
|
|
$
|
5,255
|
|
$
|
3,236
|
|
$
|
1,697
|
|
US
GAAP Loss Per Share
|
|
$
|
0.17
|
|
$
|
0.23
|
|
$
|
0.20
|
|
$
|
0.20
|
|
$
|
0.13
|
|
US
GAAP Weighted Average Shares (000)
|
|
|
30,682
|
|
|
28,876
|
|
|
26,191
|
|
|
16,212
|
|
|
12,600
|
|
US
GAAP Equity
|
|
$
|
19,727
|
|
$
|
13,616
|
|
$
|
12,132
|
|
$
|
9,044
|
|
$
|
2,379
|
|
US
GAAP Total Assets
|
|
$
|
21,848
|
|
$
|
15,287
|
|
$
|
15,756
|
|
$
|
11,026
|
|
$
|
5,575
|
|
US
GAAP Mineral Properties
|
|
$
|
9,159
|
|
$
|
9,113
|
|
$
|
9,522
|
|
$
|
5,901
|
|
$
|
1,576
|
|
In
this
Annual Report, unless otherwise specified, all dollar amounts are expressed
in
Canadian Dollars (CDN$). The Government of Canada permits a floating exchange
rate to determine the value of the Canadian Dollar against the U.S. Dollar
(US$).
Table
No.
3 sets forth the rate of exchange for the Canadian Dollar at the end of the
five
most recent fiscal periods ended December 31st, the average rates for
the period, and the range of high and low rates for the period. Table No. 3
also
sets forth the rate of exchange for the Canadian Dollar at the end of the 12
most recent fiscal quarters, and the range of high and low rates for these
periods.
For
purposes of this table, the rate of exchange means the noon buying rate in
New
York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York. The table sets forth the
number of Canadian dollars required under that formula to buy one U.S. Dollar.
The average rate means the average of the exchange rates on the last day of
each
month during the period.
Table
No.
3
Canadian
Dollar/US Dollar
|
|
Average
|
|
High
|
|
Low
|
|
Close
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended 12/31/05
|
|
$
|
1.21
|
|
$
|
1.27
|
|
$
|
1.15
|
|
$
|
1.17
|
|
Year
Ended 12/31/04
|
|
$
|
1.30
|
|
$
|
1.39
|
|
$
|
1.18
|
|
$
|
1.20
|
|
Year
Ended 12/31/03
|
|
$
|
1.39
|
|
$
|
1.58
|
|
$
|
1.29
|
|
$
|
1.29
|
|
Year
Ended 12/31/02
|
|
$
|
1.57
|
|
$
|
1.61
|
|
$
|
1.51
|
|
$
|
1.52
|
|
Year
Ended 12/31/01
|
|
$
|
1.55
|
|
$
|
1.60
|
|
$
|
1.49
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended 12/31/05
|
|
$
|
1.17
|
|
$
|
1.19
|
|
$
|
1.15
|
|
$
|
1.17
|
|
Three
Months Ended 9/30/05
|
|
$
|
1.19
|
|
$
|
1.24
|
|
$
|
1.16
|
|
$
|
1.16
|
|
Three
Months Ended 6/30/05
|
|
$
|
1.24
|
|
$
|
1.27
|
|
$
|
1.21
|
|
$
|
1.23
|
|
Three
Months Ended 3/31/05
|
|
$
|
1.23
|
|
$
|
1.23
|
|
$
|
1.20
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended 12/31/04
|
|
$
|
1.22
|
|
$
|
1.27
|
|
$
|
1.18
|
|
$
|
1.20
|
|
Three
Months Ended 9/30/04
|
|
$
|
1.31
|
|
$
|
1.33
|
|
$
|
1.26
|
|
$
|
1.31
|
|
Three
Months Ended 6/30/04
|
|
$
|
1.36
|
|
$
|
1.39
|
|
$
|
1.31
|
|
$
|
1.34
|
|
Three
Months Ended 3/31/04
|
|
$
|
1.32
|
|
$
|
1.34
|
|
$
|
1.27
|
|
$
|
1.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended 12/31/03
|
|
$
|
1.30
|
|
$
|
1.35
|
|
$
|
1.29
|
|
$
|
1.29
|
|
Three
Months Ended 9/30/03
|
|
$
|
1.38
|
|
$
|
1.41
|
|
$
|
1.34
|
|
$
|
1.35
|
|
Three
Months Ended 6/30/03
|
|
$
|
1.39
|
|
$
|
1.48
|
|
$
|
1.33
|
|
$
|
1.36
|
|
Three
Months Ended 3/31/03
|
|
$
|
1.50
|
|
$
|
1.58
|
|
$
|
1.47
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Capitalization
and Indebtedness
Not
applicable
C. Reasons
for the Offer and Use of Proceeds
Not
applicable
D. Risk
Factors
An
investment in the Common Shares of the Company must be considered speculative
due to the nature of the Company’s business and the present stage of exploration
of its non-producing mineral properties. In particular, the following risk
factors apply:
Risks
Associated with Mineral Exploration
The
Company is Involved in the Resource Industry which is Highly Speculative and
has
Certain Inherent Exploration Risks which Could have a Negative Effect on the
Company’s Operations
Resource
exploration is a speculative business, characterized by a number of significant
risks including, among other things, unprofitable efforts resulting not only
from the failure to discover mineral deposits but also from finding mineral
deposits which, though present, are insufficient in quantity and quality to
return a profit from production. The marketability of minerals acquired or
discovered by the Company may be affected by numerous factors which are beyond
the control of the Company and which cannot be accurately predicted, such as
market fluctuations, the proximity and capacity of milling facilities, mineral
markets and processing equipment, and such other factors as government
regulations, including regulations relating to royalties, allowable production,
importing and exporting of minerals, and environment protection, the combination
of which factors may result in the Company not receiving an adequate return
on
investment capital.
The
Company’s Operations Contain Significant Uninsured Risks which Could Negatively
Impact Profitability as the Company Maintains No Insurance Against its
Operations
The
Company’s exploration of its mineral properties contain certain risks, including
unexpected or unusual operating conditions including rock bursts, cave-ins,
flooding, fire and earthquakes which could adversely affect operations and
may
result in liabilities.
The
Company currently maintains no insurance against its properties or operations
and may decide to not take out any such insurance in the future. If such
liabilities arise, they could reduce or eliminate the Company’s assets and
shareholder equity as well as result in increased costs and a decline in the
value of the Company’s securities.
The
Company Has No Known Reserves and No Economic Reserves May Exist on Its
Properties Which Would have a Negative Effect on the Company’s Operations and
Valuation
Despite
exploration work on its mineral claims, no known bodies of commercial ore or
economic deposits have been established on any of the Company’s mineral
properties. In addition, the Company is at the exploration stage on all of
its
properties and substantial additional work will be required in order to
determine if any economic deposits occur on the Company’s properties. Even in
the event commercial quantities of minerals are discovered, the exploration
properties might not be brought into a state of commercial production. Finding
mineral deposits is dependent on a number of factors, not the least of which
is
the technical skill of exploration personnel involved. The commercial viability
of a mineral deposit once discovered is also dependent on a number of factors,
some of which are particular attributes of the deposit, such as size, grade
and
proximity to infrastructure, as well as metal prices. Most of these factors
are
beyond the control of the entity conducting such mineral exploration. The
Company is an exploration stage company with no history of pre-tax profit and
no
income from its operations. There can be no assurance that the Company’s
operations will be profitable in the future.
The
Company Has Not Surveyed Any of Its Properties and the Company Could Lose Title
and Ownership of Its Properties which would have a Negative Effect on the
Company’s Operations and Valuation
The
Company has only done a preliminary legal survey of the boundaries of any of
these properties, and therefore, in accordance with the laws of the
jurisdictions in which these properties are situated, their existence and area
could be in doubt. The Company has not obtained formal title reports on any
of
its properties and title may be in doubt. If title is disputed, the Company
will
have to defend its ownership through the courts. In the event of an adverse
judgment, the Company would lose its property rights.
The
Mining Industry is Highly Competitive which could Restrict the Company’s
Growth
The
Company competes with other corporations that may have greater resources. Such
corporations could outbid the Company for potential projects or produce minerals
at lower costs which would have a negative effect on the Company’s
operations.
Mineral
Operations are Subject to Market Forces Outside of the Company’s Control which
could Negatively Impact the Company’s Operations
The
marketability of minerals is affected by numerous factors beyond the control
of
the entity involved in their mining and processing. These factors include market
fluctuations, government regulations relating to prices, taxes, royalties,
allowable production, import, exports and supply and demand. One or more of
these risk elements could have an impact on costs of an operation and if
significant enough, reduce the profitability of the operation and threaten
its
continuation.
The
Company is Subject to Substantial Government Regulatory Requirements which
could
cause a Restriction or Suspension of the Company’s
Operations
The
Company’s exploration operations are affected to varying degrees by government
regulations relating to resource operations, the acquisition of land, pollution
control and environmental protection, safety, production and expropriation
of
property. Changes in these regulations or in their application are beyond the
control of the Company and may adversely affect its operations, business and
results of operations. Failure to comply with the conditions set out in any
permit or failure to comply with the applicable statutes and regulations may
result in orders to cease or curtail operations or to install additional
equipment. The Company may be required to compensate those suffering loss or
damage by reason of its operating or exploration activities. Operations may
be
affected in varying degrees by government regulations with respect to
restrictions on production, price controls, export controls, foreign exchange
controls, income taxes, expropriation of property, environmental legislation
and
mine safety.
Currently,
the Company’s Canadian properties are subject to the jurisdiction of the federal
laws of Canada, the provincial laws of British Columbia and the Northwest
Territories, as well as local laws where they are located. In addition, the
Company’s U.S. properties are subject to U.S. Federal laws, the state laws of
Nevada and Oregon, as well as local laws where they are located. Mineral
exploration and mining may be affected in varying degrees by government
regulations relating to the mining industry. Any changes in regulations or
shifts in political conditions are beyond the control of the Company and may
adversely affect its business.
On
the
Federal and Provincial level, the Company must comply with exploration
permitting requirements which require sound operating and reclamation plans
to
be approved by the applicable government body prior to the start of exploration.
Depending upon the type and extent of the exploration activities, the Company
may be required to post reclamation bonds and/or assurances that the affected
areas will be reclaimed. Currently, the Company has estimated $1,406,734 in
reclamation liabilities for its properties. $1,000,000 has been deposited for
the benefit of the Province of British Columbia until released or applied to
reclamation costs. If the reclamation requires funds in addition to those
already allocated, Seabridge could be forced to pay for the extra work and
it
could have a significant negative effect upon the Company’s financial position
and operations.
On
the
State and Provincial level, the government has jurisdiction over certain
properties and requires their own permitting and compliance with applicable
regulations. On the local level, regulations deal primarily with zoning, land
use and specific building permits, as well as taxation and the impact of the
Company’s operations on the existing population and local services.
The
Company is Subject to Substantial Environmental Requirements which could cause
a
Restriction or Suspension of Company Operations
In
connection with its operations and properties, the Company is subject to
extensive and changing environmental legislation, regulation and actions. The
Company cannot predict what environmental legislation, regulation or policy
will
be enacted or adopted in the future or how future laws and regulations will
be
administered or interpreted. The recent trend in environmental legislation
and
regulation generally is toward stricter standards and this trend is likely
to
continue in the future. The recent trend includes, without limitation, laws
and
regulations relating to air and water quality, mine reclamation, waste handling
and disposal, the protection of certain species and the preservation of certain
lands. These regulations may require obtaining permits or other authorizations
for certain activities. These laws and regulations may also limit or prohibit
activities on certain lands lying within wetland areas, area providing for
habitat for certain species or other protected areas. Compliance with more
stringent laws and regulations, as well as potentially more vigorous enforcement
policies or stricter interpretation of existing laws, may necessitate
significant capital outlays, may materially affect the Company’s results of
operations and business, or may cause material changes or delays in the
Company’s intended activities.
On
the
Federal, State and Provincial level, regulations deal with environmental quality
and impacts upon air, water, soils, vegetation and wildlife, as well as
historical and cultural resources. Approval must be received from the applicable
bureau and/or department before exploration can begin, and will also conduct
ongoing monitoring of operations. If operations result in negative effects
upon
the environment, government agencies will usually require the Company to provide
remedial actions to correct the negative effects.
Specific
to its U.S. properties, costs involved with complying with various government
environmental regulations vary by anticipated operations. Typically, surface
sampling does not require any permits. Agency review and approval for
exploration drilling and access construction can vary from several hundred
dollars to several thousands of dollars, depending upon the level of activity.
Permitting and environmental compliance costs vary, depending upon the level
of
activities proposed and the sensitivity of the areas where mineral activities
are proposed. As a general rule, these costs makeup 10% or less of the total
cost amount of the program. The Company also may be required to post reclamation
bonding and assurance that areas will be reclaimed after exploration. These
bonds and guarantees range from approximately $1,000 on a small-scale
exploratory drill program in Nevada to approximately $150,000 on an advanced
exploration program in Oregon.
At
present, the Company has not estimated or allocated any funds for reclamation
at
its Courageous Lake property, nor have any specific environmental concerns
been
identified. However, the history of mining and exploration of the property
by
others may have caused certain environmental damage which will require cleanup
funded by Seabridge as the current landholder. In addition, unidentified
environmental deficiencies may exist on other of the Company’s properties. The
discovery of and any required reclamation of any additional properties would
likely have a negative effect on the Company’s operations and financial
position.
Financing
Risks
The
Company is Likely to Require Additional Financing which Could Result in
Substantial Dilution to Existing Shareholders and/or the Delay or Cessation
of
Operations
The
Company, while engaged in the business of exploiting mineral properties, has
sufficient funds to undertake its planned current exploration projects. If
the
Company’s exploration programs are successful, additional financing will be
required to develop the mineral properties identified and to place them into
commercial production. The exploration of the Company’s mineral properties is,
therefore, dependent upon the Company’s ability to obtain financing through the
joint venturing of projects, debt financing, equity financing or other means.
Such sources of financing may not be available on acceptable terms, if at all.
Failure to obtain such financing may result in delay or indefinite postponement
of exploration work on the Company’s mineral properties, as well as the possible
loss of such properties. Any transaction involving the issuance of previously
authorized but unissued shares of common or preferred stock, or securities
convertible into common stock, could result in dilution, possibly substantial,
to present and prospective holders of common stock. These financings may be
on
terms less favorable to the Company than those obtained previously.
The
Company Has a History of Net Losses and Expects Losses to Continue for the
Foreseeable Future
The
Company has had a history of losses and there is no assurance that it can reach
profitability in the future. As of the end of the last fiscal year dated
December 31, 2005,
the
Company historical net loss totals ($18,509,113). The Company will require
significant additional funding to meet its business objectives. Capital will
need to be available to help maintain and to expand exploration on the Company’s
principal exploration property. The Company may not be able to obtain additional
financing on reasonable terms, or at all. If equity financing is required,
as
expected, then such financings could result in significant dilution to existing
shareholders. If the Company is unable to obtain sufficient financing, the
Company might have to dramatically slow exploration efforts and/or lose control
of its projects. The Company has historically obtained the majority of its
financing through the issuance of equity, there is no limit to the number of
authorized common shares, and the Company has no current plans to obtain
financing through means other than equity financing.
The
Company has a Lack of Cash Flow to Sustain Operations and Does Not Expect to
Begin Receiving Operating Revenue in the Foreseeable
Future
None
of
the Company’s properties have advanced to the commercial production stage and
the Company has no history of earnings or cash flow from operations. The Company
has paid no dividends on its shares since incorporation and does not anticipate
doing so in the foreseeable future. Historically, the only source of funds
available to the Company has been through the sale of its common shares and
convertible debt instruments. Any future additional equity financing would
cause
dilution to current stockholders. If the Company does not have sufficient
capital for its operations, management would be forced to reduce or discontinue
its activities which would likely have a negative effect on the stock
price.
The
Company Operates in Foreign Countries and is Subject to Currency Fluctuations
which could have a Negative Effect on the Company’s Operating
Results
While
engaged in the business of exploiting mineral properties, the Company’s
operations outside of Canada, i.e. in the United States, make it subject to
foreign currency fluctuation as the Company’s accounts conducted in Canadian
dollars while certain expenses are numerated in US dollars. Such fluctuations
may have adversely affected the Company’s financial positions and results.
Management may not take any steps to address foreign currency fluctuations
that
will eliminate all adverse effects and, accordingly, the Company may suffer
losses due to adverse foreign currency fluctuations.
Risks
Relating to an Investment in the Securities of the Company
The
Market for the Company’s Stock has Been Subject to Volume and Price Volatility
which Could Negatively Effect a Shareholder’s Ability to Buy or Sell the
Company’s Shares
The
market for the common shares of the Company may be highly volatile for reasons
both related to the performance of the Company or events pertaining to the
industry (i.e., mineral price fluctuation/high production costs/accidents)
as
well as factors unrelated to the Company or its industry. In particular, market
demand for products incorporating minerals in their manufacture fluctuates
from
one business cycle to the next, resulting in change of demand for the mineral
and an attendant change in the price for the mineral. The Company’s common
shares can be expected to be subject to volatility in both price and
volume
arising from market expectations, announcements and press releases regarding
the
Company’s business, and changes in estimates and evaluations by securities
analysts or other events or factors. In recent years the securities markets
in
the United States and Canada have experienced a high level of price and volume
volatility, and the market price of securities of many companies, particularly
small-capitalization companies such as the Company, have experienced wide
fluctuations that have not necessarily been related to the operations,
performances, underlying asset values, or prospects of such companies. For
these
reasons, the shares of the Company’s common shares can also be expected to be
subject to volatility resulting from purely market forces over which the Company
will have no control. Further, despite the existence of markets for trading
the
Company’s common shares in Canada and the United States, stockholders of the
Company may be unable to sell significant quantities of common shares in the
public trading markets without a significant reduction in the price of the
stock.
The
Company has a Dependence Upon Key Management Employees, the Absence of Which
Would Have a Negative Effect on the Company’s Operations
The
Company strongly depends on the business and technical expertise of its
management and key personnel, including Rudi Fronk, President. There is little
possibility that this dependence will decrease in the near term. As the
Company’s operations expand, additional general management resources will be
required. The Company may not be able to attract and retain additional qualified
personnel and this would have a negative effect on the Company’s operations. The
Company does not carry any formal services agreements between itself and its
officers/directors. The Company does not carry any “Key Man” Life Insurance.
Certain
Officers and Directors May Have Conflicts of Interest Which Could have a
Negative Effect on the Company’s Operations
Certain
of the directors and officers of the Company are also directors and/or officers
and/or shareholders of other natural resource companies. While the Company
was
engaged in the business of exploiting mineral properties, such associations
may
have given rise to conflicts of interest from time to time. The directors of
the
Company are required by law to act honestly and in good faith with a view to
the
best interests of the Company and to disclose any interest that they may have
in
any project or opportunity of the Company. If a conflict of interest arises
at a
meeting of the board of directors, any director in a conflict must disclose
his
interest and abstain from voting on such matter. In determining whether or
not
the Company will participate in any project or opportunity, the directors will
primarily consider the degree of risk to which the Company may be exposed and
its financial position at the time.
The
Company Could be Deemed a Passive Foreign Investment Company Which Could have
Negative Consequences for U.S. Investors
The
Company could be classified as a Passive Foreign Investment Company (“PFIC”)
under the United States tax code. If the Company is declared a PFIC, then owners
of the Company’s Common Stock who are U.S. taxpayers generally will be required
to treat any so-called "excess distribution" received on its common shares,
or
any gain realized upon a disposition of common shares, as ordinary income and
to
pay an
interest
charge on a portion of such distribution or gain, unless the taxpayer makes
a
qualified electing fund ("QEF") election or a mark-to-market election with
respect to the Company’s shares. A U.S. taxpayer who makes a QEF election
generally must report on a current basis its share of the Company’s net capital
gain and ordinary earnings for any year in which the Company is classified
as a
PFIC, whether or not the Company distributes any amounts to its shareholders.
U.S. investors should consult with their tax advisors for advice as to the
U.S.
tax consequences of an investment in the Common Stock.
U.S.
Investors May Not Be Able to Enforce Their Civil Liabilities Against The Company
or Its Directors, Controlling Persons and Officers
It
may be
difficult to bring and enforce suits against the Company. The Company is a
corporation incorporated in Canada under the Canada Business Corporation
Act. A majority of the Company’s directors and officers are residents of
Canada and a substantial portion of the Company’s assets and its subsidiaries
are located outside of the United States. Consequently, it may be difficult
for
United States investors to effect service of process in the United States upon
those directors or officers who are not residents of the United States, or
to
realize in the United States upon judgments of United States courts predicated
upon civil liabilities under United States securities laws. There is substantial
doubt whether an original action could be brought successfully in Canada against
any of such persons or the Company predicated solely upon such civil liabilities
under the U.S. Securities Act.
Forward
Looking Statements
Certain
Statements presented herein contain certain forward-looking statements relating
but not limited to the Company’s expectations, intentions, plans and beliefs.
Forward-looking information can often be identified by forward-looking words
such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate”,
“may” and “will” or similar words suggesting future outcomes, or other
expectations, beliefs, plans, objectives, assumptions, intentions or statements
about future events or performance. Forward-looking information may include
reserve and resource estimates, estimates of future production, unit costs,
costs of capital projects and timing of commencement of operations, and is
based
on current expectations that involve a number of business risks and
uncertainties. Factors that could cause actual results to differ materially
from
any forward-looking statement include, but are not limited to, failure to
establish estimated resources and reserves, the grade and recovery of ore which
is mined varying from estimates, capital and operating costs varying
significantly from estimates, delays in obtaining or failures to obtain required
governmental, environmental or other project approvals, inflation, changes
in
exchange rates, fluctuations in commodity prices, delays in the development
of
projects and other factors. Forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from expected results.
Potential
shareholders and prospective investors should be aware that these statements
are
subject to known and unknown risks, uncertainties and other factors that could
cause
actual
results to differ materially from those suggested by the forward-looking
statements. Shareholders are cautioned not to place undue reliance on
forward-looking information. By its nature, forward-looking information involves
numerous assumptions, inherent risks and uncertainties, both general and
specific, that contribute to the possibility that the predictions, forecasts,
projections and various future events will not occur. The Company undertakes
no
obligation to update publicly or otherwise revise any forward-looking
information whether as a result of new information, future events or other
such
factors which affect this information, except as required by law.
Item
4. Information on the
Company
DESCRIPTION
OF BUSINESS
Introduction
The
Company’s executive office is located at:
172
King
Street East, 3rd Floor, Toronto, Ontario M5A 1J3 Canada
Telephone:
(416) 367-9292
Facsimile:
(416) 367-2711
E-Mail:
info@seabridgegold.net
Website:
www.seabridgegold.net
The
Contact person in Toronto is Rudi Fronk, President and CEO.
The
Company currently leases its executive offices in Toronto on a sub-lease from
the Academy of Canadian Cinema and Television. The lease covers the entire
3rd floor of a building located at 172 King Street East, Toronto,
Ontario, Canada. The original sublease was effective January 21, 1999 and
expired February 28, 2004. The sublease was renewed commencing March 1, 2004
and
expires February 28, 2009. The initial rent was for $4,265 per month, and is
adjusted annually based upon a building cost operating adjustment. Current
monthly rent is approximately $3,900.
The
Company's fiscal year ends December 31st.
The
Company's common shares trade on the TSX Venture Exchange under the symbol
"SEA"
and on the American Stock Exchange under the symbol “SA”.
The
authorized share capital of the Company consists of an unlimited number of
common shares and an unlimited number of preferred shares. As of December 31,
2005, the end of the most recent fiscal year, there were 32,106,685 common
shares issued and outstanding and no preferred shares issued and outstanding.
Corporate
Background
The
Company was originally incorporated under the Company Act of British Columbia
under the name of Chopper Mines Ltd. on September 14, 1979. After conducting
a 1
for 5 reverse split, the Company changed its name to Dragoon Resources Ltd.
on
November 9, 1984. On May 20, 1998, the Company conducted a 1 for 10 reverse
split and changed its name to Seabridge Resources Ltd. On June 20, 2002, the
Company changed its name to Seabridge Gold Inc. in order to better reflect
the
Company’s focus on gold and gold projects. On October 31, 2002 the Company also
continued from British Columbia into Canadian Federal jurisdiction under the
Canada Business Corporations Act.
The
Company presently has three active subsidiaries: Seabridge Gold Corporation,
a
Nevada corporation; Pacific Intermountain Gold Inc., a Nevada corporation;
and
5073 N.W.T. Limited, a company incorporated under the laws of the Northwest
Territories of Canada. The following diagram illustrates the current
inter-corporate relationship between the Company and its material
subsidiaries:
(1)
|
The
Company's 100% interest in the Kerr-Sulphurets property is subject
to the
terms of an option agreement with Noranda Inc. under which Falconbridge
Inc. can earn up to a 65% interest in the property. See "Narrative
Description of the Business - Kerr Sulphurets Project -
Summary".
|
(2)
|
The
Company's
100% interest in the Quartz Mountain project is subject to the terms
of an
option agreement with Quincy Energy Corp. under which Quincy can
earn up
to a 62.5% interest in the
property.
|
Currently,
the Company conducts operations in both Canada and the United States. As of
December 31, 2005, the Company’s non-current assets were located as
follows:
United
States:
|
$ 8,073,361
|
History
and Development of the Business
On
May
20, 1998, the Company completed a 1 for 10 reverse split and changed its name
to
Seabridge Resources Inc.
In
October 1999, the Company initiated a corporate strategy based on its belief
that the then depressed gold market offered significant upside potential. In
October 1999, a new Board and senior management team possessing the required
technical and financial skills to implement the new strategy were put in place.
The new corporate direction was to acquire gold mining assets, including
developed resources and shutdown or suspended projects, which had been made
available by depressed gold prices and a lack of capital and which were
uneconomic at the current gold price. The Company observed that projects that
previously commanded significant market capitalization when gold prices were
higher were becoming available at fractions of their previous valuations. The
success of this new strategy was dependent on a return to higher gold prices.
From October 1999 through June 2002 the Company acquired eight North American
based gold projects which collectively contain substantial gold resources.
With
the
recent improvement in gold prices, the Company has commenced engineering studies
and exploration activities on several of its projects. In addition, the Company
has entered into joint venture agreements on some of its projects where partners
will be conducting exploration activities.
In
February 2000, the Company acquired an option to purchase 100% of the Grassy
Mountain gold project located in eastern Oregon from Atlas Precious Metals
Inc.
In March 2003, the Company completed the purchase of the Grassy Mountain project
by paying Atlas US$600,000.
In
June
2000, the Company entered into a Letter of Intent with Placer Dome (CLA) Limited
to acquire a 100% interest in the Kerr-Sulphurets project located in the
Iskut-Stikine River region, approximately 20 km southeast of the Eskay Creek
Mine in British Columbia. The Company agreed to issue Placer 500,000 common
shares, 500,000 common share purchase warrants exercisable at $2.00 per share
for two years and grant a 1% NSR royalty for the property. In June 2001,
Seabridge completed the acquisition of Placer Dome’s 100% interest in the
project. In September 2002, the Company announced it had entered into an
agreement with Noranda Inc. (now named Falconbridge Limited) whereupon
Falconbridge can earn a 50% interest in the project by spending $6,000,000
on
exploration at the project within 6 years. Falconbridge can earn an additional
15% interest by funding all costs to complete a feasibility study. If, after
earning its 50%
interest,
Falconbridge elects not to proceed with a feasibility study, Seabridge has
the
option to acquire Falconbridge’s interest for $3,000,000. After having earned
its 50% interest, Flaconbridge has the right to delay its decision to proceed
with a feasibility study for up to three years by either spending $1.25 million
per year on the property or making payments to Seabridge which would total
$1.5
million over the three-year period. Through December 31, 2005, Falconbridge
has
expended approximately $2.3 million towards its initial earn-in requirement.
In
October 2000, the Company acquired a 100% leasehold interest in the Castle/Black
Rock gold project in Esmeralda County, Nevada. The Company issued 5,000 common
shares and paid US$7,500 in advance royalty payments and agreed to payments
of
up to $25,000 per year as well as granting a sliding 3-5% NSR on precious metals
and a 3.5% NSR from all other metals produced to Platoro West Inc. in exchange
for a 100% interest in the project.
In
November 2000, the Company acquired a 100% leasehold interest in the Hog Ranch
gold project in northern Nevada. The Company paid Platoro West Inc. US$75,000
and issued 500,000 common shares to Platoro for a 100% interest in the project.
The Company also granted Platoro a sliding 3-5% NSR on precious metals produced
and a 3.5% NSR from all other metals produced. In August 2003, the Company
granted Romarco Minerals an option to earn a 60% interest in the Hog Ranch
gold
project in Nevada. Romarco can earn a 60% interest by spending $2.5 million
in
exploration and project holding costs and issuing to the Company 1.5 million
Romarco common shares, by December 31, 2007. In February 2005, Romarco
terminated its interest in Hog Ranch and the property reverted to the
Company.
In
December 2001, the Company entered into an agreement to acquire a 100% interest
in the Quartz Mountain Gold Project located in Lake County, Oregon. Seabridge
agreed to pay to Quartz Mountain Gold Corporation US$100,000 cash, 300,000
shares, 200,000 warrants and a 1% NSR for Quartz Mountain’s 100% interest in the
project. In addition, the Company agreed to pay a 0.5% NSR on the property
as a
finders fee. The acquisition was completed in January 2002. In October 2003
the
Company granted Quincy Resources Inc. (now known as Quincy Energy Corp.) an
option to earn a 50% interest in the Quartz Mountain gold project, excluding
the
existing gold resources. Under certain conditions Quincy can increase its
interest to 62.5%.
In
December 2001, the Company entered into an agreement to acquire a 100% interest
in the Red Mountain Gold Project and related assets located near Stewart,
British Columbia. Seabridge agreed to issue to North American Metals Corporation
800,000 common shares in exchange for a 100% interest in the project and the
assumption by Seabridge of all liabilities, including reclamation and underlying
lease obligations, associated with the project. The transaction was completed
in
April 2002. In 2003, the Company commissioned SRK to undertake an engineering
study on the Red Mountain project. The SRK study was completed in August
2003.
In
May
2002, the Company reached agreement to purchase a 100% interest in the
Courageous Lake Project located in the Northwest Territories, Canada. Seabridge
paid former owners Newmont Canada Limited and Total Resources (Canada)
US$2,500,000
and
granted a 2.0% NSR for 100% of the project. Seabridge also agreed to pay Newmont
and Total up to an additional US$3,000,000 depending upon the price of gold.
The
purchase was closed in July 2002. In April 2003, the Company made a US$1,500,000
payment to Newmont and Total which was triggered by the price of gold reaching
US$360 per ounce. A final payment of US$1,500,000 was due to Newmont and Total
when the price of gold exceeds US$400 for 10 consecutive days. This final
payment was made in February 2004. In 2004, an additional property was optioned
in the area (“Red 25”). Under the terms of the agreement, the Company paid
$50,000 on closing and is required to make option payments of $50,000 on each
of
the first two anniversary dates and subsequently $100,000 per year. In addition,
the property may be purchased at any time for $1,250,000 with any option
payments being credited against the purchase price. From 2003 through 2005,
the
Company completed significant exploration activities at the project including
core drilling. In September 2005 an independent engineering study was completed
on the project.
In
June
2002, the Company and an independent third-party incorporated a Nevada company
named Pacific Intermountain Gold Corp. (“PIGCO”) to acquire and explore
early-stage exploration projects which have previously identified gold systems
potentially capable of hosting large-scale gold deposits. In July 2004, the
Company acquired a 100% interest in PIGCO by forgiving debt of approximately
$65,000 and agreeing to pay 10% or any sale of PIGCO projects to third parties.
The Company intends to explore some of the acquired properties itself and form
joint ventures to explore the remainder.
Business
Overview
All
of
the Company’s operations are located in Canada and the United States. The
Company operates in the mineral exploration sector.
All
of the Company’s properties are currently at the exploration stage. There is no
assurance that an economic and commercially viable deposit exists on any of
the
Company’s properties, and substantial additional work will be required in order
to determine if any economic and legally feasible deposits occur on the
Company’s properties.
Operations
are not seasonal as the Company can conduct exploration at certain of its
properties year-round. To date, the Company’s income has been limited to
interest on its cash balances and therefore it is not currently dependent upon
market prices for its operations, nor is it dependent upon any patents, licenses
or manufacturing processes.
The
mineral exploration operations of the Company are subject to regulation by
several government agencies at the Federal, Provincial and local levels. These
regulations are well documented and a fundamental aspect of operations for
any
resource company in Canada and the United States. Management believes the
Company is in compliance with all current requirements and does not anticipate
any significant changes to these regulations which will have a material effect
on the Company’s operations. The
Company
has obtained all material permits required for its anticipated exploration
activities.
Mineral
Properties
The
Company currently operates in the mineral exploration sector. All of the
Company’s properties are located in Canada and the United States and are at the
exploration stage.
The
individual mineral properties are described below.
Courageous
Lake Project
The
Courageous Lake project is a gold project covering approximately 67,000 acres
located in the Northwest Territories, Canada. Seabridge has a 100% interest
in
the project, subject to a 2% NSR on certain portions of the
property. The Property is without known mineral reserves and is at
the exploration stage; The Company’s current efforts are exploratory in
nature.
Location
and Access
The
project is located approximately 240 kilometers northeast of Yellowknife in
the
Northwest Territories. Year round access is available by air, either by fixed
wing aircraft to the airstrip at the former Salmita mine 6 kilometers to the
south or via float-equipped aircraft to several adjacent lakes. During
mid-winter, access is available via a winter road. There are about 10 kilometers
of gravel roads located on the property.
How
Acquired
In
May
2002, Seabridge entered into a purchase agreement with Newmont Canada Limited
and Total Resources Canada Limited on the Courageous Lake project comprised
of
17 mining leases covering 18,178 acres. Under the purchase agreement, Seabridge
paid Newmont/Total US$2.5 million in cash and granted them a 2.0% NSR and agreed
that it would be liable to make two (2) further payments of US$1.5 million,
each
subject to the price of gold passing certain thresholds, for a 100% interest
in
the property. A further US$1.5 million was paid to Newmont/Total in April 2003
as a result of the spot price of gold closing above US$360 per ounce for 10
consecutive days, which occurred in February 2003. A further US$1.5 was payable
to Newmont/Total 60 days after the spot price of gold closes at or above US$400
per ounce. This final payment was made in February 2004. The purchase by
Seabridge closed on July 31, 2002. Upon acquiring the Courageous Lake project,
Seabridge assigned its right thereto to its wholly owned subsidiary, 5073 N.W.T.
Ltd. The obligations of 5073 N.W.T. Ltd. under the agreement, including the
payment of the royalty, is secured by a debenture under which the vendors have
been granted a security interest in the Courageous Lake property. Subsequent
to
this acquisition, Seabridge staked contiguous open ground totaling an additional
48,905 acres in 42 mining claims of which a portion is subject to the terms
of
the purchase agreement, including the 2% royalty. In 2004, an additional
property was optioned in the area (“Red 25”). Under the terms of the agreement,
the Company paid $50,000 on closing and is required to make option payments
of
$50,000 on each of the first two anniversary dates and subsequently $100,000
per
year. In addition, the property may be purchased at any time for $1,250,000
with
any option payments being credited against the purchase price.
Regional
and Property Geology
The
Courageous-Matthews Lakes belt is characterized by a series of north to
northwest trending Archean metavolcanic and metasedimentary rocks that are
within the Yellowknife Supergroup and are locally referred to as the Courageous
Lake Greenstone Belt (“CLGB”). The CLGB is approximately 60 kilometers long,
with a maximum east-west width of 5.5 kilometers. Two distinct volcanic cycles
have been recognized within the CLGB. The second cycle of volcanism is
conformably overlain by a thick sequence of metasedimentary rocks that are
locally known as the Yellowknife Group Sediments (“YGS”). The dominant post YGS
lithology consists of large granodiorite to diorite plutons that bound the
Courageous Lake deposit along its east and west flanks.
North
of
Matthews Lake, the Courageous Lake property consists of a sequence of northerly
trending, steeply dipping metasedimentary and metavolcanic rocks, with tops
to
the east. All of the currently recognized gold occurrences on the property
are
located within or near the top of the second cycle of volcanism of the CLGB.
Generally, the units that make up the second volcanic cycle are about 2
kilometers thick and have been subdivided into 8 distinct mappable units.
Both
the
main Tundra and carbonate zones within the Courageous Lake property strike
north-south and have a near vertical dip component. The zones are characterized
by moderate to intense shearing, sericite-carbonate alteration, and quartz
veining. These mineralized zones are very persistent along strike and down
dip.
The continuity of gold mineralization has been demonstrated to be at least
800
meters along strike based upon previous drilling results. Within the area that
has been tested by drilling, the continuity of gold mineralization is at least
100 meters in a down dip direction. The limits of gold mineralization have
not
been fully tested and the deposit remains open along strike and down dip.
Previous
Exploration History
Gold
was
first discovered in the Courageous Lake area in 1936. Beginning in 1976, Noranda
Exploration Ltd. initiated exploration in the Courageous Lake Volcanic Belt.
Exploration activities included geological reconnaissance, airborne, EM and
magnetic surveys, ground follow-up and claim staking. In 1982, Noranda initiated
a limited drill program to evaluate rock units north of Matthews Lake. Detailed
geophysics, geological mapping, and extensive diamond drilling followed this
initial program leading to the discovery of two gold deposits, the Tundra
Deposit (Main Zone), known as the FAT Deposit, and the Carbonate Zone.
From
1982
to 1987, Noranda continued core drilling the property from the surface and
also
constructed a winter road to the property. They also began an environmental
impact study. In late 1987, Noranda made the decision to sink a vertical shaft
to provide access for conducting an underground definition drilling program
and
to be able to test gold grade continuity and tenor by drifting and raising
on
ore grade shoots. This also allowed Noranda to extract a bulk sample for
metallurgical testing. In conjunction with the development of the shaft, surface
core drilling, magnetic, VLF, and HLM surveys were also completed.
In
late
1987, Noranda completed an in-house preliminary resource estimate. Based upon
this work, a two-year underground exploration program was initiated. The program
was designed to establish an underground mining reserve, access material for
bulk metallurgical sampling and provide engineering information for mine design
and planning. The shaft was timbered and completed to a depth of 472.6 meters
in
April 1989. Drifting on the target zone occurred between May to November 1989
and totaled 1,948.2 meters. Both lateral drifts and sub-vertical raises were
completed and provided access to bulk sample locations and diamond drilling
stations along the strike of the target zones. Approximately 200 vertical meters
and 750 to 8000 of strike length of the mineralized zone were tested by
underground drill holes. Additional horizontally fanned holes were drilled
on
25-meter centers to aid in the interpretation of the target zone. Underground
drilling was completed in November 1989 and totaled 27,459.25 meters in 125
diamond drill holes.
Little
additional work was performed on the property until Placer Dome optioned the
property in 1998. Placer’s exploration included a core drilling/sampling program
in order
to
verify
Noranda’s previous work and to provide infill sample data. Detailed mapping and
structural analysis was done by Placer concurrent with the drilling to help
design a drill plan as well as conducting a ground magnetic survey to define
the
zone of mineralization. Placer utilized two diamond drill rigs to provide
detailed information on the continuity of the Tundra Main Zone and to confirm
the Carbonate Zone. The total diamond drilling completed by Placer was 15,988
meters in 76 drill holes. Placer dropped its option on the property in
1999.
Environmental/Regulatory
Information
As
part
of its due diligence review on the property, Seabridge engaged EBA Engineering
Consultants Ltd. of Yellowknife, Northwest Territories, to prepare an
Environmental Review of the Courageous Lake property. EBA determined the
governmental environmental review process in the NWT would likely take 24 to
36
months from the time a Project Description Report had been filed with the
authorities before the review process began. An additional 12 to 16 months
would
likely be required to complete the regulatory review process, all at a cost
of
$2-8 million, plus another $0.5-1 million for costs during the regulatory phase.
Additionally,
EBA visited and evaluated the site for any current or potential environmental
damage related to historical exploration work conducted at Courageous Lake
by
previous operators. EBA found no significant environmental concerns, but did
note several areas of potential concerns, including the existing land
disturbances, acid rock drainage from waste rock and drill casings.
Seabridge
began to collect environmental data at their Courageous Lake, NWT property
in
2003. The data collection was designed and implemented by EBA Engineering
Conslutants Ltd. To date the data includes archaeology, fisheries, water
quality, hydrology and wildlife. The environmental program in 2004 and 2005
included water quality, hydrology and wildlife. The results are summarized
below.
Wildlife:
Caribou:
Four aerial caribou surveys were flown (September and November 2004, and July
and September 2005). The results indicated that the general area of the property
is used by baren ground caribou during both the southward migration in the
fall
and the northward migration in the spring. No caribou were noted in the area
during the winter months and limited numbers in the summer months. The southward
migration appears to occur between August and October and the northward
migration between April and June.
Grizzly
Bear: Aerial and ground surveys were conducted in 2004 and 2005 to document
grizzly and wolf dens occurring within the study area. Over the two years twelve
bears were sighted; in 2004 a single adult, one female with one cub, and one
female with three cubs seven grizzly bears, two new dens, and three old bear
dens and in 2005 one female with two cubs, one large adult male, and one adult
of unknown sex were documented. Over the same period dens observed included
two
used the previous winter and four old dens.
Wolves:
Observations of wolves, wolf activity, and wolf dens documented one active
den,
one inactive den site and 24 observations of wolf sign in 2004; two additional
old wolf dens and two adult wolves were observed in 2005.
Hydrology
During
the summer and fall of 2005 a hydrometric survey of Matthews Creek was
conducted. The maximum-recorded discharge of 1.2 m3/s for Matthews Creek
occurred on June 24, 2005 and a minimum flow of 0.2 m3/s was recorded on
September 22, 2005 just prior to the creek freezing over. The instrumentation
installed recorded flow continuously for the period.
Water
Quality
Four
water quality, sampling stations were located on Matthews Lake, one station
at
Courageous Lake, and one on Matthews Creek and were sampled twice during the
open water season in both 2004 and 2005. Samples were analyzed for total and
dissolved ultra-low metals (both total and dissolved), low-level nutrients,
routine water, and cyanide as well as temperature, conductivity and dissolved
oxygen. In general, the physical and chemical water quality parameters in the
area of the Courageous project are generally pristine. Some impacts of the
abandoned Tundra mine on Matthews Lake, could be noted in the concentrations
of
aluminum, cadmium, copper, and mercury.
2006
Program
The
environmental field program in 2006 will concentrate on documenting the
hydrology of Matthews Creek. A detailed design of the environmental data
collection program to support the application to the McKenzie Valley Land and
Water Board for development licenses and permits will also be
completed.
Current
and Planned Work
In
late
2002, Seabridge engaged a group of independent consulting firms to undertake
an
engineering study for Courageous Lake. During 2003, preliminary reports were
completed on key mining and metallurgical issues relating to the project. In
January 2004, Seabridge authorized the independent consultants to upgrade
capital and operating cost estimates in its Courageous Lake study to
pre-feasibility levels to better define the economics of the project. As a
result of a 2004 drilling program, the Company commissioned a new independent
resource estimate for the FAT deposit which was completed in December 2004
and
was incorporated into the engineering study. The engineering study was completed
in September 2005 and the results are presented below.
During
a
2003 summer exploration program, Seabridge successfully identified 12 gold
targets at Courageous Lake with characteristics similar to the existing FAT
zone
at the project. The Company also identified significant drill core from previous
owners of these targets which had not been assayed. The drill core, an estimated
110,000 meters, was retained on the property but never evaluated for bulk
mineable potential. From September
through
December of 2003, Seabridge conducted a program to evaluate and prioritize
these
12 targets by sampling and assaying available core. The results from this
program confirmed that nine of the 12 targets have the potential to host bulk
mineable deposits similar to FAT. Of these nine targets, four have been
consolidated into what is now called the Salmita Zone and five have been
consolidated into what is now called the Tundra Zone. A 10,000-meter core drill
program was conducted by Seabridge during 2004 that focused on testing the
Salmita and Tundra Zones as well as the potential strike extension of the FAT
zone and the FAT hanging wall zone.
In
2004,
drill testing of selected priority targets was undertaken by the Company. The
program was conceived in 2 stages, initial testing for strataform gold
concentrations similar to the FAT Deposit and sectional drilling for potential
resource additions. The initial program intended to test 3 target areas, Olsen
Lake, Walsh Lake and the South FAT Extension. Ground conditions precluded a
test
of the Walsh Lake target, but the other targets were tested. Results from the
initial stage of the program lead Seabridge to initiate sectional drilling
on
the South FAT Extension. The South FAT Extension was a projection of the
previous resource model where little work had been completed. Surface and
initial drilling results indicated that 300 meters of strike could be added
to
the FAT Deposit with the completion of sectional drilling. The second stage
of
the 2004 program completed the sectional drilling on 50-meter section lines
across these 300 meters of strike.
A
7,500
meter core drill program was completed by the Company during 2005 designed
to
test for the north and south strike extensions of the FAT. The program
demonstrated the potential to extend the FAT deposit by an additional 850 meters
to the south and a further 600 meters to the north.
In
September 2005, an engineering study (classified as a Preliminary Assessment
under National Instrument 43-101 in Canada) for the Courageous Lake project
was
completed by TJS Mining-Met Services Inc. (TJS), Roscoe Postle Associates Inc.
(RPA) and EBA Engineering Consultants Limited (EBA) (TJS, RPA and EBA
collectively, the “Project Consultants”). The Preliminary Assessment is dated
September 7, 2005 and is entitled “Seabridge Gold Inc., Courageous Lake Project,
Preliminary Technical Assessment”. The independent consultants concluded that
given the resource size, location and grade, a year round, open-pit bulk
mineable operation with on-site processing is the most suitable development
scenario. A base case scenario was developed for the project incorporating
a
25,000 tonne per day operation (9.0 million tonne per year throughput) resulting
in a projected 8.5 year operation with average annual production of 545,000
ounces of gold.
Work
on
the Courageous Lake project is ongoing to evaluate modifications which could
improve project economics. The opportunities identified are as
follows:
·
|
Tailings
options - further testwork may prove out paste tailings as an option
which may reduce the tailings footprint, tailings capital and operating
costs.
|
·
|
All-weather
road - providing an all-weather road to the site would have a large
positive impact on the project. Such a road is being considered by
the
various levels
|
of
government. There would be a significant reduction in on-site storage
requirements, especially fuel oil and lime.
·
|
Power
generation sharing - providing a network to share power between the
mines in the area. There are three mines in the area that potentially
could share power generating facilities and costs.
|
·
|
Mine
life extensions - the potential extension of mine life could have a
positive material impact on the project's pre-tax net cash flow.
The
independent consultants have recommended additional exploration to
follow-up on 2005’s exploration
results.
|
The
Company estimates its annual holding costs of the Courageous Lake Project to
be
$186,000 with $136,000 of these costs paid to the Department of Indian Affairs
and Northern Development, Northwest Territories and the remaining $50,000 as
an
option payment on the Red 25 claim payable to Bathurst Inlet Developments (1984)
Ltd.
Mineral
Resources
Over
the
period of previous exploration at Courageous Lake, several resource estimates
have been prepared. The most detailed historic estimates were conducted by
Noranda in 1990 at the conclusion of its underground exploration program, by
Placer Dome in 1999 at the conclusion of its exploration program and by Resource
Modeling Inc. (an independent consulting firm based in Tuscon, Arizona) in
July
2002 as part of the Company’s due diligence when it acquired the project from
Newmont and Total.
In
December 2004, RMI completed a new resource model for Courageous Lake,
incorporating the results from the Company’s 2004 exploration program. The study
provided resource estimates at various cut-off grades. In September, 2005 an
engineering study was completed for the project which indicated that a 0.83
gram
per tonne cut-off grade was appropriate for the deposit. Using its own
estimation parameters and a cut-off grade of 0.83 grams of gold per tonne,
RMI
calculated resources for the project as follows:
Courageous
Lake Gold Resources at 0.83 grams per tonne cut-off:
Measured
|
Indicated
|
Tonnes
(000’s)
|
Grade
(g/T)
|
Ounces
(000’s)
|
Tonnes
(000’s)
|
Grade
(g/T)
|
Ounces
(000’s)
|
3,378
|
2.55
|
277
|
47,002
|
2.28
|
3,445
|
Cautionary
Note to U.S. Investors concerning estimates of Measured and Indicated
Resources
This
section uses the terms “measured resources”, “indicated resources” and “inferred
resources”. We advise U.S. investors that while those terms are recognized and
required by Canadian regulations, the U.S. Securities and Exchange Commission
does not recognize them. U.S. Investors are
cautioned
not to assume that any part or all of mineral deposits in these categories
will
ever be converted into reserves.
Courageous
Lake Gold Inferred Resources at 0.83 grams per tonne cut-off
Inferred
|
Tonnes
(000’s)
|
Grade
(g/T)
|
Ounces
(000’s)
|
77,442
|
2.10
|
5,229
|
Cautionary
Note to U.S. Investors concerning estimates of Inferred
Resources
This
section uses the term “inferred resources”. We advise U.S. investors that while
this term is recognized and required by Canadian regulations, the U.S.
Securities and Exchange Commission does not recognize it. “Inferred resources”
have a great amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. It cannot be assumed that all or
any
part of an Inferred Mineral Resource will ever be upgraded to a higher category.
Under Canadian rules estimates of Inferred Mineral Resources may not form the
basis of feasibility or other economic studies. U.S. investors are
cautioned not to assume that part or all of an inferred resource exists, or
is
economically or legally mineable.
None
of
the resource can be classified as a Mineral Reserve. Additional exploration
work
will be required in order to upgrade the resources into reserve categories,
and
a full feasibility study will be required in order to determine if any of the
mineral resource are economic and can be profitably mined.
The
resource model constructed for the Courageous Lake deposit incorporates data
from 449 holes drilled by Seabridge, Noranda and Placer Dome totaling 115,649
meters. Block model gold grades in the Courageous Lake resource model were
estimated using an inverse distance weighting interpolation procedure.
Grassy
Mountain Project
The
Grassy Mountain Property covers approximately 6.7 square miles or 4,300 acres,
and is located in eastern Oregon. Seabridge has a 100% interest in the project.
The Property is without known mineral reserves and is at the exploration
stage; The Company’s current efforts are exploratory in
nature.
Location
and Access
The
property consists of 320 unpatented lode claims of approximately 4,600 acres
and
lies approximately 22 miles southwest of Vale, Oregon and 70 miles west of
Boise, Idaho. The property is accessed by traveling 4 miles west from Vale
on US
Highway 20,
then
south on the Twin Springs County Road for 23 miles, or by driving south from
Nyssa, Oregon on US Highway 95 to Owyhee and then west to Rock Springs Canyon
and by gravel road for 14 miles.
How
Acquired
In
February 2000, Seabridge acquired an option to purchase 100% of the Grassy
Mountain gold project located in eastern Oregon from Atlas Precious Metals
Inc.
The Company originally had until December 31, 2002 to acquire for
US $1,700,000, a 100% interest in 214 mineral claims located in Malheur
County, Oregon, USA. The purchase price was to be a combination of cash,
Seabridge common shares and notes.
In
December 2002, the Company and Atlas restructured the terms of the acquisition
agreement due to Atlas’ preference for cash. In exchange for a US$300,000 option
payment, Atlas granted Seabridge the right to acquire a 100% interest in the
property for an additional US$600,000 cash payment on or before March 31, 2003.
Seabridge also agreed to provide US$500,000 in financing for an Atlas subsidiary
on or before March 31, 2003. Seabridge paid the US$300,000 option payment,
as
well as the US$600,000 cash payment and the US$500,000 in financing and now
holds a 100% interest in the property as well as 1,000,000 common shares of
the
Atlas subsidiary.
The
property lies on Bureau of Land Management (“BLM”) lands, and ownership includes
four leasehold interests covering 76 unpatented lode and placer claims and
an
additional 138 unpatented lode claims. There is one Oregon State section within
the property for which applications for State prospecting permits have been
submitted. A sliding scale NSR royalty applies to the main Grassy Mountain
deposit. The royalty rate is a 4% NSR for gold prices up to US$500 per ounce,
to
a maximum of 7% for gold prices above US$800 per ounce.
Regional
and Property Geology
The
property is situated in the Oregon Plateau portion of the northern Great Basin
and is characterized by abundant Cenozoic volcanism. The flat-lying to gently
dipping volcanics and volcanic sediments were deposited over wide areas during
this time of crustal extension. The rocks exposed at Grassy Mountain are part
of
the late to middle-Miocene Grassy Mountain Formation; Mineralization is
associated with a low-grade gold-silver bearing siliceous hot springs system
with enrichment along multi-stage quartz-adularia veins and favorable
lithologies. The mineralized rock is highly silicified and locally brecciated
in
the vicinity of the feeder structures. As silicification decreases so does
grade. The finer grained siltstones contain the bulk of the lower grade
material. The higher grades are found in the coarser arkosic
sandstones.
Previous
Exploration History
Atlas
acquired the property in 1986 from two prospectors after recognizing its
potential to host hot springs type gold mineralization. There were no
significant mining or major mineral occurrences known in the area prior to
the
discovery of the Grassy Mountain Deposit.
Detailed
mapping and sampling were completed and Atlas drilled six holes on two target
areas. A follow up drill program consisting of five holes was completed in
the
spring of 1988. Hole 26-9 is considered the discovery hole with 145 feet of
mineralization averaging 0.075 opt Au. The claim block was expanded at this
time
and exploration work continued through 1991. Atlas completed 388 drill holes
for
a total of approximately 221,500 feet on the property.
In
1990,
Atlas commissioned Kilborn Engineering (“Kilborn”) to complete a feasibility
study on Grassy Mountain. Based on the positive Kilborn study, Atlas sold the
property to Newmont Exploration Ltd. in September 1992 for US$30 million plus
a
5% net smelter royalty interest. Newmont continued the property evaluation
through August 1994, completing an additional 13 core and reverse circulation
holes while concentrating on the higher-grade ore zones. At the conclusion
of
its exploration programs, Newmont determined the property did not currently
meet
its project criteria and returned the project to Atlas in September
1996.
In
January 1998, Atlas executed an agreement with Tombstone Exploration Company
Ltd. and associated sister company Orinoco Gold Inc. ("Tombstone"), whereby
Tombstone was granted the option to purchase 100% of the property. Exploration
work during Tombstone's initial program at Grassy Mountain included 8,500 of
reverse circulation and core drilling in 10 drill holes. Prior to the drill
program and execution of the definitive option agreement, Tombstone completed
an
extensive review of previous work at the property and commissioned an economic
study of alternative development scenarios by Pincock, Allen and Holt (“PAH”). A
second phase drill program was proposed by Tombstone to assess the highly
prospective structural trends identified by geophysics, and to upgrade previous
mineralization models. Due to a downturn in the resource market and its
resulting inability to raise venture capital during 1998 forced Tombstone to
return Grassy Mountain to Atlas in May 1998.
Environmental/Regulatory
Information
The
Bureau of Land Management (BLM), through its Vale District office, is the lead
agency responsible for the Grassy Mountain area. In 2000, Seabridge retained
Gochnour & Associates of Parker, Colorado (“Gochnour”) to undertake an
environmental review and regulatory permitting due diligence on Grassy Mountain.
The report of Gochnour, prepared by Lee “Pat” Gochnour, is entitled “Grassy
Mountain Project Permitting/Environmental Report” (the “P/E Report”) and dated
June 27, 2000. The Gochnour study examined three potential scenarios: (1)
open-pit mining with a combination of heap-leach and milling processing; (2)
underground mining with on-site milling; and (3) underground mining with
off-site milling. Gochnour concluded that each of the development scenarios
is
permittable under current federal and state law. To complete the permitting
process, Gochnour estimates that the open-pit scenario would take 3-5 years
to
permit once a Plan of Operations (“POO”) had been submitted. Gochnour estimated
the permitting time frame for the underground scenarios at 2-3 years after
the
POO was submitted. Gochnour also reviewed the extensive database of all previous
environmental and baseline work and estimated the cost and time frame
associated
with bringing the work up to date. In aggregate, Gochnour estimated a minimum
of
one year to bring the base-line work up to date at a cost of approximately
US$500,000. Gochnour recommended that this work be performed concurrently with
the preparation of a final feasibility study.
Current
and Planned Work
During
2006, the Company plans to conduct a program to re-examine the economic
potential for both the open pit and underground development scenarios at Grassy
Mountain and choose the appropriate path for future work.
Holding
costs of the property are currently approximately US$98,000 annually broken
down
as follows:
|
a)
|
US$20,000
paid to the United States Bureau of Land Management and Malheur County,
Oregon;
|
|
b)
|
US$35,000
paid to Sherry & Yates, a Montana Corporation, as an annual advance
royalty, escalating by US$5,000 per year to a maximum of US$60,000;
|
|
c)
|
US$33,000
paid to the Bishop family of Vale,
Oregon;
|
|
d)
|
Approximately
US$10,000 in storage and warehouse
fees.
|
Kerr-Sulphurets
Project
The
Kerr-Sulphurets Project consists of two separate gold properties, Kerr and
Sulphurets, located in the Iskut-Stikine River region of British Columbia.
Seabridge currently has a 100% interest in the project but is subject to an
agreement with Noranda Inc. whereupon Noranda may earn an interest in the
property. The Property is without known mineral reserves and is at the
exploration stage; The Company’s current efforts are exploratory in
nature.
Location
and Access
The
Kerr-Sulphurets property is located in the Iskut-Stikine River region,
approximately 65 km northwest of Stewart, British Columbia. Access to the
property is by helicopter from Stewart. Mobilization of equipment and personnel
can be staged quite effectively from the Tide Lake airstrip, Bronson Strip
or
from Bob Quinn and Bell II Crossing on the Stewart Cassiar Highway.
How
Acquired
Seabridge
entered into a Letter of Intent with Placer Dome in June 2000 to acquire a
100%
interest in Kerr-Sulphurets. On March 27, 2001, the Company and Placer Dome
executed a definitive acquisition agreement and the acquisition closed in June
2001. At closing, the Company issued Placer Dome (i) 500,000 common shares
of
Seabridge; (ii) 500,000 common share purchase warrants, exercisable by Placer
Dome at C$2.00 per share for two years; and (iii) a 1% net smelter royalty
interest on the Project, capped at C$4.5 million. Seabridge will be obligated
to
purchase the 1% net smelter royalty from Placer Dome for $4.5 million in the
event that a positive feasibility study demonstrates a 10% internal rate of
return after tax and financing costs.
The
Kerr-Sulphurets project consists of two contiguous claim blocks known as the
Kerr Property and the Sulphurets Property. Total minimum annual holding costs
associated with the project are approximately $86,000.
Property
Description
The
Kerr
Property consists of 18 mineral claims (190 units) and 10 placer claims along
Sulphurets Creek. Annual assessment requirements or cash-in-lieu payments for
the 190 Kerr units is approximately $40,000. The associated placer claims
require annual rental payments totaling C$6,000.
The
Sulphurets property consists of 40 mineral claims totaling 158 units. Annual
assessment requirements for the 158 Sulphurets units are approximately $33,000.
Three of the claims are subject to a contractual royalty obligation in
accordance with terms in the underlying Dawson Agreement. The three claims
were
purchased from Mrs. Dawson in 1990, for a sum of US$25,000, subject to a net
smelter return royalty of 2% of one-half of net smelter returns (effectively
1%
NSR) on ore production. The Dawson Royalty is capped at US$650,000 less the
property purchase amount. Advance annual royalties of US$5,000 per year
commenced on December 15, 1991, and may be bought out for US$450,000.
There
is
a further underlying agreement between Placer Dome Inc. and Newhawk Gold Mines
Ltd. dated February 4, 1992, whereby the advance annual royalties payable to
Dawson are being paid two-thirds by Placer Dome and one third by Newhawk. This
split is based on the fact that two of three claims, namely the XRAY 2 and
6,
are now part of Placer Dome’s Sulphurets Property and the XRAY 8 is on Newhawk’s
property.
Regional
and Property Geology
The
Kerr-Sulphurets property lies within the Stikine Terrane and is underlain
largely volcanic, volcaniclastic and sedimentary rocks at the western edge
of
the Bowser Basin. Within this geologic framework, copper, gold and molybdenum
mineralization and associated alteration are focused in a local core where
intense folding, faulting, thrust faulting and intrusions are prevalent. A
number of deformed porphyry and vein type
deposits
occur in the Mitchell-Sulphurets area. These deposits are characterized by
a
strong copper-gold and minor molybdenum association, and spatially occur along
the flanks of a horseshoe-shaped trend.
The
project consists of two separate gold zones, Kerr and Sulphurets. Each consists
of separate and unique structures and are discussed separately
below:
Kerr
Zone
The
Kerr
deposit extends approximately 3,000 m in a northerly trend from the crest of
a
ridge above the southwestern branch of the Sulphurets Glacier down to the lower
slopes of a cirque-like basin just above Sulphurets Lake. The deposit is a
pyrite-rich copper-gold system that occurs in strongly altered and deformed
monzonitic intrusions in sedimentary and volcaniclastic rocks. The most
important mineralization type is quartz stockwork. The strongest copper-gold
mineralization is associated with a core of chlorite-bearing alteration and
quartz stockwork.
Sulphurets
Zone
Disseminated
copper-gold mineralization in the Sulphurets Gold Zone is centered about a
hydrothermal breccia (Breccia Gold Zone) and dyke complex (Raewyn Copper-Gold
Zone) representing the higher levels of a copper-gold porphyry system. The
combined gold and copper lithogeochemical anomaly associated with the Sulphurets
Gold Zone Target has a strike length of 2.5 kilometers by up to one kilometer
in
width.
Exploration
History
Placer
gold was discovered in Sulphurets Creek in the 1880s. In 1935, copper
mineralization was discovered on Mitchell-Sulphurets Ridge in a location now
known as the Main Copper Zone. In 1959, gold-silver mineralization was
discovered in the Brucejack Lake area. These showings were subsequently explored
with surface and underground exploration in the 1980s and 1990s as three
comparatively small high-grade gold-silver zones by Newhawk Gold Mines Ltd.
and
Lacana Mining Corp.
In
1960,
claims on the Sulphurets property were staked by Granduc Mines Ltd. and some
independent prospectors. Exploration including diamond drilling was completed
over an eight-year period on Sulphurets Gold, Main Copper and Quartz Stockwork
Zones by Granduc and the Newmont Mines Joint Venture. From 1971 to 1975 Granduc
continued exploration on the Sulphurets Property. From 1980 to 1985, Esso
Minerals optioned the Sulphurets Property from Granduc with in order to explore
for porphyry molybdenum, bulk mineable copper-molybdenum-gold and gold-bearing
vein type deposits. In 1985, Esso surrendered its interest in the Sulphurets
Property to Granduc.
The
Alpha
Joint Venture (“Alpha”) staked the Kerr Property in 1982 Anomalous gold values
in soils were identified in 1983 by Alpha and based on these results Brinco
Limited optioned the Kerr Property in 1984 and funded the next phase of
geological mapping, prospecting and geochemical sampling. This work outlined
a
gold anomaly over one kilometer long. In 1985, Newhawk Gold Mines Ltd. and
Lacana Mining Corp.
formed
a
joint venture, and optioned the adjoining Sulphurets Property from Granduc
and
explored several zones, including conducting diamond drilling.
In
1989,
fieldwork completed by Placer Dome included additional diamond drilling to
extend the Kerr deposit to a strike length of more than 1,600 meters. In 1990,
Placer Dome completed a major diamond drill program on the Kerr Property to
further define the deposit. Placer further completed a major diamond drill
program on the Sulphurets Gold Zones and adjoining Kerr deposit during the
summer of 1992, with the total exploration expenditures incurred by Placer
on
the Kerr-Sulphurets property through to year-end 1992 was C$6.6 million.
Environmental/Regulatory
Information
The
Kerr-Sulphurets Property falls within the Cassiar-Iskut-Stikine Land and
Resource Management Plans (LRMP). At this stage, there are no direct Protected
or Special Management Areas overlapping the Kerr-Sulphurets Property. However,
as negotiations on recommendations proceed, there may be potential Land Use
conflicts arising from future allocations by the Regional Protected Areas Team
in the vicinity of the Kerr-Sulphurets project. In particular, a
Conservation-oriented Protection Area and large River Corridor Special
Management Area are currently being recommended along the lower two-thirds
of
the Unuk River. The establishment of this type of Protected Area, although
it
does not overlap the Kerr-Sulphurets Property, could impact the approval process
of potential development plans and valley access to the project.
Reclamation
and decommissioning activities associated with previous exploration activities
have been initiated and almost completed on the Kerr-Sulphurets Property. The
main activities include response to periodic inspections by the British Columbia
Ministry of Energy and Mines. There are a number of outstanding activities
that
are still required to be administered in accordance with recommendations
from the Ministry including additional reclamation on drill access roads
and equipment and material clean-up. The British Columbia Ministry of Energy
and
Mines estimates $225,000 of additional reclamation work may be required and
the Company has deposited this amount under a safekeeping agreement with
the Ministry for these obligations.
Current
and Planned Work
On
September 17, 2002, the Company entered into an agreement with Noranda Inc.
(now
known as Falconbridge Limited) whereupon Falconbridge may earn an interest
in
the project. The agreement allows Falconbridge to earn a 50% interest in the
project by spending $6,000,000 on exploration within 6 years. Falconbridge
may
earn a further 15% by funding all costs to complete a feasibility study on
the
project. If, after earning its 50% interest, Falconbridge elects not to proceed
with a feasibility study, Seabridge has the option to acquire Falconbridge’s
interest for $3,000,000. After having earned its 50% interest, Falconbridge
has
the right to delay its decision to proceed with a feasibility study for up
to
three years by either spending $1.25 million per year on the property or making
payments to Seabridge which would total $1.5 million over the three-year period.
During
2003 and 2004, Falconbridge conducted field programs at Kerr-Sulphurets designed
to explore outside the known deposits in order to expand the known resources.
The programs consisted of mapping, rock and soil sampling, and IP surveys.
The
size of mineralized zones at Iron Cap, Mitchell and Main Copper were expanded
into areas of recent glacier retreat which were not accessible by Placer Dome.
During
2005, Falconbridge completed a summer drill program consisting of 16
widely-spaced core drill holes totaling 4,092 meters designed to test six
targets situated outside the resources previously defined for the Kerr and
Sulphurets deposits. Gold-copper mineralization was encountered at all six
targets, with the Iron Cap and West Mitchell zones yielding the most encouraging
results.
Red
Mountain Project
The
Red
Mountain Project is a 20,175 hectares gold project located in northern British
Columbia, Canada. Seabridge currently has a 100% interest in the project,
subject to net smelter royalty obligations ranging from 2 to 6.5% on various
segments of the property. The Property is without known mineral reserves
and is at the exploration stage; The Company’s current efforts are exploratory
in nature.
Location
and Access
The
Red
Mountain project is situated in northwestern British Columbia near the town
of
Stewart, 880 km northwest of Vancouver and 180 km north of Prince Rupert. The
property lies in the Skeena Mining Division, approximately 18 km east-northeast
of the town of Stewart, at 55°57’N
latitude and 129°42’
W
longitude, between the Cambria Ice Field and the Bromley Glacier at elevations
ranging between 1,500 and 2000 meters.
Access
to
the property is currently by helicopter from Stewart with a flight time of
10
to15 minutes. Road access along the Bitter Creek valley from Highway 37A was
partially completed for 13 km by Lac Minerals in 1994 to the Hartley Gulch-Otter
Creek area. Currently this road is passable for only a few kilometers from
the
highway. The remainder is not passable, as sections have been subjected to
washout or landslide activity.
How
Acquired
Effective
December 31, 2001, the Company agreed to acquire a 100% interest in the Red
Mountain project from North American Metals Corp. (“NAMC”), a subsidiary of
Wheaton River Minerals Ltd. (“WRM”). Closing of the acquisition was completed in
April 2002. At closing, the Company issued NAMC 800,000 common shares of the
Company in exchange for a 100% interest in the Red Mountain project which
includes 106 mineral claims comprising 19,030 hectares; all project data
including an extensive, high-quality data base and drill core repository; an
office/warehouse building in Stewart; a large complement of mining equipment
at
the Red Mountain site which has been independently valued at approximately
$0.5
million; mineral exploration permit MX-1-422 and a related $1.5 million cash
reclamation deposit lodged with the B.C. Mines Ministry. In January 2002, WRM
filed a revised reclamation plan with the B.C. Mines Ministry which has reduced
the $1.5 million cash reclamation deposit to $1.0 million. Of the $500,000
that
was released by the Ministry, $350,000 was retained by Seabridge and $150,000
was paid to WRM. During 2003 Seabridge purchased additional claims at Red
Mountain totaling 1,145 hectares.
At
closing Seabridge also assumed obligations of various underlying property
agreements which include net smelter royalty obligations ranging from 2 to
6.5%,
as well as an annual minimum royalty payment of $50,000 on the Wotan Resources
Corp. (“Wotan”) claim group. Production from the Wotan claims, which contain the
Red Mountain gold deposit, is subject to two separate royalties aggregating
3.5%
of net smelter returns (“NSR”), comprising a 1.0% NSR payable to Barrick and a
2.5% NSR payable to Wotan.
The
Company also paid a finder’s fee of 40,000 common shares of Seabridge in regards
to the acquisition of the property.
Regional
and Property Geology
Red
Mountain is located near the western margin of the Stikine terrain in the
Intermontane Belt. Structurally, Red Mountain lies along the western edge of
a
complex, northwest-southeast trending, doubly-plunging structural culmination,
which was formed during the Cretaceous. Structural deformation at the property
scale is consistent with the observations at the regional and tectonic
scales.
Previous
Exploration History
Prospecting
and small-scale mining took place near Red Mountain, in the Bitter Creek Valley,
as early as 1900 and persisted intermittently through the first half of the
20th century. At that time much of Red Mountain was covered with snow
or glacial ice. Since that time the glaciers have retreated significantly,
exposing large portions of the summit and surrounding bedrock.
Porphyry
molybdenum and copper occurrences in the immediate Red Mountain area were
explored in the 1960s and 1970s. In 1965, molybdenum and native gold occurrences
were
discovered at McAdam Point, on the south side of Red Mountain. Additional small
molybdenum showings were subsequently located and explored in the central cirque
of Red Mountain. Gold exploration at Red Mountain then ceased as it was
generally regarded as a setting favorable for porphyry style molybdenum
mineralization.
Evaluation
of the Red Mountain area for gold potential recommenced in 1987. The Wotan
claims were staked in 1988 by local prospectors and optioned to Bond Gold in
1989. In that year, gold mineralization that was the surface expression of
the
Marc zone was discovered and a drill program was initiated. From 1989 to 1991
Bond carried out exploration programs including 17,638 meters of diamond
drilling, surface mapping and sampling and airborne EM and magnetic surveys.
Lac
Minerals acquired Bond in early 1991. Surface drilling on the Marc, AV, JW,
AV
Tails and 141 zones continued in 1991, 1992, 1993 and 1994, totaling 48,000
meters. Underground exploration of the Marc zone, including a total of 38,600
meters of diamond drilling, was conducted in 1993 and 1994 via the use of a
1,000-metre production-sized decline.
In
September 1994, Barrick acquired Lac and the Red Mountain project assets were
transferred to Barrick. Barrick sold the project to Royal Oak in August 1995.
Royal Oak extended the underground workings, undertook a drill program seeking
extensions to the known deposits, and worked on plans for the possible
development of the project. In 1996, lacking funds for exploration, Royal Oak
virtually ceased all activity at Red Mountain. By early 1999 Royal Oak was
in
serious financial difficulty and an Interim Receiver was appointed to dispose
of
Royal Oak’s assets, including Red Mountain.
NAMC’s
purchase of the Red Mountain project was completed on February 10, 2000. During
2000, NAMC completed a comprehensive review of the Red Mountain geological
and
environmental data. NAMC also carried out geological work including the
re-logging of a substantial quantity of drill core in order to produce an
improved resource estimation model. An access road route was designed from
the
end of the existing road to the site. During 2001 new management at WRM elected
to dispose of certain assets, including Red Mountain. Effective December 31,
2001, Seabridge agreed to acquire the Red Mountain project.
In
total,
466 surface and underground diamond drill holes totaling 134,807.24 meters
have
tested a variety of targets on the Red Mountain property. Four hundred and
six
holes, totaling 105,129.20 meters, were drilled by Bond and Lac between 1989
and
1994. The remaining 60 holes, totaling 29,678.04 meters, were drilled by Royal
Oak in 1996. No drilling was conducted by NAMC. The majority of drilling has
tested the Marc, AV, JW and AV-JW Tails mineralized zones. A total of 368 drill
holes from the Bond and Lac programs, including 207 surface drill holes and
161
underground drill holes, have tested this area. In addition, 2,000 meters of
underground workings have been excavated, including a 1,000-meter
production-sized decline.
Mineral
Resources
Red
Mountain is a structurally-controlled gold deposit. In May 2001, WRM completed
a
comprehensive review and validation of the project’s geological and
environmental data. This review included re-logging all drill core and the
construction of a new kriged resource block model. Prior to the closing of
the
acquisition of the property, Seabridge commissioned D.L. Craig, Professional
Geologist, to perform an independent technical review of the new resource model.
The
new
mineral resource estimate for Red Mountain incorporates data from 206 drill
holes that were relogged in 2000 by NAMC. Gemcom software was used to create
geological and mineralization outlines in plan and section for a 3D block model.
Gold and silver grades were interpolated using ordinary kriging with anisotropic
search ellipses designed to fit the geology.
Cautionary
Note to U.S. Investors concerning estimates of Measured and Indicated
Resources
This
section uses the terms “measured” and “indicated resources”. We advise U.S.
investors that while those terms are recognized and required by Canadian
regulations, the U.S. Securities and Exchange Commission does not recognize
them. U.S. Investors are cautioned not to assume that any part or all of
mineral deposits in these categories will ever be converted into
reserves.
In
January 2003, the Company engaged SRK Consulting to complete an engineering
study of the Red Mountain project. In their study, which was completed in August
2003, SRK determined that a 6.0 gram per tonne cut-off grade was appropriate
for
determining gold resources which may be available for economic
extraction.
Red
Mountain Measured and Indicated Resources at 6.0-gram-per-tonne
cutoff:
Measured
|
|
Indicated
|
Tonnes
(000s)
|
Grade
(g/t)
|
|
Tonnes
(000s)
|
Grade
(g/t)
|
|
|
|
|
|
866
|
9.39
|
|
193
|
8.43
|
|
|
|
|
|
Cautionary
Note to U.S. Investors concerning estimates of Inferred
Resources
This
section uses the term “inferred resources”. We advise U.S. investors that while
this term is recognized and required by Canadian regulations, the U.S.
Securities and Exchange Commission does not recognize it. “Inferred resources”
have a great amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. It cannot be assumed that all or
any
part of an Inferred Mineral Resource will ever be upgraded to a higher category.
Under Canadian rules
estimates
of Inferred Mineral Resources may not form the basis of feasibility or other
economic studies. U.S. investors are cautioned not to assume that part
or all of an inferred resource exists, or is economically or legally
mineable.
Red
Mountain Inferred Resource at 6.0 gram-per-tonne cutoff:
Inferred
|
Tonnes
(000s)
|
Grade
(g/t)
|
|
|
158
|
8.62
|
None
of
the resource can be classified as a Mineral Reserve. Additional exploration
work
will be required in order to upgrade the resources into reserve categories,
and
a full feasibility study will be required in order to determine if any of the
mineral resource are economic and can be profitably mined.
Environmental/Regulatory
Information
The
Red
Mountain project is covered by the British Columbia Ministry of Energy and
Mines, Mineral Exploration Permit MX-1-422. This permit was first issued on
June
24, 1993 and was most recently transferred to the Company in April
2002.
Exploration
work to date includes surface geological examinations, surface diamond drilling,
and creation of underground workings. Underground workings totaled 1000 meters
of declines and 1000 meters of crosscuts and drifts. There are 90,000 tonnes
of
waste from exploration work stored in two locations on surface. Of this
material, 5,000 tonnes is situated adjacent to the portal and 85,000 tonnes
is
stored 250 meters south of the portal. The underground workings remain intact
to
the water level at the first main crosscut and the portal is sealed with a
wooden door to prevent access. The piles were started in 1993 and the last
waste
rock was added in the summer of 1996. There is a small fleet of mobile equipment
at the site, mostly parked on top of the waste dump. There are also several
sea
containers near the portal, a wooden exploration camp in the bowl below the
portal and a steel Quonset hut hanger near the camp. The equipment on site
is
considered adequate to carry out the proposed reclamation plan.
A
reclamation plan was filed in June 1996 by Royal Oak Mines along with $1.5
million in cash reclamation security held by the Province of BC under a safe
keeping agreement. Based on subsequent monitoring and site work performed by
NAMC, with technical assistance provided by SRK Consulting of Vancouver B.C.,
in
January 2002, NAMC submitted a revised reclamation plan to the B.C. Ministry
of
Energy and Mines. The major difference between the original Royal Oak plan
and
the revised NAMC plan is the proposed treatment of the 90,000 tonnes of waste
material. The revised plan, endorsed by SRK, involves in-place recountouring
of
the waste material rather than placing the
material
underground. In April 2002, the B.C. Ministry of Energy and Mines reduced the
cash reclamation bond to $1.0 million.
Current
and Planned Work
In
August
2003, SRK Consulting completed an engineering study of the Red Mountain project.
SRK reviewed previous reviewed previous work performed on the project and
evaluated the development alternatives relating to various aspects of the
project. In their study, SRK determined that the best development alternatives
for Red Mountain are:
|
·
|
Road
access to the site. A road was designed by NAMC in 2001 to access
the
project site.
|
|
·
|
A
seasonal operation from May to October was selected in favor of year-round
operations on the basis of safety and
reliability.
|
|
·
|
An
on-site mill using a grinding and cyanidation leaching (CIP) circuit
was
selected. The alternative of using flotation to produce a sulphide
concentrate for offshore marketing was discarded on the basis of
poor
economics caused by lower overall gold recovery and smelting
costs.
|
|
·
|
A
conventional type of mill was selected instead of a portable type
due to
the tonnage required (1000tpd) and the very fine grind
needed.
|
|
·
|
The
full use of backfill was selected to optimize the mining recovery
of the
resources. Minimizing backfill was considered to reduce costs, but
the
possible savings are not enough to justify the lower mining recovery
that
results.
|
SRK
identified that the main risks associated with the project are related
to:
|
·
|
The
construction and operation of the mine access road, which must traverse
rugged mountainous terrain.
|
|
·
|
A
lack of continuity in the workforce due to the seasonal
operation.
|
|
·
|
Project
economics requiring a higher gold price than currently
exists.
|
|
·
|
The
tailings facility, which must retain a water cover on the tailings
in
perpetuity.
|
SRK
recommends that the following follow up work could prove beneficial to the
project:
|
·
|
Exploration
to increase the potentially economic
mineralization.
|
|
·
|
A
revised design for the cirque tailings facility to reduce its capital
cost
and its long-term costs after
closure.
|
None
of
the resource at Red Mountain can be classified as a Mineral Reserve. Additional
exploration work will be required in order to upgrade the resources into reserve
categories, and a full feasibility study will be required in order to determine
if any of the mineral resource are economic and can be profitably mined.
The
Company estimates annual holding costs of the property to currently be
approximately $215,000 broken down as follows:
|
a)
|
$130,000
to the British Columbia Ministry of Energy and
Mines
|
|
b)
|
$50,000
to Wotan Resources Corporation as an annual advance
royalty
|
|
c)
|
Approximately
$15,000 in property taxes, utilities and rentals on warehouse space
paid
to the District of Stewart, British
Columbia
|
|
d)
|
Approximately
$20,000 for ongoing environmental monitoring at the project
site.
|
Quartz
Mountain Project
The
Quartz Mountain Project is a 542 hectare (1,340 acres) gold project located
in
southern Oregon. Seabridge currently has a 100% interest in the project, subject
to NSR’s totaling 1.5%, and an option agreement with Quincy Energy Corp.
(formerly Quincy Resources Inc.), who can earn an initial 50% interest in the
property by expending $1,500,000 on exploration by October 15, 2008 and issuing
250,000 common shares of Quincy to Seabridge. The agreement with Quincy excludes
the mineral resource already outlined on the property as discussed below.
The Property is without known mineral reserves and is at the exploration
stage; The Company’s current efforts are exploratory in
nature.
Location
and Access
The
Quartz Mountain property is located in the Fremont National Forest, Bly Ranger
District, of South-central Oregon about 30 miles west-northwest of the town
of
Lakeview along Oregon State Highway 140. Two claim groups make up the property
holdings and consist of 67 mining claims that total 542 ha (1,340 acres).
Access
to
the property from Oregon State Highway 140 is via several paved and gravel
covered forest access roads. These forest service access roads are used on
a
seasonal basis by local logging companies that operate in the area. Connected
to
the network of forest service roads are a variety of trails that were
constructed to facilitate logging and previous mineral exploration. Access
to
the resource areas can be gained on existing secondary trails or by
rehabilitating old trails.
How
Acquired
In
December 2001, the Company entered into an Asset Purchase & Sale and Royalty
Agreement with Quartz Mountain Gold Corp. whereby Seabridge agreed to acquire
100% of the Quartz Mountain Gold Project in consideration of the following
payments to Quartz Mountain Gold Corp. US$100,000 in cash; 300,000 common shares
of Seabridge; 200,000 common share purchase warrants, exercisable for two years
at a price of $0.90 per share (exercised in 2003); and a 1% NSR in the project.
Closing of the acquisition was completed in January 2002. Additionally, a 0.50%
NSR will be payable to an unrelated third-party as a finder’s fee.
On
October 15, 2003, the Company signed an option agreement with Quincy Resources
(now known as Quincy Energy Corp.) where Quincy can earn an initial 50% interest
in the project (not including the “Excluded Ounces” as defined below”) by
spending $1,500,000 on exploration at the project on or before October 15,
2008
under the following schedule.
|
Date
|
Required
Expenditure Amount
|
|
|
|
|
By
October 15, 2004
|
$100,000
(completed)
|
|
By
October 15, 2005
|
$250,000
(completed)
|
|
By
October 15, 2006
|
$500,000
|
|
By
October 15, 2008
|
$1,500,000
|
Quincy
must also issue 250,000 of its common shares to Seabridge under the following
schedule:
|
Date
|
Required
Share Issuance
|
|
|
|
|
Upon
Execution of the Agreement
|
50,000
shares (issued)
|
|
Within
30 days satisfying the expenditure obligations above
|
200,000
shares
|
Once
the
expenditure amounts and the share issuances have been satisfied, Quincy will
be
deemed to have earned a 50% interest in the property and will form a
Joint-Venture with Seabridge. Quincy can earn an additional 12.5% interest
(for
62.5% total) in the project by funding 100% of a feasibility study on the
project within 3 years and issuing an additional 250,000 common shares to
Seabridge upon completion of the study. If
Quincy
decides against preparing a feasibility study, or fails to deliver a study
within 3 years, Seabridge has a one-time option to purchase Quincy’s interest in
the project for US$750,000. Quincy will be responsible for all land holding
fees
and costs associated with the property as long as the option remains in
effect.
The
option agreement with Quincy excludes the potential mineral resource already
outlined on the property under a Winters, Dorsey & Company LLC study. That
area of the property, known as the “Excluded Ounces”, remains 100% held by
Seabridge, subject to the NSR. If Quincy delivers to Seabridge a Feasibility
Study that incorporates within the mine plan the Excluded Ounces, those ounces
shall be transferred to the Joint Venture at a price to be paid by Quincy to
Seabridge equal to Quincy’s working interest times the estimated gross operating
margin of those ounces, less a 25% discount. Payment for the Excluded Ounces
will be due on a quarterly basis as they are produced.
Under
the
option agreement, the company’s also agree that should either party acquire
and/or stake claims, exploration permits, mining leases or any other form of
mineral right or interest within an area of interest within 2 miles of the
outer
boundaries of the property, that additional property will automatically become
part of the property subject to the agreement.
Regional
and Property Geology
The
Quartz Mountain gold and mercury district is located in a Mid-Tertiary volcanic
highland within the northern transitional zone of the Great Basin. One of the
primary structural features of the district is a wide (3 miles) northwest
trending structural zone that interrupts the thick sequence of basalt flows.
Hydrothermal alteration in the district is characterized by acid leaching of
the
host rocks and subsequent precipitation of quartz in the gold zones. Ryholitic
domes make up the central feature of the volcanic stratigraphy of the area
and
are characterized by glassy tops.
The
Quartz Mountain project is a volcanic-hosted, hot-spring gold deposit.
Disseminated, micron-size, native gold mineralization at Quartz Mountain
accompanies pervasive silica flooding and quartz veining. Mineralized zones
measure up to 300 feet in thickness and 3000 feet in diameter on Crone Hill
and
up to 100 feet in thickness and 1000 feet in diameter on Quartz Butte. There
are
two distinct areas of gold mineralization present at Quartz Mountain, Crone
Hill
and Quartz Butte.
Previous
Exploration
Quartz
Mountain was believed to have been initially prospected for gold by migrant
Chinese in the 1890s. Rare prospect pits that contain ponderosa pine trees
over
four feet in diameter are indirect evidence of this initial early stage of
exploration activity.
The
earliest recorded work was performed by the Sun Oil Company, between 1936 and
1940. Sun Oil was prospecting for mercury with shallow pits and trenches. In
1949, small amounts of gold were reportedly recovered from two shafts on Crone
Hill and Quartz
Butte.
The shafts were sunk by employees of the Ewauna Camp Lumber Company and have
since caved in. The property saw renewed interest in the late 1950’s due to a
nation-wide mercury "boom". Local prospectors staked dozens of claims in what
became the 60-square mile Quartz Mountain mercury district. Most of the cinnabar
claims were allowed to become delinquent during the 1960s in a general collapse
of the mercury mining industry.
In
1980,
the claims were staked by a prospector and acquired by Exploration Ventures
Company (“EXVENCO”) of Spokane, Washington in 1982. The Anaconda Company entered
a joint venture partnership with EXVENCO in December 1982, and subsequently
enlarged the claim block to include the entire Quartz Mountain district.
Anaconda was the operating partner and initiated the first systematic
exploration program for gold in the district. In the spring of 1985, Anaconda
was disbanded by its parent company, Atlantic Richfield Corporation, and Quartz
Mountain, along with all of their other mineral properties, was placed up for
sale.
Wavecrest
Resources Ltd secured Anaconda's interest in the property through a purchase
agreement in the autumn of 1985. Wavecrest quickly consolidated their holdings
on the entire claim block by purchasing EXVENCO's interest. The remaining small,
inlaying claim blocks dating from the late 1950’s were systematically acquired
and for the first time in its history, the Quartz Mountain district was
consolidated under a single owner in June of 1986. Wavecrest Resources Ltd.
and
Galactic Resources Ltd. created Quartz Mountain Gold Corporation in June of
1987
to jointly advance the project. In 1987, 460 drill holes were completed on
Crone
Hill, Quartz Butte and Angel’s Camp totaling 52,284 meters (171,537 feet) of
drilling. In 1988, 100 drill holes (including 47 large diameter metallurgical
drill core holes) were completed on Crone Hill, Quartz Butte, Angel East and
Drews Dome for a total of 10,600 meters (34,778 feet). The Crone Hill and Quartz
Butte deposits were drilled off on at least 30.5 meters (100-foot) centers
during these programs. Between mid-September and late November 1988, 19 deep
drill holes totaling 4,473 meters (14,675 feet) were completed on Quartz Butte
to explore for high-grade feeder veins within the throat of the Quartz Butte
dome. A total of 34 deep drill holes now define this feeder zone
system.
In
July
1989, Pegasus Gold became operator of the Quartz Mountain Gold Project. In
December 1994, Pegasus terminated the joint venture agreement with Quartz
Mountain. Some of the key terms of this termination agreement required Pegasus
to return its interest in the property, forgive outstanding loans to Quartz
Mountain and performed all required reclamation work. Pegasus completed these
obligations and Quartz Mountain Gold assumed undivided ownership of the property
without debt or reclamation obligations. In August 1995, Quartz Mountain Gold
Corporation concluded a letter agreement with Newmont Exploration Ltd. on the
Quartz Mountain property. This agreement allowed Newmont to earn an 80%
operating interest in the property for certain cash payments and work
commitments. Newmont drilled 10 holes on the project, which were focused on
expanding the near-surface, low-grade gold resources that had been previously
identified. The project did not satisfy Newmont’s investment criteria and was
returned
to Quartz Mountain Gold in 1996. Since 1996, little exploration work has been
performed on the project.
Environmental/Regulatory
Information
The
United States Forest Service (USFS) would be the lead regulatory agency on
the
federal level that is responsible for review and approval of mining activities
at Quartz Mountain. The Quartz Mountain Project is characterized as an
exploration stage project that has undergone considerable exploration and a
Feasibility Study level evaluation of an open pit(s) mine with heap leach
processing in the mid-to-late 1980's. Environmental baselines and monitoring
at
Quartz Mountain were initiated by previous owners in the late 1980's. These
activities were directed by SRK Consulting’s Reno Office. These reports are
valuable in assessing impacts and making recommendations for future work. The
reports also provide valuable information that may be used by Seabridge in
limiting liability as well as supporting future efforts should Seabridge decide
to proceed with preparation of a particular plan at the Quartz Mountain
Project.
To
further study the permitting issues at Quartz Mountain, Seabridge retained
Gochnour & Associates of Parker, Colorado (“Gochnour”) to undertake an
environmental review and regulatory permitting due diligence on Quartz Mountain.
The report of Gochnour is entitled “Quartz Mountain Project;
Permitting/Environmental Report” (the “QMP P/E Report”) and dated November 28,
2001.
The
Gochnour study examined various potential development scenarios including an
open pit and/or underground mining operations. Processing Alternatives include
on-site milling and/or heap leach technology utilizing cyanide, and off-site
processing (toll milling). Waste disposal alternatives include overburden
stockpiles adjacent to the orebody (under an open pit scenario). With an
underground or combination open-pit/underground mining scenario, waste could
be
used as backfill and/or stockpiled on the surface, adjacent to mining
operations. Each Alternative would require the preparation of a different
reclamation strategy. Gochnour concluded that each of the scenarios is
permittable under current federal and state law. To complete the permitting
process, Gochnour estimates that the open-pit scenario would take 3-5 years
to
permit once a Plan of Operations (“POO”) had been submitted. Gochnour estimated
the permitting time frame for the underground scenarios at 2-3 years after
the
POO was submitted.
Exploration
Potential
The
Quartz Mountain mineral system can be classified as a low-sulfidation epithermal
deposit based on the characteristic mineralogical suite of adularia, cinnabar
and stibnite. The characteristic geometry and bonanza vein occurrences
associated with low-sulfidation systems have not been recognized at Quartz
Mountain because resource delineation has been focused on the shallow parts
of
the system that favor the bulk-mineable or disseminated gold concentrations.
The
low-sulfidation epithermal model seems to best explain the distribution of
gold,
characteristic boiling textures in the veins and mineralogy at Quartz Mountain.
This model implies that there is a potential for
discovering
high-grade bonanza veins that provided fluid pathways for the large volumes
of
gold-bearing fluids that created the system.
Current
and Planned Work
During
2004, Quincy completed approximately 4,000 meters of core drilling at the
property designed to test for higher grade feeder zones. Quincy plans to conduct
additional drilling in 2005. Annual holding costs at the project are
approximately US$10,000 primarily paid to the U.S. Bureau of Land
Management.
Hog
Ranch Project
The
Hog
Ranch Project is a gold project of approximately 5,000 acres located in northern
Nevada. Seabridge currently has a 100% interest in the project, subject to
a 3%
to 5% NSR which varies depending upon the commodity price of gold. In August
2003, the Company granted Romarco Minerals an option to earn an initial 60%
interest in the property. The Property is without known mineral reserves
and is at the exploration stage; The Company’s current efforts are exploratory
in nature.
Location
and Access
The
Hog
Ranch project is located in northern Washoe County, Nevada, approximately 230
kilometers north of Reno. Access to the property is 2 miles off of Nevada state
highway 477, midway between Gerlach, Nevada and Susanville,
California.
How
Acquired
In
November 2000, the Company acquired a 100% leasehold interest in the Hog Ranch
gold project in northern Nevada. Under the agreement with Platoro West Inc.,
Seabridge paid Platoro US$75,000 cash and issued 500,000 common shares. Platoro
will be paid a further US$250,000 upon the earlier of:
|
a)
|
confirmation
by an independent third party of a measured and indicated gold reserve
of
more than 1.0 million ounces, or
|
|
b)
|
completion
of a positive bankable feasibility study which demonstrates a mine
capable
of producing at least 100,000 ounces of gold per
annum.
|
Commencing
on the 4th anniversary of the agreement, Platoro will receive an
annual advance royalty payment of US$10,000, escalating by US$2,500 per annum
to
a maximum of US$20,000 per annum. Additionally, Seabridge is required to
maintain the property claim block in good standing at an estimated annual cost
of US$35,000. Should production commence at Hog Ranch, Platoro West will be
paid
a sliding-scale net smelter royalty ranging from 3% when gold is less than
$300
per ounce, to 5% when gold is greater than $500 per ounce. In addition, Platoro
will be paid a royalty of 3.5% on gross proceeds from any other metals produced.
Seabridge retains the right to buy back 40% of the royalty at any time for
US$2
million.
In
August
2003, the Company granted Romarco Minerals an option to earn an initial 60%
interest in the property by spending US$2.5 million on exploration and issuing
to Seabridge 1.5 million Romarco common shares by December 31, 2007. In February
2005 Romarco terminated its rights under the agreement and the property reverted
back to the Company.
Regional
and Property Geology
Hog
Ranch
is situated on the southeast edge of the Cottonwood Creek volcanic center
(“CVCC”), which is located at the southern end of the Northwest Nevada volcanic
field. The CVCC is thought to be a failed or downsag caldera with no recognized
large volume ash flow eruption or catastrophic caldera collapse event. Hog
Ranch
is an epithermal low-sulfidation gold deposit hosted by rhyolite volcanic and
volcanoclastic rocks. Ore zones exploited by Ferret and Western Mining were
principally disseminated occurrences hosted by poorly welded tuff and lacustine
rocks. Veins are better developed in the component densely welded tuff. Volcanic
centers and the historical open pits are aligned in a northeast trend coincident
with the Black Rock Structural Boundary. The identified high-grade vein system
is contained in the northwest trending faults.
Previous
Exploration
Gold
was
first discovered at Hog Ranch in 1980 by Noranda Exploration, Inc. Noranda
geologists were led to the area by an airborne radiometric survey of
northwestern Nevada during a 1979 uranium reconnaissance program. No significant
uranium occurrences were found but anomalous gold concentrations were discovered
in the Bell Springs area. By 1981, Noranda had extended their claim holdings
across the northern part of the Hog Ranch area and had drilled out a small
gold
resource at Bell Springs. Ferret Exploration Company, Inc. assumed operation
of
the Hog Ranch project in 1982 and proceeded to discover and drill out gold
resources in the northern part of the Hog Ranch area and at Bell
Springs.
Exploration
activities by various owners through 1986 focused exclusively on open-pit
deposits amenable to heap leach processing. In 1986 Western Goldfields commenced
mining activities at Hog Ranch. In 1988 Western Mining Corporation purchased
Hog
Ranch and continued mining until 1993. The mine has been shut down since 1993
and final reclamation activities by Western Mining have been largely completed.
Exploration
activities by previous owners at Hog Ranch focused exclusively on open pit
resources amenable to heap leach processing. At least 2,640 holes were drilled
at Hog Ranch, of which only 247 were drilled as angle holes and only 65 were
drilled to a depth greater than 200 meters. A high percentage of these deeper
inclined holes were in exploration areas away from the productive deposits.
The
vast majority of the drilling was vertical holes focused on the delineation
of
disseminated low-grade open-pit reserves. The Company believes that the
unrealized opportunity at Hog Ranch rests with
In
2004
Romarco completed two phases of drilling at Hog Ranch. The initial phase of
drilling consisted of a total of 725 meters in three rotary-reverse circulation
drill holes that were designed to begin testing bonanza gold vein targets below
and around the previously mined Geib Pit. One of the holes intersected 21.3
meters averaging 5.23 grams of gold per tonne. Included in this intercept were
two 1.5-meter high-grade intercepts which assayed 28.7 grams of gold per tonne
and 17.2 grams of gold per tonne respectively. Rom
high-grade
gold mineralization associated with the high-angle,
structurally-controlled feeder zones.
In
early
2001, Seabridge initiated an eight-hole diamond drill program to test for
the
potential of a high-grade underground gold deposit similar to the nearby
Midas
and Sleeper mines. The program successfully confirmed all the necessary
conditions for such a deposit. High-grade gold intercepts from two different
structures intersected in the drilling may represent the discovery of the
upper
levels of such a deposit. Results from this drilling program yielded assay
results of up to 19.9 grams of gold per tonne within a fracture and vein
zone.
Observations of the core from the recent program have enabled Company geologists
to reinterpret previous data and conclude that: (1) alteration has the scale
(seven by eight kilometers) and intensity similar to other major deposits
in
northern Nevada; (2) the gold has been concentrated in specific, identifiable
structures which have significant strike and down-dip potential; and (3)
previous open pit mining was in the very top of the mineralized system, leaving
the higher-grade potential intact and below the level of previous workings.
A
further program has been recommended to test for the higher grade ‘boiling’ zone
which evidence suggests should be below the intercepts from the recent
program.
Current
and Planned Work
arco’s
second phase of drilling consisted of approximately 1,400 meters in six diamond
drill core holes. The purpose of the program was to begin testing bonanza gold
vein targets below and around the previously mined Geib and Krista Pits and
to
try to expand on the significant mineralization encountered in Romarco initial
phase o drilling. The highlight of the second phase program was 1.5-meter
intercept that assayed 15.3 grams of gold per tonne. In February 2005 Romarco
terminated its rights under the agreement and the property reverted back to
the
Company.
There
is
no immediate exploration planned at Hog Ranch for the current year. Current
holding costs at Hog Ranch are estimated to be US$47,000 per year including
$34,500 in payments to the US Bureau of Land Management and Washoe County,
Nevada, and an annual advanced royalty payment of US$12,500 to Platoro West
Inc.
The annual advanced royalty payment to Platoro increases by US$2,500 per year
to
a maximum of US$20,000 per year.
Castle/Black
Rock Project
The
Castle/Black Rock Project is a 2,500 acres gold project located in west-central
Nevada. Seabridge currently has a 100% interest in the project, subject to
a 3%
to 5%
NSR
which
varies depending upon the commodity price of gold. The Property is
without known mineral reserves and is at the exploration stage; The Company’s
current efforts are exploratory in nature.
Location
and Access
The
Castle/Black Rock project is located in Esmeralda County, Nevada, off the flank
of the Monte Cristo Mountain Range in the southwest part of the Big Smokey
Valley. The property consists of 131 contiguous unpatented mining claims located
on public lands administered by the U.S. Bureau of Land Management. The project
straddles U.S. highway 95/6, approximately 20 miles west of Tonopah,
Nevada.
How
Acquired
In
October 2000, the Company acquired a 100% leasehold interest in the Castle/Black
Rock gold from Platoro West Inc. The purchase agreement included the Company
issuing 5,000 common shares to Platoro and for annual advance royalty payments
of US$7,500 in the first year, US$8,500 in year 2, US$17,500 in year 3, and
thereafter US$25,000 annually. Additionally, Seabridge is required to maintain
the 2,500-acre claim block in
good
standing at an estimated annual cost of US$15,000. Should production commence
at
Castle/Black Rock, Platoro West will be paid a net smelter royalty ranging
from
3% when gold is less than $320 per ounce, to 5% when gold is greater than $500
per ounce. In addition, Platoro will be paid a royalty of 3.5% on gross proceeds
from any other metals produced. Seabridge retains the right to buy back half
of
the royalty at any time for US$1.8 million.
Regional
and Property Geology
The
property occurs within the Walker Lane gold belt. Quaternary gravel and alluvial
fan deposits cover most of the Castle/Black Rock property. Hydrothermal
alteration in the volcanic rock is focused on structures and zoned vertically
and laterally. Vertical zonation of the alteration sequence has created an
intense argillic cap above the gold bearing structures, from 3 to 30 meters
thick.
The
known
gold mineralization on the property is concentrated in 3 zones; Castle, Black
Rock and Berg-Boss. In each zone, gold is concentrated in structures hosted
by
sedimentary rocks, andesite and rhyolite. Gold is also distributed away from
the
structures in andesite and rhyolite.
Previous
Exploration
Outcropping
gold mineralization was discovered by a Tonopah prospector in the 1960s in
the
hills just northwest of Black Rock and Highway US 95/6. The mineralization
was
explored at that time by a 50-foot deep shaft (Boss Mine) and some dozer
trenches plus 2 diamond and 8 rotary drill holes.
Houston
Oil and Minerals Corporation (HOM) began systematic surface exploration of
the
outcropping mineralization and surrounding area in 1979 and outlined a small
unclassified resource of about 200,000 tons at an average gold grade of 0.07
ounces per ton. Disappointed with the small size and their inability to get
the
ore to leach, HOM relinquished the property at the end of 1979. The property
was
then acquired in 1981 by Ebco Enterprises and optioned in that year by Falcon
Exploration, who proceeded to delineate a larger reported ore zone at the Boss
and elected to construct a small open-pit, heap leach mine. Homestake Mining
Company optioned Falcon’s peripheral claims in 1987 and discovered gold
mineralization south of Black Rock during their drill program. Homestake
relinquished the property that same year.
Falcon
poured their first bar of gold in January 1988 and began an exploration program
on the peripheral claims in the spring of that year. Westley Explorations and
Mintec Resources optioned the Boss claims from Falcon in August of 1988 and
undertook a surface exploration and drilling program. The area northeast of
Black Rock, now known as the Castle zone, was never drilled by Mintec. Mintec
eventually relinquished their claims in the early 1990s, including the
northeastern corner of the block, which covered the current Castle
deposit.
Kennecott
Exploration staked a large block of claims northeast of the Boss pit in 1992
as
part of a large regional exploration program in the Walker Lane District. This
original claim block did not include what eventually became the Castle
discovery. Kennecott executed a surface exploration program with initial
drilling in 1993. Kennecott eventually drilled a total of 65 Reverse Circulation
(“RC”) holes totaling 26,435 feet, which delineated a broad mineralized zone
2400 feet wide and at least 4200 feet long. The last RC hole was drilled in
August 1995. Within this broad zone, Kennecott identified at least one ore
zone
that was never systematically drilled out and other mineralized drill holes
were
left without follow-up.
In
October 1996, Fischer-Watt Gold Company (FWG) purchased the Castle property,
consisting of 20 “CP” claims, from Kennecott. They staked an additional 32 lode
claims around the periphery of the Kennecott block. The surrounding ground
to
the west and south, including the Berg and Black Rock zones, was staked by
Platoro Resources, LLC earlier in that same year. In January 1998, the property
was optioned from FWG by Zephyr Resources. Subsequent to Zephyr Resources,
Cordex Exploration Co (a 100% subsidiary of Ray rock Resources Inc.) leased
the
FWG properties and conducted additional exploration activities, including RC
drilling. In 1999 Glamis Gold acquired Ray rock and the Castle/Black Rock
project was dropped. Later in 1999, Platoro acquired the FWG ground, thereby
consolidating the property positions under a single owner.
Current
and Planned Work
There
is
no immediate exploration planned at Castle/Black Rock for the current year.
However, management intends to retain the project within its property portfolio.
The Company estimates annual holding costs of the property to be a total of
US$40,000, with US$25,000 paid to Platoro West as an annual advance royalty
and
US$15,000 paid to the US Bureau of Land Management and to Esmeralda County,
Nevada.
Pacific
Intermountain Gold Corporation Projects
The
Company currently owns a 100% interest in Pacific Intermountain Gold Corporation
(“PIGCO”), a private company focused on the acquisition and exploration of
early-stage gold and silver properties in Nevada. The Company’s ownership
interest in PIGCO is subject to a 10% net profits interest held by a previous
minority shareholder in PIGCO.
All
of PIGCO’s Properties are without known mineral reserves and are at the
exploration stage; PIGCO’s current efforts are exploratory in
nature.
To
date,
PIGCO has staked approximately 1,800 claims, or about 36,000 acres, of mineral
exploration land in Nevada. This acreage covers more than 20 identified gold
exploration targets, with most of the property located in Nye County. All lands
in the area are managed by the US Bureau of Land Management, and annual holding
costs of the property are approximately US$250,000 plus an additional US$99,500
in underlying lease payments.
Seabridge
intends to seek joint-venture partners to carry out exploration on the majority
of PIGCO’s staked lands. However, Seabridge intends to maintain certain
properties for its own exploration portfolio and conduct work on these
properties in the future. Seabridge plans to drill test the Four-Mile Basin
project and Golden Arrow project during 2006.
Not
applicable
Item
5. Operating and Financial
Review and Prospects
Overview
The
Company's financial statements are stated in Canadian Dollars (C$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP except
as
noted in Footnote #11 to its audited annual financial statements for the year
ended December 31, 2005. The value of the U.S. Dollar in relationship to the
Canadian Dollar was $1.17 as of December 31, 2005.
The
Company has since inception financed its activities through the distribution
of
equity capital. The Company anticipates having to raise additional funds by
equity issuance in the next several years, as all of the Company’s properties
are at the exploration stage. The timing of such offerings is dependent upon
the
success of the Company’s exploration programs, the ability to attract
joint-venture partners, as well as the general economic climate.
Results
of Operations
Year
Ended December 31, 2005 Compared to Year Ended December 31,
2004
The
Net
Loss for the year ended December 31, 2005 totaled $1,157,000 or $0.04 per share
compared to $1,226,000, or $0.04 per share for the year ended December 31,
2004.
The loss in 2005 was reduced by $821,000 (2004 - $575,000) in income tax
recovery largely relating to the Company renouncing the Canadian Exploration
Expenses to the investors of the flow-through financings completed in 2004
and
2003, respectively. Also in 2004, Pacific Intermountain Gold Inc. (“PIGCO”) a
subsidiary of the Company sold shares which it had received on optioning out
a
mineral property resulting in a gain of $75,000 offset by $19,000 representing
the minority interest in the gain. Corporate and general expenses were slightly
lower in 2005 compared to 2004 as additional expenses in 2004 were incurred
related to the listing of the Company’s shares on the American Stock Exchange
and investor relations activity offset by slightly higher management fees in
2005. In 2005 stock option compensation expense was $361,000 compared to
$115,000 in 2004. Approximately $332,000 of the 2005 amount relates to the
recognition of
compensation
expense for the two-tiered options to management. The expense is for reaching
the $6 and $9 share price vesting requirements with the consequent vesting
of
500,000 of the 750,000 stock options outstanding.
Year
Ended December 31, 2004 Compared to Year Ended December 31,
2003
The
Net
Loss for the year ended December 31, 2004 totaled $1,226,000 or $0.04 per share
compared to $1,338,000, or $0.05 per share for the year ended December 31,
2003.
The loss in 2004 was reduced by a $575,000 income tax recovery largely relating
to the recognition of the Company’s tax assets after renouncing the Canadian
Exploration Expenses to the investors of the flow-through financings completed
in 2003. Also in 2004, PIGCO sold shares which it had received on optioning
out
a mineral property resulting in a gain of $75,000 offset by $19,000 representing
the minority interest in the gain. Corporate and general expenses increased
by
$867,000 in 2004 over 2003. Approximately 39% of this increase was due to
increased investor relations activities including listing on the American Stock
Exchange and investor communications. Approximately 27% of the increase in
corporate and general expenses was due to higher salaries and benefits for
senior personnel and the hiring of a Chief Financial Officer. A further 15%
of
the increase reflects a full year of directors’ fees which the Company commenced
paying in mid 2003 as well as the introduction of a comprehensive directors
and
officers liability insurance policy. About 12% of the increase was due to the
recognition of the accretion for costs of reclamation liabilities. Finally,
about 6% of the increase was due to higher costs of regulatory compliance,
principally accounting and legal fees required by changes in regulations. In
2003, the Company wrote off the Tobin Basin exploration project in Nevada
amounting to $342,000 due to unsuccessful exploration results.
Liquidity
and Capital Resources
The
ability of the Company to successfully acquire additional advanced-stage gold
projects or to advance the projects already acquired is conditional on its
ability to secure financing when required. The Company proposes to meet any
additional cash requirements through equity financings. In light of the
continually changing financial markets, there is no assurance that new funding
will be available at the times required or desired by the Company.
Year
Ended December 31, 2005
The
Company’s working capital position, at December 31, 2005, was $10,603,000 an
increase of $6,383,000 compared to $4,220,000 at the prior year-end. Included
in
working capital, in 2005, was $4,028,000 (2004 - $1,170,000) in cash from
flow-through share financings which will be used in 2006 for exploration at
the
Courageous Lake property. In 2005, the Company completed two flow-through
financings, in February 500,000 common shares were issued at $4.25 each and
in
December 435,000 common shares were issued at $7.25 each. In addition, a private
placement of 1 million shares at $5 each was completed with the Company’s
largest shareholder. Also in 2005, the Company received cash of $863,000 from
the exercise of warrants and $361,000 from the
exercise
of options. In 2005, total financings received were $11,299,000 compared to
$8,241,000 in 2004.
Cash
and
short-term deposits at December 31, 2005 were $6,165,000, up from $2,788,000
at
December 31, 2004. In addition to the stated cash and short-term deposits,
the
Company had $4,028,000 in cash from flow-through share financings which will
be
used in 2006 for exploration at the Courageous Lake property. Operations
activities used $1,220,000 in 2005 compared to $1,764,000 in the prior year
due
to increased corporate activities in 2004 including listing the Company on
the
American Stock Exchange. Cash expenditures on Mineral Interests including the
capital assets were $3,843,000 comparable to the $6,714,000 cash expenditures
in
2004.
US
GAAP Reconciliation with Canadian GAAP
Under
U.S. GAAP, all expenditures relating to mineral interests prior to the
completion of a definitive feasibility study, which establishes proven and
probable reserves, must be expensed as incurred. Under Canadian GAAP, these
amounts can be deferred. As such, under US GAAP, these amounts and related
future tax liabilities are not recorded on the balance sheets.
The
reader is advised to consult Seabridge’s audited annual financial statements for
the period ending December 31, 2005, particularly Note #11, Reconciliation
to
United States Generally Accepted Accounting Principles, for the quantification
of the differences.
Variation
in Operating Results
The
Company derives interest income on its bank deposits, which depend on the
Company's ability to raise funds, the amount of the deposits and interest
rates.
Management
periodically, through the exploration process, reviews results both internally
and externally through resource related professionals. Decisions to abandon,
reduce or expand exploration efforts is based upon many factors including
general and specific assessments of mineral deposits, the likelihood of
increasing or decreasing those deposits, land costs, estimates of future mineral
prices, potential extraction methods and costs, the likelihood of positive
or
negative changes to the environment, permitting, taxation, labor and capital
costs. There cannot be a pre-determined hold period for any property as
geological or economic circumstances render each property unique.
Under
United States GAAP when flow-through shares are issued, the proceeds are
allocated between the issue of shares and the sale of tax benefits. The
allocation is made based on the difference between the quoted price of the
existing shares and the amount that the investor pays for the shares. The
shareholders’ equity is reduced and a liability is recognized for this
difference which amounted to $202,000 for the flow-through shares issued in
2004
(2003 - $97,200). The liability is reversed when the tax benefits are renounced
and a deferred tax liability recognized at that time. Income tax expense is
the
difference
between the amount of the deferred tax liability and the liability recognized
on
issuance.
The
Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP except
as
noted in Note 11 to the 2005 audited financial statements. The value of the
Canadian Dollar in relationship to the US Dollar was $1.17 as of December 31,
2005.
Research
and Development
The
Company conducts no Research and Development activities, nor is it dependent
upon any patents or intellectual property licenses.
Trend
Information
The
Company knows of no trends, uncertainties, demands, commitments or events that
are reasonably likely to have a material effect on the Company’s operations or
financial condition.
PART
E: Off Balance Sheet Disclosure
Not
Applicable
PART
F: Contractual Obligations
On-going
contractual obligations of the Company are limited to property holding costs
and
reclamation liabilities. Although property holding costs are at the discretion
of the Company, if payments are not made the Company will lose their rights
to
the project. Table No. 4 provides details of the Company’s future contractual
obligations which are required to be satisfied in order to keep its projects
in
good standing.
Table
No.
4
Contractual
Obligations ($000’s)
|
|
|
|
Payments
due by period
|
|
|
|
Total
|
|
2006
|
|
2007-9
|
|
20010-11
|
|
After
2011
|
|
Mineral
interests
|
|
|
9,270
|
|
|
1,195
|
|
|
3,969
|
|
|
2,738
|
|
|
1,
372
|
|
Reclamation
liabilities
|
|
|
1,407
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,407
|
|
|
|
|
10,677
|
|
|
1,195
|
|
|
3,969
|
|
|
2,738
|
|
|
2,779
|
|
Amounts
shown for mineral interests include option payments and mineral lease payments
that are required to maintain the Company’s interest in the mineral
projects.
Item
6. Directors, Senior Management and
Employees
Table
No.
5 lists as of March 15, 2006 the names of the Directors of the Company. The
Directors have served in their respective capacities since their election and/or
appointment and will serve until the next Annual General Meeting or until a
successor is duly elected, unless the office is vacated in accordance with
the
Articles/By-Laws of the Company. All Directors are citizens of Canada, except
William Calhoun, Eliseo Gonzalez-Urien and Louis Fox, all of whom are citizens
of the United States. Rudi Fronk is a citizen of both Canada and the United
States.
Table
No.
5
Directors
Name
|
Age
|
Date
First Elected/Appointed
|
James
Anthony
|
58
|
October
1999
|
Rudi
Fronk
|
47
|
October
1999
|
Frederick
Banfield (1,3)
|
63
|
October
1999
|
William
Calhoun (1,2,3)
|
73
|
February
2000
|
Thomas
Dawson (1,3)
|
69
|
January
2006
|
Henry
Fenig (2,3)
|
60
|
November
2001
|
Louis
Fox (2,3)
|
63
|
January
2000
|
Eliseo
Gonzalez-Urien (3)
|
65
|
January
2006
|
|
(1)
|
Member
of Audit Committee.
|
|
(2)
|
Member
of Compensation Committee
|
|
(3)
|
Member
of Corporate Governance Committee
|
Table
No.
6 lists, as of March 15, 2006 the names of the Executive Officers of the
Company. The Executive Officers serve at the pleasure of the Board of Directors.
Mr. Threlkeld is a citizen of the United States. Mr. Chisholm is a citizen
of
Canada. Mr. Fronk is a citizen of both Canada and the United
States.
Table
No.
6
Executive
Officers
Name
|
Position
|
Age
|
Date
of
Appointment
|
Rudi
Fronk
|
President
|
47
|
October
1999
|
William
Threlkeld
|
Senior
Vice President
|
51
|
November
2001
|
Roderick
Chisholm
|
Secretary
and CFO
|
56
|
August
2004
|
James
Anthony is a financier and corporate strategist specializing in growth
companies. He served as a senior policy advisor to a number of cabinet ministers
and a premier before establishing a corporate strategy consultancy. He advised
a
number of major
corporations
on their positioning within their political and financial environments and
lectured at the Niagara Institute. Mr. Anthony has been President of J.S.
Anthony & Company, a private investment company, since 1975 and was the past
chairman of the board of Greenstone Resources Ltd. Mr. Anthony has been a
Director of Seabridge since 1999 and as Chairman since 2001. Mr. Anthony spends
approximately 50% of his time on Seabridge business.
Rudi
Fronk has over 20 years experience in the gold industry, including serving
as a
director and senior officer of several publicly traded gold companies. He was
appointed President, CEO and a Director of Seabridge in 1999 and has since
that
time continuously served in those roles. Mr. Fronk is the past President and
Director of Greenstone Resources Ltd. from 1994 to 1999. Prior to 1994, he
held
positions with Columbia Resources (1992-1993), DRX Inc. (1989-1992), Behre
Dolbear & Company (1986-1989), Riverside Associates (1984-1986),
Phibro-Salomon (1982-1983), and Amax (1980). Mr. Fronk is a graduate of Columbia
University from which he holds a Bachelor of Science in Mining Engineering
and a
Master of Science in Mineral Economics. Mr. Fronk spends 100% of his time on
Seabridge business.
Frederick
Banfield is the Founder of Mintec since 1970. Mintec is a consulting and
software company that provides consulting services to the mineral industry.
Mr.
Banfield has also served an independent reserves auditor and mine planning
advisor gold mining organizations with respect to projects in the United States,
Canada, Africa, Australia and Latin America. Mr. Banfield holds an engineering
degree from the Colorado School of Mines. Mr. Banfield spends less than 10%
of
his time on Seabridge business.
William
Calhoun is President of W.M. Calhoun Inc., an independent consultant that
provides consulting services to the minerals industry in the areas of mining
operations, mine planning, mine design, ore reserves and environmental issues.
From 1972 through 1981, Mr. Calhoun served as President and CEO of Day Mines,
Inc., an American Stock Exchange Company with mining operations in the western
United States that was acquired by Hecla Mining. In 1981 Mr. Calhoun's extensive
public service record includes membership on President Ronald Reagan's Strategic
Minerals Task Force, President Gerald Ford's Inflation Task Force; Director
of
the Silver Institute; Trustee of the Northwest Mining Association; Chairman
of
the Mining Advisors Committee to the Governors of Washington and Idaho;
President of the Idaho Mining Association; Chairman of Advisory Committee of
Idaho College of Mines; and numerous other civil and professional organizations.
Mr. Calhoun has a Bachelor of Science degree in Mining/Geology from the
University of Texas. Mr. Calhoun spends less than 10% of his time on Seabridge
business.
Thomas
Dawson has been a Chartered Accountant since 1961. He is a retired senior audit
and accounting partner with 40 years of experience at Deloitte & Touche LLP,
Chartered Accountants. Mr. Dawson currently serves as a Director and Chief
Financial Officer of Arizona Star Resource Corp. He received his B.Comm. from
Loyola College (now Concordia University), Canada, in 1959. Mr. Dawson is also
a
director of SouthernEra
Diamonds
Inc., WFI Industries Ltd., Energy Split Corp. and Anvil Mining Limited. Mr.
Dawson spends less than 10% of his time on Seabridge business.
Henry
Fenig has been the Chief Financial Officer and Vice President of Friedberg
Mercantile Group Ltd. (FMG) since April 1983. FMG is a Toronto based, privately
owned Investment Dealer and Futures Commission Merchant and member of the
Toronto Stock Exchange. Mr. Fenig holds primary responsibility for overseeing
compliance for FMG and its affiliates with all applicable Canadian and United
States laws and regulations. Since December 1984, Mr. Fenig has been Executive
Vice-President, Treasurer and a Director of FCMI Financial Corporation, the
sole
shareholder of Pan Atlantic Bank and Trust Limited. Mr. Fenig has a Bachelor
of
Arts degree in Economics from Yeshiva College and a Masters of Business
Administration degree in International Business and Marketing from Columbia
University in New York City. Mr. Fenig spends less than 10% of his time on
Seabridge business.
Louis
Fox
has more than 25 years experience in precious metals trading, merchanting and
merchant banking activities. From 1984 to 1999, Mr. Fox was a Senior Vice
President of Gerald Metals, Inc., commodity trading, refining and merchant
banking firm, in Stamford, Connecticut. At Gerald Metals, Mr. Fox was the head
of the company's worldwide precious metals group. Prior to Gerald Metals, from
1974 to 1981, Mr. Fox was a Vice President of J. Aron & Co., a precious
metals trading firm. Following the acquisition of J. Aron & Co. by Goldman
Sachs in 1981, Mr. Fox was a Vice President of Goldman Sachs through 1984.
Mr.
Fox holds a B.A. from the University of Pittsburgh and a J.D. from the Boston
University Law School. Mr. Fox spends less than 10% of his time on Seabridge
business.
William
Threlkeld has served as Senior Vice President of Seabridge since November 2001,
and from 2000 to 2001 acted as a technical consultant to the Company. From
1997
to 2000, he was Vice President, Exploration for Greenstone Resources Ltd. and
was responsible for resource delineation on three Central American gold deposits
and development of an organization and strategy to identify new mineral
investments. From 1991 to 1997, Mr. Threlkeld was Exploration Manager and
Vice President of Placer Dome and was responsible for all of Placer Dome’s
exploration activity and investment in Latin America. Mr. Threlkeld obtained
his
MSc in Economic Geology from the University of Western Ontario. Mr. Threlkeld
spends 100% of his time on Seabridge business.
Roderick
Chisholm was appointed Secretary of Seabridge in June 2003 and Chief Financial
Officer of Seabridge in August 2004. Since 1981, Mr. Chisholm has been a
financial officer and corporate secretary of a number of Canadian junior
exploration companies. Prior thereto he was an audit manager with Deloitte
&
Touche LLP, Chartered Accountants. Mr. Chisholm is a Chartered Accountant and
spends approximately 70% of his time on Seabridge business.
Other
than as set forth below, no Director and/or Executive Officer has been the
subject of any order, judgment, or decree of any governmental agency or
administrator or of any court or competent jurisdiction, revoking or suspending
for cause any license, permit or other authority of such person or of any
corporation of which he is a Director and/or Executive Officer, to engage in
the
securities business or in the sale of a particular security or temporarily
or
permanently restraining or enjoining any such person or any corporation of
which
he is an officer or director from engaging in or continuing any conduct,
practice, or employment in connection with the purchase or sale of securities,
or convicting such person of any felony or misdemeanor involving a security
or
any aspect of the securities business or of theft or of any felony. Mr. Chisholm
served as Secretary-Treasurer of Canuc Resources Corp. (CDN-OTC: CANC) in 2000
when a cease trade order was issued halting all trading of the common shares
of
Canuc due to failure to file financial statements. The cease trade order remains
in effect as of the date hereof.
There
are
no arrangements or understandings between any two or more Directors or Executive
Officers, pursuant to which he was selected as a Director or Executive Officer.
There are no family relationships between any Directors or Executive Officers.
COMPENSATION
The
Company had no arrangements pursuant to which directors are compensated by
the
Company or its subsidiaries for their services in their capacity as directors,
or for committee participation, involvement in special assignments or for
services as consultant or expert during the most recently completed fiscal
year.
During
2003 the Company adopted a formalized stock option plan, approved by its
shareholders, for the granting of incentive stock options. To assist the Company
in compensating, attracting, retaining and motivating personnel, the Company
grants stock options to Directors, Executive Officers and employees; refer
to
ITEM #10, "Stock Options".
Table
No.
7 sets forth the compensation paid to the Company’s executive officers and
members of its administrative body during the last three fiscal
years.
Table
No.
7
Summary
Compensation Table
All
Figures in Canadian Dollars unless otherwise noted
Name
|
Year
|
Salary
|
Options
Granted (1)
|
Other
Compensation
|
Rudi
Fronk,
President,
CEO and Director
|
2005
2004
2003
|
$250,000
$250,000
$180,000
|
Nil
Nil
Nil
|
$7,750
$43,269
$14,348
(2)
|
James
Anthony,
Chairman
|
2005
2004
2003
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
$120,000
$132,500
$60,000
|
Frederick
Banfield,
Director
|
2005
2004
2003
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
US$20,000
US$15,000
US$7,500
|
William
Calhoun,
Director
|
2005
2004
2003
|
Nil
Nil
Nil
|
Nil
Nil
65,000
|
US$20,000
US$15,000
US$7,500
|
Vahid
Fathi (3),
Director
|
2005
2004
2003
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
US$20,000
US$15,000
US$7,500
|
Henry
Fenig,
Director
|
2005
2004
2003
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
US$20,000
US$15,000
US$7,500
|
Louis
Fox,
Director
|
2005
2004
2003
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
US$20,000
US$15,000
US$7,500
|
Roderick
Chisholm
Secretary
and CFO
|
2005
2004
2003
|
Nil
|
Nil
115,000
15,000
|
$145,000
$106,000
$43,360
|
William
Threlkeld,
Senior
VP
|
2005
2004
2003
|
$160,000
$156,000
$107,000
|
50,000
Nil
Nil
|
$29,200
Nil
Nil
|
(1) The
stock options were granted under the stock option plans which are described
under “Item 10: Stock Options”
(2) The
“Other Compensation” listed for Rudi Fronk, President, relate to certain
educational expenses reimbursed to Mr. Fronk by the Corporation and in 2004
also
includes a $25,000 bonus.
(3) Mr.
Fathi resigned as a director in January 2006.
No
funds
were set aside or accrued by the Company during Fiscal 2005 to provide pension,
retirement or similar benefits for Directors or Executive Officers.
Staffing
The
Company currently has 4 employees and 3 executive officers.
Share
Ownership
The
Company’s shares are publicly held. The Company is not controlled by another
corporation as described below.
Table
No.
8 lists, as of March 15, 2006, Directors and Executive Officers who beneficially
own the Company's voting securities and the amount of the Company’s voting
securities owned by the Directors and Executive Officers as a group.
Table
No.
8
Shareholdings
of Directors and Executive Officers
Title
Of
Class
|
Name
of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of
Class
|
Common
|
James
Anthony (1)
|
1,438,125
|
4.39%
|
Common
|
Rudi
Fronk (2)
|
1,627,000
|
4.94%
|
Common
|
Frederick
Banfield (3)
|
245,000
|
0.76%
|
Common
|
William
Calhoun (4)
|
208,334
|
0.65%
|
Common
|
Thomas
Dawson (5)
|
64,400
|
0.20%
|
Common
|
Henry
Fenig (6)
|
180,000
|
0.56%
|
Common
|
Louis
Fox (7)
|
339,000
|
1.05%
|
Common
|
Eliseo
Gonzalez-Urien (8)
|
75,000
|
0.23%
|
Common
|
William
Threlkeld (9)
|
390,000
|
1.20%
|
Common
|
Roderick
Chisholm (10)
|
146,000
|
0.45%
|
|
|
|
|
Total
Directors/Officers (11)
|
4,712,859
|
13.54%
|
(1)
|
Of
these shares 333,334 represent currently exercisable share purchase
options; 66,666 represent share purchase options subject to certain
vesting requirements; 125,000 represent share purchase options subject
to
shareholder approval and certain vesting requirements; and 438,334
shares
are held indirectly.
|
(2)
|
Of
these shares 430,334 represent currently exercisable share purchase
options; 66,666 represent share purchase options subject to certain
vesting requirements; and 250,000 represent share purchase options
subject
to shareholder approval and certain vesting requirements.
|
(3)
|
Of
these shares 75,000 represent currently exercisable share purchase
options
and 100,000 represent share purchase options subject to shareholder
approval and certain vesting requirements.
|
(4)
|
Of
these shares 65,000 represent currently exercisable share purchase
options
and 100,000 represent share purchase options subject to shareholder
approval and certain vesting requirements.
|
(5)
|
Of
these shares 50,000 represent share purchase options subject to
shareholder approval and certain vesting requirements and 11,400
are held
indirectly.
|
(6)
|
Of
these shares 80,000 represent currently exercisable share purchase
options
and 100,000 represent share purchase options subject to shareholder
approval and certain vesting requirements.
|
(7)
|
Of
these shares 25,000 represent currently exercisable share purchase
options
and 100,000 represent share purchase options subject to shareholder
approval and certain vesting requirements.
|
(8)
|
Of
these shares 50,000 represent share purchase options subject to
shareholder approval and certain vesting
requirements.
|
(9)
|
Of
these shares, 266,667 represent currently exercisable share purchase
options and 83,333 represent share purchase options subject to certain
vesting requirements.
|
(10)
|
Of
these shares, 106,667 represent currently exercisable share purchase
options and 33,333 represent share purchase options subject to certain
vesting requirements.
|
(11)
|
See
notes (1) through (10)
|
Percent
of Class number is based on 32,211,685 shares outstanding as of March 15, 2006
and Stock options held by each beneficial holder.
Based
upon information provided by the Company’s transfer agent, as of March 15, 2006,
approximately 7.5 % of the Company’s common shares were held of record by US
residents.
Board
Practices
Mandate
of the Board
The
Company's Board of directors is responsible for the supervision of the
management of the Company's business and affairs. Under its governing statute
(the Canada Business Corporations Act), the Board is required to carry out
its
duties with a view to the best interests of the Company. The Board specifically
recognizes its responsibility for the following areas:
(a)
representing the
interests of the shareholders in all significant decisions affecting the
Company
and ensuring that shareholders are
kept
informed of developments affecting their Company;
(b) reviewing
and approving corporate objectives, goals and strategies with a view to
enhancing shareholder value;
(c) reviewing
and approving the Company’s operating plans and monitoring
performance;
(d) reviewing
significant operational and financial issues as they arise and providing
direction to management on these matters;
(e) acting
diligently to ensure that the Company fulfils its legal and regulatory
requirements;
(f)
evaluating the effectiveness of senior management and establishing their
compensation; and
(g) evaluating
whether of not directors receive the information they require to perform their
duties as directors.
The
frequency of the meetings of the Board of directors as well as the nature of
agenda items change depending upon the state of the Company's affairs and in
light of opportunities or risks which the Company faces.
Composition
of the Board
The
TSE
Report recommends that a Board of directors be constituted with a majority
of
individuals who qualify as "unrelated directors". The TSE Report defines an
"unrelated director" as a director who is independent of management and free
from any interest and any business or other relationship, which could, or could
reasonably be perceived to, materially interfere with that director's ability
to
act with a view to the best interest of the Company, other than an interest
arising from shareholding. The Company does not have a "significant"
shareholder, defined in the TSE Report as a shareholder with the ability to
exercise a majority of votes for the election of directors.
The
directors have examined the relevant definitions in the TSE Report and have
individually considered their respective interests in and relationship with
the
Company. As a consequence, the Board has concluded that five of the Board's
present eight members are "unrelated" within the meaning of the TSE Report:
Frederick A. Banfield; William Calhoun; Thomas C. Dawson; Henry Fenig and Louis
J. Fox. The Corporate Governance Committee is responsible for reviewing and
recommending a suitable approach for the Company to assess director
performance.
The
Board
considers eight directors to be an appropriate size for the Board at the current
time. The Board believes that the inclusion of the President and Chief Executive
Officer, Rudi P. Fronk, on the Company's Board of directors is useful to the
effective governance of the Company. Each director brings to the Board a
specific area of expertise which is instrumental in creating a Board which
is
able to implement the Company’s strategy effectively.
At
present, in addition to those matters which must by law be approved by the
Board, management seeks Board approval for any transaction which is out of
the
ordinary course of business or could be considered to be material to the
business of the Company.
Committees
The
Board
has assigned specific governance responsibilities to three committees. A
description of the mandate of each committee follows:
Audit
Committee
The
following constitutes the Charter of the Audit Committee.
The
Audit
Committee of Seabridge is a committee of the Board composed entirely of three
outside and unrelated directors. Its overall goal is to ensure that the Company
adopts and follows a policy of full, plain, true and timely disclosure of
material financial
information
to its stakeholders. It reviews all material matters affecting the risks and
financial well being of the Company and is a key part of the Corporate
Governance system. The Committee is mandated to satisfy the requirements of
the
Canada Business Corporations Act.
The
Audit
Committee meets at a minimum, quarterly and on such other occasions as required.
The auditors are invited to attend the meetings called to discuss the annual
audit plan and the final review of the year-end financial statements. At least
annually, the Committee meets with the auditors to review management’s
performance relating to financial reporting matters.
Specifically,
the Committee:
(a)
|
reviews
the annual statements of the Company and makes recommendations to
the
Board with respect to these
statements,
|
(b)
|
reviews
the quarterly financial statements and makes recommendations to the
Board
regarding these financial
statements,
|
(c)
|
reviews
and approves financial information in all prospectuses, offering
circulars, and similar documents,
|
(d)
|
oversees
the adequacy and accuracy of the Company’s financial disclosure policies
and obligations,
|
(e)
|
reviews
significant accounting policies and
estimates,
|
(f)
|
monitors
the Company’s internal controls, financial systems and procedures, and
management information systems,
|
(g)
|
oversees
management’s reporting on internal
control,
|
(h)
|
meets
with the Company’s auditors to review management’s financial stewardship
and to review their recommendations to management,
and
|
(i)
|
recommends
the appointment of auditors and reviews the terms of the audit engagement
and the appropriateness of the proposed
fee,
|
(j)
|
reviews
through discussions or by way of a formal document the plan followed
for
the annual audit with the auditors and
management,
|
(k)
|
evaluates
the performance of the auditors,
|
(l)
|
confirms
the independence of auditors,
|
(m)
|
establishes
procedures for the receipt, retention and treatment of complaints
received
regarding accounting, internal accounting controls or auditing matters,
and
|
(n)
|
establishes
procedures for the confidential, anonymous submission by employees
of
concerns regarding questionable accounting or auditing
matters.
|
Corporate
Governance Committee
The
Corporate Governance Committee is presently composed of all five “un-related”
and outside directors. This Committee has prepared and obtained approval by
the
Board of written policies on Fair Disclosure, Insider Trading and Conflict
of
Interest. Reporting to the full Board of Directors, this Committee is mandated
to:
1.
|
Prepare
and recommend to the Board on an annual basis, proposed goals for
the
Company and its CEO and a mandate for the
CEO;
|
2.
|
Ensure
that the Board is adequately informed of developments and issues
within
the Company such that it is able to fulfill its duties and
responsibilities;
|
3.
|
Ensure
that the Board reviews and approves all major corporate decisions
which
could reasonably be expected to affect shareholder
value;
|
4.
|
Assess
the effectiveness of the Board as a whole, of each of the directors
and of
each committee of directors and consider the impact that the number
of
directors has on effectiveness of the
Board.
|
5.
|
Conduct
an annual discussion among non-management directors on the role and
effectiveness of independent
directors;
|
6.
|
Ensure
that each Board Committee has a clear, written mandate and is performing
diligently the tasks necessary to limit Board
liability;
|
7.
|
Oversee
the administration of the Company’s Fair Disclosure Policy and Insider
Trading Policy;
|
8.
|
Oversee
an annual review of each director’s business interests in accordance with
the Company’s Conflict of Interest Policy to ascertain which conflicts
might exist with respect to the interests of Seabridge and how such
conflicts, if any, are to be managed so as to ensure the independence
of
directors and to protect the interests of Seabridge and its
shareholders;
|
9.
|
Review
disclosure of corporate governance matters to ensure that shareholders
are
adequately informed of the Board’s procedures for governance on their
behalf.
|
Compensation
Committee
The
Compensation Committee is presently composed of three directors, all of which
are outside and unrelated directors. Reporting to the full Board of Directors,
this Committee is mandated to:
1.
|
On
an annual basis, review the total compensation of the President and
Vice
President(s) against their performance, mandates and goals and make
recommendations on their compensation to the
Board;
|
2.
|
Review,
approve and recommend to the Board for confirmation all grants of
options
to all directors and employees; ensure the proper administration
of the
Company’s options program in conformity with the Company’s Option
Plan;
|
3.
|
Review
on an annual basis the Company’s overall hiring and compensation practices
with reference to industry norms.
|
None
of
the members of the Committee have any indebtedness to the Company or any of
its
subsidiaries nor have they any material interest, or have any associates or
affiliates which have any material interest, direct or indirect, in any actual
or proposed transaction in the last financial year which has materially affected
or would materially affect the Company or any of its subsidiaries.
The
compensation of the Company's executive officers is determined by the Board
of
Directors upon recommendations made by the Committee. The Committee met twice
during the last financial year. The Company's executive compensation program
consists of an annual base salary and a longer-term component consisting of
stock options, however the Committee may also recommend a bonus for management
or its directors in the future.
Item
7. Major Shareholders and Related Party
Transactions
As
of
March 15, 2006, Pan Atlantic Bank and Trust Ltd. owned 6,129,652 shares of
the
Company representing 19.0% of the outstanding shares of the Company. In
addition, as of March 15, 2006 principals of, and funds managed by, the
Friedberg Mercantile Group Ltd. owned 1,093,400 shares of the Company
representing 3.4% of the outstanding shares of the Company. Pan Atlantic Bank
and Trust Ltd. is ultimately beneficially owned and controlled by Albert D.
Friedberg and members of his immediate family. Albert D. Friedberg is the
President and a director of Friedberg Mercantile Group Ltd. Henry Fenig, a
Director of the Company, is CFO and Vice President of Friedberg Mercantile
Group
Ltd. The Company is not aware of any other person/company who beneficially
owns
5% or more of the Company’s voting securities.
No
shareholders of the Company have different voting rights from any other
shareholder.
There
are
no arrangements known to the Company, the operation of which as of a subsequent
date, could result in a change of control of the Company.
INTEREST
OF MANAGEMENT IN CERTAIN TRANSACTIONS
During
the fiscal year ended December 31, 2005, Mintec, Inc., a private company
controlled by Fred Banfield, a Director of Seabridge, was paid $39,400 for
technical services provided by his company related to the mineral properties.
These technical services were for consulting and computer software for geologic
modeling, reserve estimation, mine planning and database management. The Company
negotiated the agreement at arms length, after the Company reviewed all
available software in the marketplace and determined that the agreement
negotiated with Mintec was the most cost effective available.
Pan
Atlantic Bank and Trust Ltd. has been an investor in two convertible debt
offerings and two private placement of common shares by Seabridge. Pan Atlantic
Bank and Trust Ltd.’s sole shareholder is FMCI Financial Corporation. Henry
Fenig, Director of Seabridge, serves as Executive Vice-President, Treasurer
and
a Director of FMCI.
None
of
the Company’s interests in its mineral properties were acquired from affiliates.
The
financial statements as required under ITEM #8 are attached hereto and found
immediately following the text of this Annual Report. The audit report of KPMG
LLP, Chartered Accountants, is included herein immediately preceding the
financial statements and schedules.
There
have been no undisclosed significant changes of financial condition since the
most recent financial statements dated December 31, 2005.
A. Offer
and Listing Details
The
Company's common shares began trading on the Vancouver Stock Exchange (now
the
TSX Venture Exchange) in Vancouver, British Columbia, Canada in Sept 1979.
The
current stock symbol is “SEA”, and the CUSIP number is #811916105.
The
Company’s common shares began trading on the American Stock Exchange in the
United States in April 2004. The current stock symbol is “SA”.
Table
No.
9 lists the volume of trading and high, low and closing sales prices on the
TSX
Venture Exchange for the Company's common shares over the disclosed periods
for
the last 12 fiscal quarters and the last five fiscal years. The Company’s common
shares commenced trading on the American Stock Exchange on April 20, 2004 and
the corresponding trading information is shown in Table No. 9.
Table
No.
9
Common
Share Trading Activity
|
|
TSX
Venture Exchange (“SEA”)
|
|
American
Stock Exchange (“SA”)
|
|
|
|
(Canadian
Dollars)
|
|
(United
States Dollars)
|
|
|
|
Volume
|
|
High
|
|
Low
|
|
Close
|
|
Volume
|
|
High
|
|
Low
|
|
Close
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
2006
|
|
|
439,240
|
|
$
|
10.50
|
|
$
|
7.80
|
|
$
|
8.66
|
|
|
3,182.700
|
|
$
|
9.52
|
|
$
|
6.80
|
|
$
|
7.64
|
|
January
2006
|
|
|
1,224,174
|
|
$
|
11.75
|
|
$
|
9.60
|
|
$
|
10.80
|
|
|
4,971,300
|
|
$
|
10.13
|
|
$
|
8.51
|
|
$
|
9.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended 31-Dec-05
|
|
|
1,744,743
|
|
$
|
12.00
|
|
$
|
5.57
|
|
$
|
11.01
|
|
|
11,781,343
|
|
$
|
10.49
|
|
$
|
4.60
|
|
$
|
9.40
|
|
3
Months Ended 30-Sep-05
|
|
|
1,641,935
|
|
$
|
7.05
|
|
$
|
2.99
|
|
$
|
7.05
|
|
|
8,615,235
|
|
$
|
6.08
|
|
$
|
2.47
|
|
$
|
5.99
|
|
3
Months Ended 30-Jun-05
|
|
|
1,339,578
|
|
$
|
3.30
|
|
$
|
2.40
|
|
$
|
3.12
|
|
|
3,346,878
|
|
$
|
2.78
|
|
$
|
1.91
|
|
$
|
2.56
|
|
3
Months Ended 31-Mar-05
|
|
|
1,475,938
|
|
$
|
4.23
|
|
$
|
3.15
|
|
$
|
3.25
|
|
|
2,993,738
|
|
$
|
3.75
|
|
$
|
2.60
|
|
$
|
2.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended 31-Dec-04
|
|
|
697,155
|
|
$
|
5.00
|
|
$
|
4.00
|
|
$
|
4.30
|
|
|
1,598,000
|
|
$
|
4.20
|
|
$
|
3.12
|
|
$
|
3.63
|
|
3
Months Ended 30-Sep-04
|
|
|
798,164
|
|
$
|
4.44
|
|
$
|
3.26
|
|
$
|
4.36
|
|
|
1,503,500
|
|
$
|
3.49
|
|
$
|
2.56
|
|
$
|
3.38
|
|
3
Months Ended 30-Jun-04
|
|
|
1,823,700
|
|
$
|
5.15
|
|
$
|
2.90
|
|
$
|
4.15
|
|
|
1,494,850
|
|
$
|
3.90
|
|
$
|
2.12
|
|
$
|
3.10
|
|
3
Months Ended 31-Mar-04
|
|
|
1,909,600
|
|
$
|
6.00
|
|
$
|
4.15
|
|
$
|
5.11
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended 31-Dec-03
|
|
|
3,422,500
|
|
$
|
5.50
|
|
$
|
3.25
|
|
$
|
5.30
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
3
Months Ended 30-Sep-03
|
|
|
3,253,482
|
|
$
|
4.28
|
|
$
|
1.86
|
|
$
|
4.00
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
3
Months Ended 30-Jun-03
|
|
|
1,670,803
|
|
$
|
2.60
|
|
$
|
2.01
|
|
$
|
2.12
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
3
Months Ended 31-Mar-03
|
|
|
2,572,700
|
|
$
|
3.56
|
|
$
|
2.02
|
|
$
|
2.55
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended 31-Dec-02
|
|
|
4,628,300
|
|
$
|
3.44
|
|
$
|
1.84
|
|
$
|
3.39
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
3
Months Ended 30-Sep-02
|
|
|
4,032,200
|
|
$
|
3.10
|
|
$
|
1.50
|
|
$
|
2.35
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
3
Months Ended 30-Jun-02
|
|
|
13,655,800
|
|
$
|
3.70
|
|
$
|
0.70
|
|
$
|
2.90
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
3
Months Ended 31-Mar-02
|
|
|
4,508,300
|
|
$
|
1.15
|
|
$
|
0.38
|
|
$
|
0.96
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American
Depository Receipts. Not applicable.
Other
Securities to be Registered. Not applicable
B. Plan
and Distribution
Not
Applicable
C. Markets
The
Company’s common shares currently trade on the TSX Venture Exchange under the
symbol “SEA” and on the American Stock Exchange under the symbol
“SA”.
United
States Market
The
Common Shares became listed on the American Stock Exchange effective April
20,
2004 under the symbol “SA”.
A. Share
Capital
Not
Applicable
B. Memorandum
and Articles of Association
Information
regarding the Company’s Certificate of Incorporation, By-Laws and other charter
documents is incorporated by reference to Item 10B to the Company’s registration
statement on Form 20-F dated February 18, 2004.
C. Material
Contracts
The
Company considers the following as material contracts, which have been entered
into by the Company which are currently in effect:
|
1.
|
Agreement
for the purchase and sale of the Red Mountain Project and Willoughby
Joint
Venture between Seabridge and North American Metals
Corp.
|
|
2.
|
Agreement
between the Company and Platoro West Incorporated covering the
Castle/Black Rock project;
|
|
3.
|
Agreement
between the Company and Platoro West Incorporated covering the Hog
Ranch
project;
|
|
4.
|
Agreement
between the Company and Placer Dome covering the Kerr/Sulphurets
project;
|
|
5.
|
Agreement
between the Company and Atlas covering the Grassy Mountain
project;
|
|
6.
|
Agreement
between the Company and Quartz Mountain Resources covering the Quartz
Mountain project.
|
|
7.
|
Agreement
between the Company and Noranda Inc. covering the Kerr/Sulphurets
project.
|
|
8.
|
Agreement
between the Company, Newmont Canada and Total Resources covering
the
Courageous Lake project.
|
Details
and a discussion of each material contract are given in the detailed property
section contained in Item 4 of this Annual Report. Copies of these contracts
were filed as exhibits to the Company’s registration statement on Form 20-F
dated February 18, 2004.
D. Exchange
Controls and Other Limitations Affecting Security Holders
The
Company is not aware of any Canadian federal or provincial laws, decrees, or
regulations that restrict the export or import of capital, including foreign
exchange controls, or that affect the remittance of dividends, interest or
other
payments to non-Canadian holders of the common shares. There are no limitations
on the right of non-
Canadian
owners to hold or vote the common shares imposed by Canadian federal or
provincial law or by the charter or other constituent documents of the
Company.
The
Investment Canada Act (the "IC Act") governs acquisitions of
Canadian business by a non-Canadian person or entity. The IC Act
requires a non-Canadian (as defined in the IC Act) making an
investment to acquire control of a Canadian business, the gross assets of which
exceed certain defined threshold levels, to file an application for review
with
the Investment Review Division of Industry Canada. The IC Act provides,
among other things, for a review of an investment in the event of acquisition
of
"control" in certain Canadian businesses in the following
circumstances:
1. If
the investor is a non-Canadian and is a national of a country belonging to
the
North American Free Trade Agreement ("NAFTA") and/or the World Trade
Organization ("WTO") ("NAFTA or WTO National"), any direct acquisition having
an
asset value exceeding $179,000,000 is reviewable. This amount is subject to
an
annual adjustment on the basis of a prescribed formula in the IC Act to
reflect inflation and real growth within Canada. This threshold level does
not
apply in certain sections of Canadian industry, such as uranium, financial
services (except insurance), transportation services and cultural services
(i.e.
the publication, distribution or sale of books, magazines, periodicals (other
than printing or typesetting businesses), music in print or machine readable
form, radio, television, cable and satellite services; the publication,
distribution, sale or exhibition of film or video recordings on audio or video
music recordings), to which lower thresholds as prescribed in the IC Act
are applicable.
2. If
the investor is a non-Canadian and is not a NAFTA or WTO National, any direct
acquisition having an asset value exceeding $5,000,000 and any indirect
acquisition having an asset value exceeding $50,000,000 is
reviewable.
3. If
the investor is a non-Canadian and is NAFTA or WTO National, an indirect
acquisition of control is reviewable if the value of the assets of the business
located in Canada represents more than 50% of the asset value of the transaction
or the business is involved in uranium, financial services, transportation
services or cultural services (as set forth above).
Finally,
certain transactions prescribed in the IC Act are exempted from review
altogether.
In
the
context of the Company, in