GOLD
AND GREEN
ANNUAL REPORT 2020
Corporate Overview
Seabridge Gold’s resource base of gold, copper and silver is one of the world’s largest. Our principal
projects are located in Canada. Our objective is to grow resource and reserve ownership per share.
Our risk-reducing strategy: acquire North American deposits; expand them through exploration;
move them to reserves through engineering; and sell or joint venture them to established
producers for mine construction and operation.
Contents
CEO's Report to Shareholders
Our 2020 Corporate Report Card and Our 2021 Objectives
A New Precious Metal Emerges: Copper - Interview with COO
Mineral Reserves and Resources
Management’s Discussion and Analysis
Management’s Responsibility for Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Corporate Information
3
6
11
14
16
27
28
31
32
33
34
35
54
Cover Photo: Copper leaching naturally from KSM
Forward-Looking Statements
We are making statements and providing information about our expectations
for the future which are considered to be forward-looking information
or forward-looking statements under Canadian and United States securities
laws. These include statements regarding future plans and the timing of
them, the proposed production scenarios in respect of our principal projects,
anticipated exploration results at our projects and our view of the gold and
copper market and financial markets generally. The purpose of these
statements is to help the reader understand management’s current views
of our future prospects and
intended for other purposes. This
information will not necessarily be updated unless required by securities
laws. This information is based on a number of material assumptions, and
in our
is subject to a number of material risks, which are discussed
annual Management's Discussion and Analysis contained
this
in
document under the headings “Forward-Looking Statements” and “Risks
and Uncertainties”. We also refer shareholders to the more comprehensive
discussion of forward-looking information in our Annual Information Form
filed on SEDAR at www.sedar.com and our Annual Report on Form 40-F
filed on EDGAR at www.sec.gov/edgar.shtml.
is not
Stock Exchange Trading Symbols
“SEA” on Toronto Stock Exchange
“SA” on New York Stock Exchange
Annual General Meeting of Shareholders
Thursday, June 24, 2021
4:30 p.m. EDT
Virtual AGM
https://agm.issuerdirect.com/sea
CEO’s Report to Shareholders
In last year’s annual report, we laid out the reasons we
believed another bull market in gold was beginning. Our
views on rising gold prices were centered on global debt
levels and a coming recession that would result in central
banks implementing aggressive monetization. At the
time, the full impact of COVID-19 on the global economic
and financial system was unknown, however, the policies
we expected were implemented by central banks right
on cue.
The price of gold began 2020 at approximately US$1,514
per ounce and by early August was trading above
US$2,000 for the first time in history. At the time, many
market players were forecasting even higher gold prices
but by year end gold had settled back to US$1,887 per
ounce and many forecasters had turned bearish. We
think the arguments we made last year on why gold will
go higher remain valid. Furthermore, monetary policy has
entered a new and more dangerous phase.
Government transfer payments have accounted
for
as much as 31% of personal income in recent months
thanks to stimulus payments reaching nearly 25% of GDP.
Enormous deficits, funded largely by the Federal Reserve,
have generated huge increases in money supply and have
begun to provoke signs of higher inflation. Interest rates
at the long end of the curve have been rising fast and
neither the Treasury nor the economy can handle higher
rates. The Federal Reserve argues that rising inflation and
yields will be transitory but we think we are headed back
to the 70s and a powerful move higher in gold.
For the past two decades, Seabridge has focused on
building the industry’s best leverage to the gold price
by growing ounces in the ground faster than our shares
outstanding. No other gold company comes close to
Seabridge in terms of gold reserves or gold resources
per common share outstanding. As shown in the chart
below, from 2003 to 2020, Seabridge’s gold resources have
grown by 915% during a period when shares outstanding
increased by only 167%.
3
ANNUAL REPORT 2020SEABRIDGE GOLD Our gold-focused strategy has resulted
in Seabridge’s common shares
significantly outperforming gold and other gold equities over the past 20
years. Last year was no different. In 2020, Seabridge’s share price increased by
approximately 53%, outperforming the GDX (+23%), the GDXJ (+28%) and the gold
price (+25%) over the same time period.
The acquisition of the Snowfield Property in December, made 2020 one of our
best years ever for offsetting equity dilution with accretion in gold resources.
Snowfield is located in the same valley that hosts KSM’s Mitchell and Iron Cap
deposits. To pay the US$100 million acquisition price, Seabridge arranged a
bought-deal equity financing consisting of 6.1 million shares. In return, Snowfield
delivered 25.9 million ounces of gold in the measured and indicated category
and a further 9.0 million ounces in the inferred category as well as substantial
copper resources. To put it another way, Seabridge was able to purchase
Snowfield’s in-the-ground gold resources for approximately US$3 per ounce.
IRON CAP
MITCHELL
SNOWFIELD
SULPHURETS
NSR$/ T
> 75
50 - 75
25 - 50
16 - 25
K S M P R O J E C T
E O Y 2 0 1 9 N S R
B L O C K M O D E L S IN
P L A N V IE W
KERR
Work is already underway to integrate Snowfield into a new KSM mine
plan. We believe a large portion of the Snowfield mineral resource could be
exploited, potentially improving KSM’s internal rate of return and net present
value projections as well as shortening the payback period of initial capital.
This coming season, we plan to collect the additional data that is necessary to
complete a new Preliminary Feasibility Study ("PFS") for KSM which includes
Snowfield. We believe this new PFS will increase project reserves and improve
capital efficiency by extending the life of open pit mining, thereby allowing us
to delay the capital-intensive development of underground block-cave mining
until later in the project life. The expected improvements to KSM as a result of the
acquisition of Snowfield are already generating new interest with potential joint
venture partners.
4
ANNUAL REPORT 2020SEABRIDGE GOLD However, Seabridge is not just about gold. In addition
to our extensive gold reserves and resources, Seabridge
has also amassed, at KSM, one of the world’s largest
inventories of copper. Since completion of the 2016
PFS, copper resources at KSM have grown by over 33
billion pounds with most of this growth coming from
exploration success at the Deep Kerr and Iron Cap
deposits. Not only is KSM the world’s largest undeveloped
gold project, but it also ranks as one of the world’s largest
undeveloped copper projects. As the charts below
show, Seabridge provides far more copper reserves and
resources per share than most of the world’s largest
operating copper/gold producers.
Source: company data. Data as of March 31, 2021
Note: companies shown include North America's largest copper companies and selected copper project development companies
Last year’s annual report theme was “Enhancing KSM”.
At the time we had just completed a new review of KSM
that included an alternative mine plan capturing some of
the higher grade copper resources added since 2016. The
results were extremely positive for the project.
The theme for this year’s annual report is “Gold and
Green”. The world’s new “green revolution” is predicated
on reducing the use of fossil fuels and their related
emissions and increasing new green energy use. Copper,
also known as the green metal, will play an important
part in this transition. To tell the story on why copper
demand is expected to grow in the coming years, and
how KSM could play a role in the new green initiative, we
have included an interview with our President and Chief
Operating Officer, Jay Layman. I hope you enjoy it.
We are very enthusiastic about Seabridge’s positioning
right now. We believe that current market conditions
provide the economic incentives for a major mining
company to meet our terms for a joint venture at KSM. In
the meantime, we believe our shareholders will benefit
from our significant exposure to copper in a world that
increasingly needs more of it as well as our industry-
leading leverage to gold.
On Behalf of the Board of Directors,
As in years past, the following section provides a self-
graded report card on how we did against the corporate
objectives set for the past year, as well as the new
objectives set for the current year.
Rudi P. Fronk
Chairman and Chief Executive Officer
April 19, 2021
5
ANNUAL REPORT 2020SEABRIDGE GOLD Our 2020 Corporate Report Card
and Our 2021 Objectives
Reporting on Last Year
We begin each year with a set of clear objectives focused
on enhancing shareholder value. At year end, our Board
of Directors evaluates how we performed against these
objectives. Last year’s annual report set out seven
objectives, six of which were achieved. Here is a recap:
OBJECTIVE #1: Complete a joint venture agreement
on the KSM Project with a suitable partner on terms
advantageous to Seabridge.
In early 2020, joint venture discussions were taking place
with a number of interested parties, with an expectation
that a joint venture proposal from a “syndicate” would
be delivered early in the second quarter. Unfortunately,
shortly after the onslaught of the COVID-19 pandemic in
March, we were informed by the interested parties that
their plans needed to be put on hold.
Improving copper and gold prices along with the
acquisition of Snowfield have made KSM an even
more attractive project. Parties with which we have
had discussions in the past, as well as new parties, are
reviewing information on the Snowfield/KSM opportunity
and we anticipate joint venture negotiations arising from
these reviews.
While we work towards a joint venture deal that meets
our objectives, we will continue to improve the quality of
the project by integrating the Snowfield Property into the
greater KSM Project in a new PFS which we believe will
further enhance the project’s already robust economics.
We have stated many times that we only get to do this
once and, in our view, joint venture terms are far more
important than timing. Our goal in a joint venture is to
maintain a meaningful interest in KSM while minimizing
our capital contributions. We believe that our patience will
be rewarded.
As of now, this objective has not been met.
OBJECTIVE #2: Continue to strengthen our social license
by responding effectively to the needs and concerns of
Treaty and First Nations and local communities.
Despite the limitations imposed by COVID-19, we were
able to continue advancing our social license. Our focus
was local engagement to respond to local needs.
6
ANNUAL REPORT 2020SEABRIDGE GOLD KSM
• This year’s educational
funding
in NW BC,
supported 68
students
from Smithers, Terrace,
Telkwa, Witset, Stewart, Dease Lake and Prince
In addition, a $25,000 donation and
Rupert.
support
funding helped
the Gitanyow Hereditary Chiefs Office establish
Institute.
the Gitanyow Education and Training
further government
for
• We supported a number of Northwest BC community
groups
in Smithers, Terrace, Stewart, Dease Lake,
Telegraph Creek, Iskut, Gitwinkshilkw, Hazelton, Witset
and Gitanyow. Some highlighted programs included
the Stewart Community Connections Society, outdoor
recreation programs in Smithers and Terrace, and a
child development center.
•
these same communities, we assisted
In
local
communities with COVID-19 preparedness donating
food, masks, cleaning supplies and hand sanitizers.
Donations were also made to the NW BC Crisis Centre
and Society of Domestic Peace.
• Seabridge participated
in Gitanyow
and Hazelton and hosted the Roundup reception
for suppliers, contractors, and Indigenous leadership
teams in early 2020 (pre-COVID).
in career fairs
• We completed a Yk Dene Traditional Use Study for the
Courageous Lake Area.
• Seabridge completed and released its 2019 Wildlife
Use Report to local Indigenous groups and regulatory
authorities. This
is an annual voluntary program
designed to mitigate concerns about the impact of
exploration activity on caribou.
• We voluntarily suspended 2020 work programs to
address community concerns regarding potential
spread of COVID-19.
This objective was accomplished.
OBJECTIVE #3: Execute our 2nd drill program at
Snowstorm, continuing to target a Getchell/Twin Creeks
style deposit.
• KSM COVID-19 protocols were developed and
implemented with the Tahltan Central Government.
• The size and scope of KSM work programs were
downsized to comply with COVID-19 protocols and
protect our Indigenous neighbors.
• Employment statistics:
o KSM Camp- On average, 34 people were in camp,
including 21 BC residents and 4 Indigenous persons.
o Iskut Camp- On average, 38 people were in camp,
including 37 BC residents and 7 Indigenous persons.
• Seabridge organized
annual environmental
its
monitoring program workshop to keep regulators
and local Indigenous communities apprised of our
environmental monitoring and exploration programs.
Courageous Lake
• Seabridge obtained renewal of its Class A Land Use
Permit (required for exploration work).
• We received an initial Class A Water License that
allows for more than 3 drill rigs to operate at the site,
increasing operational flexibility and efficiency.
• These permits were obtained with the full support of
the local Indigenous communities including the Yk
Dene and TliCho.
Our 2nd drill program at Snowstorm
in Nevada
commenced in September and was completed in April
2021. The program was an exercise in patience. The pace
of drilling was slow due to difficult access in inclement
weather, high water pressures in some of the stratigraphy
and self-imposed restrictions around COVID-19 concerns.
The 2020 program was designed to advance the project
(MT)
to the next stage by testing magnetotelluric
structures for the presence of gold-bearing fluids in the
rocks. These types of structures host major gold deposits
to the south. The four-hole drill program was successful.
Two holes tested a shallow dipping geophysical target
near multiple converging northeast and northwest
trending fault zones. A third angled hole was designed
to cross a northeast structure and test the same shallow
dipping geophysical target. The fourth hole tested a
large low resistivity anomaly, hanging wall to the shallow
dipping geophysical response and into the core of an
interpreted fold.
7
ANNUAL REPORT 2020SEABRIDGE GOLD
the
targeting
intermediate
intensely altered
low angle MT anomaly
The holes
encountered
intrusive
rocks. These intrusive rocks and wall rocks footwall to
the intrusions are sheared and contain abundant silica
introduction. Associated with the sheared and altered
zones are gold, arsenic and silver concentrations one to
two orders of magnitude above background intensities.
Shearing and alteration in these rocks indicate that this
target represents a thrust fault within the Paleozoic
stratigraphy that acted as a pathway for gold-bearing
fluids.
Snowstorm was acquired because we thought it was
an excellent opportunity for the discovery of a Getchell-
style high grade gold deposit. These occurrences are
challenging to find as they are hidden under younger
volcanic cover. Our 2019 program confirmed that
Snowstorm has the right stratigraphy and a continuation
of the Getchell structural setting. The 2020 program met
its objective of finding a gold-bearing feeder system
hosted within similar rocks and structural setting as
the Turquoise Ridge and Twin Creek mines, located
southwest of Snowstorm on the Getchell Trend.
Additional drilling is planned for 2021 to attempt to vector
towards gold occurrences analogous to other Getchell
deposits.
This objective was accomplished.
OBJECTIVE #4: Conduct an initial drill test for a gold/
copper porphyry deposit below the Quartz Rise lithocap
at Iskut.
The 2020 program at Iskut was completed in September.
The program was designed to test geophysical anomalies
below the Quartz Rise lithocap that is host to a diatreme
pipe containing gold-copper mineralized vein fragments.
A total of 8,961 meters of core drilling was completed in
11 holes. Results were consistent with the alteration halo
from a large porphyry system. Mineralized intervals of
0.62% copper over 31.8 meters and 158 meters grading 0.16
g/T gold and 0.16% copper were intersected, indicating
that drilling to date is in the outer halo of a gold-copper
porphyry. The next step is to vector to the heart of that
system which may still exist at greater depth. Analysis of
the intrusive rocks, trace element geochemistry, alteration
mineralogy, structural and deformation settings
is
ongoing to refine targets.
This objective was accomplished.
OBJECTIVE #5: Continue the reclamation and closure
of the Johnny Mountain Mine
in cooperation with
the Tahltan Nation and BC regulators
COVID-19 restricted certain planned field activities at
Johnny Mountain in 2020. Early in the year, Seabridge
developed and implemented the necessary COVID-19
protocols with the Tahltan Central Government which
dictated the field work that could be undertaken.
Work proceeds on rehabilitating an abandoned mine.
8
ANNUAL REPORT 2020SEABRIDGE GOLD During 2020 we were able to complete the second year of
the ongoing regional aquatic effects monitoring program.
Additionally, we were able to conduct our required
field sampling and reporting requirements under our
existing permits. We also continued our longer-term
monitoring programs to ensure the stability of the tailings
management facility.
In cooperation with the Tahltan Nation, we published a
joint technical paper with the BC Technical and Research
Committee on Reclamation, detailing reclamation work
at the Johnny Mountain Mine. Finally, we developed a
joint Tahltan Nation-Seabridge Gold video on the Johnny
Mountain Mine Reclamation Program for educational
purposes.
Although hindered by the impacts of COVID-19, critical
work did continue, and this objective was accomplished.
OBJECTIVE #6: Assemble all of the historic data
generated at 3 Aces into a 3-D model and identify targets
to drill in 2021.
integrated
Structural and drill hole data have been
into a database. These initial results indicate two sub-
parallel zones with potential for resource development.
Seabridge’s exploration team, working with consultants
who were active previously on the project, has built a
preliminary 3-D model utilizing all previously generated
data. The preliminary 3-D model has identified drill
targets that we plan to drill in 2021.
This objective was accomplished.
Surface mineralization at 3 Aces grading better than 1 oz. of gold per tonne.
9
ANNUAL REPORT 2020SEABRIDGE GOLD OBJECTIVE #7: Increase gold ownership per common
share by way of accretive resource additions from
acquisitions and/or continued exploration at our projects.
We ended 2019 with 63.5 million shares outstanding and
62.3 million ounces of gold in the measured and indicated
categories plus 61.8 million ounces
inferred
category. Thus, at the end of 2019 we reported 1.95 ounces
of gold per share.
in the
To fund our 2020 activities, we issued 10.7 million shares
comprised of:
(i)
1,440,000 shares
financing;
in a hard dollar, non-brokered
Due to the size and complexity of the KSM Project, the
number of potential partners is probably limited to fewer
than 10 major gold and base metal companies. The
combination of KSM’s size, location, economics and permit
status represent one of the most compelling development
opportunities on the planet. We believe that current gold
and copper price expectations coupled with the addition
of Snowfield to the project’s development plans will
enhance KSM’s compelling economics and strengthen
our hand in negotiations. Finally, the market is starting
to wake up to the fact that major mining companies are
depleting their reserves faster than they are replacing
them and new projects are needed just to sustain current
production levels. We firmly believe our patience will reap
rewards for shareholders who stay the course.
(ii) 345,000 shares in a flow through financing to fund
Here are seven other objectives we have set for 2021:
the Iskut drill program;
(iii) 300,000 common shares to Golden Predator for the
acquisition of 3 Aces;
to
1. Continue
license by
responding effectively to the needs and concerns of
Treaty and First Nations and local communities.
strengthen our
social
(iv) 390,153 shares in option exercises;
(v) 139,600 shares in RSUs vesting to employees;
2. Collect all the data necessary to be in a position to
complete an updated Preliminary Feasibility Study
incorporating Snowfield into the greater KSM Project;
(vi) 1,327,046 shares through our at-the-market financing
3. Execute our 3rd drill program at Snowstorm, continuing
facility; plus
to target a Getchell/Twin Creeks style deposit;
(vii) 6,710,000 shares, principally to fund the acquisition of
Snowfield.
4. Conduct a follow-up drill test at Iskut for a gold/
copper porphyry deposit below the gold and copper
mineralization discovered in the 2020 program;
To offset the total 2020 dilution of 10.7 million shares, we
needed to add approximately 20.8 million ounces of new
gold resources to maintain our 1.95 ounces per share.
The acquisition of Snowfield provided 25.9 million ounces
of gold in the measured and indicated categories plus
an addition 9.0 million ounces of gold in the inferred
category. Thus, with 88.2 million ounces of gold in the
measured and indicated categories plus 70.8 million in the
inferred category, we ended 2020 with 2.14 ounces of gold
per share, an increase of approximately 10% from 2019.
This objective was accomplished.
Now for 2021…
Our primary objective continues to be to complete a joint
venture agreement on the KSM Project with a suitable
partner on terms advantageous to Seabridge. Our goal
in a joint venture is to: (1) retain a significant interest in a
producing mine; (2) minimize our capital exposure; and
(3) ensure that our partner must build a mine in order to
keep its interest.
5. Continue the reclamation and closure of the Johnny
Mountain Mine in cooperation with the Tahltan Nation
and BC regulators;
6. Commence field activities at 3 Aces
including
geophysical surveys, drill hole relogging and surface
confirmation of structural interpretation to be followed
by an initial drill program to confirm our geologic
model; and
7. Increase gold ownership per common share by way of
accretive resource additions from acquisitions and/or
continued exploration at our projects.
It remains to be seen what limitations COVID-19 may
impose on our planned 2021 programs. However, our goal
remains to continue to add shareholder value this year
and, in the years, ahead.
10
ANNUAL REPORT 2020SEABRIDGE GOLD A New Precious Metal Emerges: Copper
An interview with Jay Layman, Seabridge President and Chief Operating Officer
Q: Seabridge is known as a gold company but really you
are equally a copper company. KSM has about 17.1 billion
pounds of measured and indicated copper resources plus
an additional 33.2 billion pounds in the inferred category.
How important is the copper in your planning?
Q: Copper is now thought of as the green metal because
of its importance in electrification which is critical to a
zero-carbon world. Copper is attracting a lot of investor
attention as a sustainable metal that conforms to a lot of
ESG objectives.
is why KSM works so well
Layman: Copper
economically. We have
found an absolutely
amazing amount of economic copper—about 684
pounds per share if you consolidate all categories of
resources. There aren’t any copper companies that
can match that.
Layman: That’s right. The changes needed to
meet the Paris Accord targets for zero carbon
emissions are radical and profound. The demand
for copper is going to go through the roof, making
KSM increasingly valuable. We are on the way to
electrifying everything.
At current metal prices, we can actually produce
gold at a negative cost per ounce after taking
account of the copper credits. Or you can go the
other way and produce copper at a negative cost by
taking gold as a byproduct. The abundance of both
metals makes KSM equally attractive to copper and
gold companies as potential joint venture partners.
Electric vehicles are
just the beginning. Other
developments that demand more copper are 5G
wireless networks, smart buildings and homes, the
internet of things and smart cities. Everything is
connecting to everything else, and the connector
is copper. In 2018, we had 1.7 billion interconnected
devices. By 2024, that will grow to about 4 billion
devices. It’s coming at us very fast.
11
ANNUAL REPORT 2020SEABRIDGE GOLD Q: What’s this mean in terms of demand growth?
Q: What’s the supply side look like?
Layman: The numbers are pretty shocking. Let’s
look at vehicles. Gas powered vehicles use about
55 pounds of copper on average. Hybrids use
twice that at around 110 pounds. BEVs, which
have zero emissions, weigh in at 165 pounds while
FCEVs - that's fuel cell vehicles - use 200 pounds of
copper. Developed countries are mandating that
carmakers have to produce these zero emission
vehicles. Most major carmakers are planning to
produce nothing else.
What’s all this mean? In 2020, vehicle production
used 4.4 million metric tonnes of copper. By 2030,
they will need an estimated 8.1 million metric
tonnes—almost twice as much.
Layman: We are facing an acute shortage of copper
going forward. We see a likely deficit of 6.3 million
tonnes per year by 2030 and a cumulative 28.9
million tonne deficit for the period from 2021-2030.
It’s not just soaring demand. Mining capacity is
projected to fall an average of 4% per year during
this same 10-year period. We are going to need at
least 1.2 million tonnes of new capacity each and
every year to satisfy demand and it’s very hard to
see this much coming online in the short term.
Obviously KSM is needed and many more projects
as well. New projects now have lower grade than in
the past so capital requirements are going to rise
substantially and it usually takes a decade or more
from discovery to start-up for new copper projects
so there is no quick fix.
12
ANNUAL REPORT 2020SEABRIDGE GOLD
Q: Why is production falling?
Layman: We have had years of under-investment
in the so-called old economy - commodities and
heavy industry - due to a decade of lower prices
and poor returns. Local opposition to new projects
and delays in permitting have contributed to the
shortfall in supply. Technology has attracted more
investment dollars and mining has had to struggle
to accommodate ESG mandates that have taken
center stage in capital markets. COVID-19 hasn’t
helped either. Deals that might have resulted in new
project opportunities didn’t happen.
You are beginning to see some experts predicting a
$10 plus copper price this decade. The industry will
likely need it to bring on lower grade deposits and
meet demand. We think the recovery in commodity
prices will actually signal the start of a much longer
structural bull market
for many commodities.
What this means is that approved projects like
KSM located in safe jurisdictions are going to be
revalued higher.
“We have found an
absolutely amazing
amount of economic
copper—about 684
pounds per share if you
consolidate all categories
of resources. There aren’t
any copper companies
that can match that.”
Q: Life is going to be fun again for the mining business.
Layman: We think so. The green revolution is first
and foremost a revolution in the metals business.
The opportunities are really exciting for companies
like ours.
13
ANNUAL REPORT 2020SEABRIDGE GOLD
SEABRIDGE GOLD
Mineral Reserves and Resources
December 2020
The following tables provide a breakdown of Seabridge’s most recent National Instrument 43-101 compliant estimates of
mineral reserves and resources by project. Seabridge notes that mineral resources that are not mineral reserves do not
have demonstrated economic viability.
Proven and Probable Mineral Reserves
Average Grades
Contained Metal
Project Zone
Reserve
Category
Tonnes
(millions)
Gold
(gpt)
Copper
(%)
Silver
(gpt)
Moly
(ppm)
Gold
(million
ounces)
Copper
(million
pounds)
Silver
(million
ounces)
Moly
(million
pounds)
Mitchell
Proven
Probable
KSM
Iron Cap
Probable
Sulphurets Probable
Kerr
KSM Totals
Probable
Proven
Probable
Total
Proven
Courageous Lake
Probable
Total
Seabridge Totals
460
934
224
304
276
460
1,738
2,198
12
79
91
0.68
0.58
0.49
0.59
0.22
0.68
0.51
0.55
2.41
2.17
2.20
0.17
0.16
0.20
0.22
0.43
0.17
0.22
0.21
3.1
3.1
3.6
0.8
1.0
3.1
2.5
2.6
59.2
50.2
13.0
51.6
3.4
59.2
38.2
42.6
n/a
n/a
n/a
10.1
17.4
3.5
5.8
2.0
10.1
28.7
38.8
1.0
5.5
6.5
1,767
3,325
983
1,495
2,586
1,767
8,388
10,155
45
95
26
8
9
45
138
183
60
104
6
35
2
60
147
207
n/a
n/a
n/a
45.3
10,155
183
207
Mineral Resources (Includes Mineral Reserves as stated above)
Gold
Copper
Silver
Molybdenum
Measured Resources
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
Project
KSM:
Mitchell
Snowfield
C$9/16 NSR
750,000
0.30
189,800
Bronson Slope
C$9 NSR
Courageous Lake
Quartz Mountain*
0.83
0.34
Total Measured Resources
84,150
13,401
3,480
0.63
0.82
0.42
2.53
0.98
15,125
4,983
1,140
1,090
110
22,448
0.17
0.09
0.15
n/a
n/a
2,844
380
280
n/a
n/a
3,504
3.2
1.7
2.2
n/a
n/a
77,374
10,332
6,010
n/a
n/a
93,716
58
97
n/a
n/a
n/a
96
41
n/a
n/a
n/a
137
14
ANNUAL REPORT 2020SEABRIDGE GOLD Project
KSM:
Mitchell
Sulphurets
Kerr
Iron Cap
KSM Total
Snowfield
Project
KSM:
Mitchell
Sulphurets
Kerr
Iron Cap
KSM Total
Snowfield
Project
KSM:
Mitchell
Sulphurets
Kerr
Iron Cap
KSM Total
Snowfield
Gold
Copper
Silver
Molybdenum
Indicated Resources
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
C$9
NSR
Pits
C$16
NSR
UG
0.30
1,045,000
446,000
374,000
423,000
2,288,000
1,180,300
102,740
93,914
54,330
0.57
0.55
0.22
0.41
0.48
0.55
0.31
2.28
0.91
19,191
7,887
2,660
5,576
35,314
20,934
1,020
6,884
1,591
65,743
0.16
0.21
0.41
0.22
0.22
0.10
0.10
n/a
n/a
3,795
2,064
3,405
2,051
11,315
2,600
222
n/a
n/a
14,137
3.0
1.0
1.1
4.6
2.6
1.7
2.2
n/a
n/a
101,709
14,339
13,744
62,559
192,351
65,444
7,160
n/a
n/a
264,955
58
53
5
41
45
84
n/a
n/a
n/a
134
52
4
38
228
217
n/a
n/a
n/a
445
Measured plus Indicated Resources
Gold
Copper
Silver
Molybdenum
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
Bronson Slope
C$9 NSR
Courageous Lake
Quartz Mountain*
0.83
0.34
Total Indicated Resources
C$9
NSR
Pits
C$16
NSR
UG
0.30
1,795,000
446,000
370,000
423,000
3,038,000
1,370,100
Bronson Slope
C$9 NSR
186,890
Courageous Lake
Quartz Mountain*
0.83
0.34
107,315
57,810
Total Measured plus Indicated Resources
0.59
0.55
0.22
0.41
0.52
0.59
0.36
2.31
0.92
34,316
7,887
2,660
5,576
50,439
25,917
2,160
7,974
1,701
88,191
0.17
0.21
0.41
0.22
0.21
0.10
0.12
n/a
n/a
6,639
2,064
3,405
2,051
14,159
2,980
502
n/a
n/a
17,641
3.1
1.0
1.1
4.6
2.8
1.7
2.2
n/a
n/a
179,083
14,339
13,744
62,559
269,725
75,776
13,170
n/a
n/a
358,671
58
53
5
41
48
86
n/a
n/a
n/a
230
52
4
38
324
258
n/a
n/a
n/a
582
Gold
Copper
Silver
Molybdenum
Inferred Resources
Cut Off
Grade (g/t)
Tonnes
(000)
Grade
(g/t)
Ounces
(000)
Grade
(%)
Pounds
(millions)
Grade
(g/t)
Ounces
(000)
Grade
(ppm)
Pounds
(millions)
C$9
NSR
Pits
C$16
NSR
UG
0.30
0.83
0.60
0.34
478,000
223,000
1,999,000
1,899,000
4,599,000
833,200
48,963
4,624
44,800
0.42
0.44
0.31
0.45
0.38
0.34
2.18
3.24
0.72
6,406
3,155
19,823
27,474
56,858
9,029
3,432
482
1,043
70,844
0.12
0.13
0.40
0.30
0.32
0.06
n/a
n/a
n/a
1,230
639
17,720
12,556
32,145
1,100
n/a
n/a
n/a
3.2
1.3
1.8
2.6
2.4
1.9
n/a
n/a
n/a
48,676
9,320
114,431
158,741
331,168
50,964
n/a
n/a
n/a
52
30
23
30
29
70
n/a
n/a
n/a
33,245
382,132
55
15
103
126
299
128
n/a
n/a
n/a
427
Courageous Lake:
FAT Deposit
Walsh Lake
Quartz Mountain*
Total Inferred Resources
* As of December, 2020 the Quartz Mountain project was subject to an option agreement under which a 100% interest in the project may be acquired
from Seabridge by the optionee.
Note: United States investors are cautioned that the requirements and terminology of NI 43-101 differ significantly from the requirements of the SEC,
including Industry Guide 7 under the US Securities Act of 1933. Accordingly, the Issuer’s disclosures regarding mineralization may not be comparable
to similar information disclosed by companies subject to the SEC’s Industry Guide 7. Mineral Resources which are not Mineral Reserves do not have
demonstrated economic viability. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral
Resources with continued exploration.
15
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion And Analysis
For the year ended December 31, 2020
The following is a discussion of the results of operations
and financial condition of Seabridge Gold Inc. and its
subsidiary companies for the years ended December
31, 2020 and 2019. This report is dated March 23, 2021
and should be read in conjunction with the audited
consolidated financial statements for the years ended
December 31, 2020 and 2019, the Company’s Annual
Information Form filed on SEDAR at www.sedar.com, and
the Annual Report on Form 40-F filed on EDGAR at www.
sec.gov/edgar.shtml. Other corporate documents are also
available on SEDAR and EDGAR as well as the Company’s
website www.seabridgegold.com.
As the Company
has no operating project at this time, its ability to carry
out its business plan rests with its ability to sell projects
or to secure equity and other financings. All amounts
contained in this document are stated in Canadian dollars
unless otherwise disclosed.
The consolidated financial statements for the year ended
December 31, 2020 and the comparative year ended
December 31, 2019 have been prepared by the Company
in accordance with International Financial Reporting
Standards
International
Accounting Standards Board.
(“IFRS”) as
issued by
the
is a company engaged
Company Overview
Seabridge Gold Inc.
in the
acquisition and exploration of gold properties located in
North America. The Company’s objective is to provide its
shareholders with exceptional leverage to a rising gold
price. The Company’s business plan is to increase its gold
ounces in the ground but not to go into production on its
own. The Company will either sell projects or participate
in joint ventures towards production with major mining
companies.
Since inception in 1999, Seabridge has
acquired interests in numerous advanced-stage gold
projects situated in North America and its principal
projects include the KSM property located in British
Columbia and the Courageous Lake property located
in the Northwest Territories. In 2016, the Company
acquired 100% of the common shares of SnipGold Corp.
(“SnipGold”) and its 100% owned Iskut Project and both in
British Columbia. In 2017, the Company purchased 100%
of Snowstorm Exploration LLC and its Snowstorm Project
in Nevada. In 2020, the Company purchased 100% interest
in the 3 Aces gold project in Yukon and acquired the
Snowfield property adjacent to the KSM Project in British
Columbia. Seabridge’s common shares trade in Canada
on the Toronto Stock Exchange under the symbol “SEA”
and in the United States on the New York Stock Exchange
under the symbol “SA”.
Selected Annual Information
Summary operating results ($000s – except per share amounts)
2020
2019
2018
Corporate and administrative expenses
Environmental rehabilitation expense
Other income - flow-through shares
Impairment of investment in associate
Equity loss of associate
Interest income
Income taxes recovery (expense)
Finance expense and other
Net loss
Basic loss per share
Diluted loss per share
Summary statements of financial position ($000s)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Equity
Total liabilities and equity
16
$ (16,530)
$ (13,340)
$ (12,370)
-
1,676
-
(187)
114
800
(815)
$ (14,942)
$ (0.23)
$ (0.23)
2020
$ 46,229
601,588
-
1,218
-
(200)
279
697
(267)
$ (11,613)
$ (0.19)
$ (0.19)
2019
$ 19,213
430,159
$ 647,817
$ 449,372
$ 10,194
22,905
614,718
$ 6,690
27,659
415,023
(7,439)
6,312
(1,336)
(160)
164
(4,967)
(144)
$ (19,940)
$ (0.34)
$ (0.34)
2018
$ 24,473
398,987
$ 423,460
$ 6,502
30,403
386,555
$ 647,817
$ 449,372
$ 423,460
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
Results of Operations, 2020 Compared to 2019
The Company incurred $14.9 million net loss or $0.23 per
share for the year ended December 31, 2020 compared
to a net loss of $11.6 million or $0.19 per share for the year
ended December 31, 2019.
Corporate and administrative expenses, including stock-
based compensation, were the most significant items
contributing to losses in fiscal 2020 and 2019. In 2020
and 2019 other income reported for flow-through shares
offset some of these expenses. These and other items are
discussed further below.
In response, the Company
In March 2020, the COVID-19 outbreak was declared
a pandemic by the World Health Organization, which
continues to cause significant financial market and social
dislocation.
implemented
measures to safeguard the health and well-being of its
employees, contractors, consultants, and community
members. Regarding human resources, the Company
conducted the majority of its Canadian operations with
Canadian personnel and US based operations with US
personnel. No operations were ceased or closed and no
disruptions to supply channels were encountered. The
outbreak has not materially impacted the Company’s
operations, financial condition or financial performance,
but it has caused it to reduce the scale of certain
programs at KSM and the closure of the Johnny Mountain
Mine and has hindered the pace of advancement at
those projects.
Corporate and administrative expenses for 2020 were
$16.5 million, up $3.2 million or 24% from prior year mainly
due to $3.4 million increase in stock-based compensation
and $0.2 million increase in cash compensation. The
increase
in stock-based compensation expense was
primarily due to the recognition of the fair value of non-
market performance options granted between 2015 and
2019 that were vested in late 2020.
Cash compensation for 2020 was $4.8 million, up $0.2
million or 4% from the prior year. The increase was mainly
due to higher headcount. Cash compensation is expected
to remain stable or increase marginally given the growth
in project and corporate activity in the Company.
The Company’s stock-based compensation expense
related to stock options and restricted share units are
illustrated on the following tables:
($000s)
Options granted
June 24, 2015
March 24, 2016
August 11, 2016
December 19, 2016
December 14, 2017
October 11, 2018
December 12, 2018
June 26, 2019
RSUs granted
December 14, 2017
December 12, 2018
December 12, 2019
December 16, 2020
Exercise
price ($)
Number
of options
Grant date
fair value
Cancelled
prior to 2019
Expensed
prior to 2019
Expensed
in 2019
Expensed
in 2020
Balance to
be
expensed
9.00
13.52
17.14
10.45
13.14
16.94
15.46
17.72
475,000
100,000
50,000
890,833
605,000
50,000
568,000
50,000
5,774
684
438
6,254
4,303
421
4,719
416
149
-
-
94
-
-
-
-
1,266
684
438
5,974
3,529
96
276
-
243
12,263
-
-
-
186
556
238
3,107
168
4,255
($000s)
4,359
-
-
-
218
87
1,328
248
6,240
-
-
-
-
-
-
8
-
8
Number
of RSUs
Grant date
fair value
Expensed
prior to 2019
Expensed
in 2019
Expensed
in 2020
65,000
68,000
139,600
135,450
854
1,051
2,351
3,413
854
183
-
-
1,037
-
868
274
-
1,142
-
-
2,077
487
2,564
Balance to
be
expensed
-
-
-
2,926
2,926
17
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company has,
the
since
compensation practices away from issuing a combination
of stock options and RSUs to only issuing RSUs with
shorter terms and service periods.
refocused
2019,
On June 25, 2020, shareholders resolved to approve that
425,000 options that were granted to the directors of
the Company in 2015 and due to expire in April 2020, be
extended for one year. The fair value of the extension
was determined to be $4.4 million. In December 2020,
upon acquisition of the Snowfield property (discussed
below) the performance condition for these options,
amongst other grants made between 2016 and 2019, was
met and management adjusted the estimated vesting
period to that date and a total of $6.0 million of fair value
was expensed through the statement of operations and
comprehensive loss.
In 2020, 139,600 RSUs fully vested to the holders upon the
Company attaining pre-established vesting conditions
and $2.1 million of fair value was expensed through the
statement of operations and comprehensive loss. The
estimated vesting period for 135,450 RSUs granted in
mid-December 2020 was determined to be four months
and the remaining $2.9 million of the full $3.4 million fair
value will be charged to the statement of operations and
comprehensive loss in 2021.
Professional fees remained steady at $1.1 million in 2020.
Professional fees in both the current and comparative
years relate to fees paid to consulting firms assisting the
Company in seeking potential joint venture partners,
completing corporate reorganizations and defending the
Company on its challenges from the Canada Revenue
Agency (the “CRA”). Other general and administrative
costs decreased by $0.4 million from $2.2 million in 2019 to
$1.8 million in the current year. General and administrative
costs, including corporate travel for investor relations
and meetings, were significantly curtailed due to the
COVID-19 pandemic restrictions. Savings, however, were
somewhat offset by rising regulatory and stock exchange
listing fees. The Company would expect travel and
accommodation costs to rise in 2021, should pandemic
restrictions be lessened but not yet to the level of costs
incurred in 2019.
In 2020, the Company recorded $1.7 million of other
income related to recognizing the flow-through share
premium recorded on financing completed in September
2019 and June 2020 (discussed below). In the comparative
year, the Company recorded $1.2 million of other income
related to recognizing the flow-through share premium
recorded on financing completed in December 2018 and
September 2019 (discussed below).
18
In 2018, the Company submitted a reclamation report
with the British Columbia Minister of Mines pointing to a
full closure cost of the Johnny Mountain Mine (purchased
in 2016 with the Iskut Project) at approximately $9.1 million
and a plan to incur the costs over approximately five years.
Significant costs include estimates for the closure of all
adits and vent raises, removal of the mill and buildings,
treatment of landfills and surface water management
as well as ongoing logistics, freight and fuel costs. All
costs incurred in the current and comparative periods
associated with these activities have been charged to the
provision for reclamation liabilities on the consolidated
statement of financial position.
the Company
In 2020,
incurred $0.8 million of
environmental rehabilitation expenditures (2019 - $1.3
million) that were recorded as a reduction to the provision
for reclamation liabilities on the consolidated statements
of financial position. Planned spending in 2020 was
reduced due to camp restrictions related to COVID-19,
and related to water
impoundment strengthening,
site monitoring and analysis. The 2019 work entailed
the demolition of portals and sealing of vent raises, the
relocation of certain waste burial sites, overall drainage
work and the cleaning and clearing of the mill for future
dismantling.
The Company holds common shares of several mining
companies that were received as consideration for
optioned mineral properties and other short-term
investments, including one gold exchange traded receipt.
In 2020, the Company recognized an increase in fair
value of investments, net of income taxes of $0.7 million.
During the comparative year, the Company recognized
an increase in fair value of investments, net of income
taxes of $0.3 million. The change in the fair value of
these investments was recorded within comprehensive
loss on the consolidated statements of operations and
comprehensive loss.
The Company holds one investment in an associate that
is accounted for on the equity basis. In 2020, the
Company recognized $0.2 million (2019 – $0.2 million) loss
in the associate.
losses
from the
In 2020, the Company recognized income tax recovery
of $0.8 million resulting
incurred
during the period. The tax recovery was partially offset
by the deferred tax expense arising from exploration
expenditures related to the September 2019 and June
2020 flow-through shares issued, that were capitalized for
accounting purposes but were renounced to investors for
tax purposes. In 2019, the Company recognized income
tax recovery of $0.7 million as losses incurred during
that period outweighed the renounced exploration
expenditures related to the 2019 and 2018 flow-through
financings.
ANNUAL REPORT 2020SEABRIDGE GOLD
MANAGEMENT’S DISCUSSION AND ANALYSIS
Results of Operations, 2019 Compared to 2018
The Company incurred $11.6 million net loss or $0.19 per
share for the year ended December 31, 2019 compared to
a net loss of a $19.9 million or $0.34 per share for the year
ended December 31, 2018.
Corporate and administrative expenses, including stock-
based compensation, were the most significant items
contributing to losses in fiscal 2019. In 2018, corporate
and administrative expenses,
including stock-based
compensation, environmental rehabilitation costs and
impairments of investment in associate were the most
significant items contributing to losses. In 2019 and 2018
other income reported for flow-through shares offset
some of these expenses.
Corporate and administrative expenses for 2019 were
$13.3 million, up $1.0 million or 8% from 2018 mainly due
to $0.6 million increase in cash compensation and $0.2
million increase in stock-based compensation. Stock-
based compensation overall remained unchanged at
$5.4 million in 2019 compared to $5.2 million in 2018. Cash
compensation for 2019 was $4.6 million, up $0.6 million
or 15% from 2018. The increase was mainly due to higher
headcount.
Total professional
fees decreased by $0.3 million
from $1.4 million in 2018 to $1.1 million in 2019. Higher
professional fees
in 2018 was mainly related to the
fees paid to consulting firms assisting the Company in
seeking potential joint venture partners and corporate
reorganization. Other general and administrative costs
increased by $0.4 million from $1.8 million in 2018 to
$2.2 million in 2019. The increase was mainly related
to investor relations costs, listing fees, and travel and
conferences costs.
In 2018,
the Company charged $7.4 million of
rehabilitation expenses to the statement of operations
loss related to the filing of a
and comprehensive
Johnny Mountain Mine reclamation report in British
Columbia and the charge was added to the provision
for reclamation liabilities on the statement of financial
position.
In 2019, the Company recorded $1.2 million of other
income related to recognizing the flow-through share
premium recorded on financing completed in December
2018 and September 2019.
In 2018, the Company
income of $6.3 million related to
recognized other
the flow-through share premium recorded on larger
financings completed in 2017 and 2018.
Quarterly Information
Selected financial information for the last eight quarters ending December 31, 2020 is as follows:
(in thousands of Canadian dollars,
except per share amounts)
Revenue
Loss for period
Basic loss per share
Diluted loss per share
2020
Q3
-
Q4
-
Q2
-
Q1
-
Q4
-
2019
Q3
-
Q2
-
Q1
-
(12,653)
4,977
(4,068)
(3,198)
(2,963)
(2,526)
(2,036)
(4,088)
(0.18)
(0.18)
0.07
0.07
(0.06)
(0.06)
(0.05)
(0.05)
(0.05)
(0.05)
(0.04)
(0.04)
(0.03)
(0.03)
(0.07)
(0.07)
In the third quarter 2020, net income included a $4.9
million reversal of stock-based compensation expense,
related to non-market condition, performance vesting
stock options granted in the years 2015 to 2019, that
was previously recognized through the statement of
operations and comprehensive loss. The reversal reflected
a revised estimated vesting period of those options. In the
fourth quarter 2020, that vesting period was re-estimated
to reflect the purchase of the Snowfield property from
Pretium Resources Inc. for $127.5 million. The purchase,
discussed below, added 25.9 million ounces of gold
and 3.0 billion pounds of copper in the measured and
indicated categories of resources and alone increased
the measured and indicated gold ounces at KSM by 51%
and by 28% for copper. The estimated service period for
these stock options, including those whose fair value
was reversed in the previous quarter, was reset to the
Snowfield property acquisition date, and $8.6 million
stock-based compensation expense was recognized
through the statement of operations and comprehensive
loss in the fourth quarter.
In the first and second quarters of 2020, the loss for the
period also included higher stock-based compensation
expense compared to other quarters as it included a $1.2
million and $0.8 million, respectively, of charges related
to amortization of RSUs granted in December 2019 that
were vested during the second quarter of 2020. In the first
quarter 2019, the loss for the period included higher stock-
based compensation expense compared to other quarters
as it included a $0.9 million charge related to amortization
of RSUs granted in December 2018 and vested and fully
expensed during the quarter.
19
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
Mineral Interest Activities
In 2020, the Company added an aggregate of $165.8
million of expenditures that were attributed to mineral
interests. Of the $165.8 million expenditures, $127.5 million
was related to the acquisition of the Snowfield property
adjacent to the Company’s KSM Project, and $6.6 million
was related to the fair value of common shares issued
to acquire the 3 Aces gold project. The remaining cash
expenditures of $31.3 million were made at KSM (63%),
Iskut (18%), Snowstorm (14%), Courageous Lake (3%), and 3
Aces (2%).
At KSM in 2020, the Company executed geotechnical
and exploration drilling programs at the project. The
programs commenced in the second quarter and field
work was completed in late October. The objective of the
geotechnical drilling program was to test the condition of
the rocks along the proposed route of the Mitchell Treaty
Tunnels, a proposed key infrastructure component of the
project. The exploration program included drilling in an
area previously untested. Results of the geotechnical work
and drilling will be analyzed in 2021 and may form the
basis of plans for follow-up work.
In mid-2020, the Company placed $5.2 million on deposit
with a financial institution pledged as security for the
Fish Habitat Offsetting Plans obligation at KSM. Of the
$5.2 million, $3.3 million is related to the construction
phase of the plans. The remaining $1.9 million is related
to monitoring phase that
is currently expected to
commence in 2022 and continue for 10 years. Subject to
approval by the Department of Fisheries and Oceans,
the security deposits can be released at the end of the
construction and monitoring phases of the plan.
In December 2020, the Company closed the transaction
acquiring a 100% interest in the Snowfield property from
Pretium Resources Inc. for a US$100 million ($127.5 million)
cash payment, a 1.5% net smelter royalty on Snowfield
property production, and a future contingent payment
of US$20 million of which, US$15 million can be credited
against future royalty payments. The US$20 million
is payable following the earlier of (i) commencement
of commercial production from Snowfield property,
and (ii) announcement by the Company of a bankable
feasibility study which includes production of reserves
from the Snowfield property. The $127.5 million fair
value of the cash paid was recorded in mineral interests
on the statement of financial position. The property
its addition
is
immediately adjacent to KSM and
significantly transforms the KSM Project
increasing
measured and indicated gold ounces of KSM by 51%
and 28% for copper and enables new development
opportunities for KSM which could have a positive impact
on the overall project economics.
In 2020 at Iskut, the Company conducted an exploration
program that was designed based on the results of the
exploration work conducted in 2019. The 2019 program
entailed the use of deep penetrating geophysical
techniques to define potential drill targets and the
evaluation of those results culminated in the Company
planning an initial drill test for a gold/copper porphyry
deposit below the Quartz Rise lithocap. Drilling results
will be analyzed for possible follow-up in 2021. In addition
to this exploration work at Iskut, the Company carried out
a scaled back program to continue the reclamation and
closure activities at the Johnny Mountain mine site. The
Company incurred $0.8 million of costs that were charged
to the provision for reclamation liabilities.
At Snowstorm, the Company commenced
its 2020
exploration program that was planned based on the
results of the first drill program and ground geophysical
studies, completed in 2019, that refined the targets for
the current year program. The drilling program continues
subsequent to the year end with completion expected at
the end of the first quarter or early in the second quarter
of 2021. The results of this program will be evaluated and
analyzed in 2021.
In June 2020, the Company acquired a 100% interest
in the 3 Aces gold project in the Yukon, Canada from
Golden Predator Mining Corp. The Company
issued
300,000 common shares valued, on the issue date, at
$6.6 million. Should the project attain certain milestones,
the Company will potentially pay an additional $2.25
million. During the remaining quarters since acquisition,
management commenced planning the next steps
for the evaluation and exploration of the project and
completed some necessary repairs to the exploration
camp on site for potential use in 2021.
The Company has been evaluating the best path forward
at Courageous Lake. Options include securing a joint
venture partner, the sale of all or a portion of the project,
updating the 2012 PFS with a smaller initial project or
conducting additional exploration outside the area of
known reserves and resources. Current period work has
focused on a high-level study of a smaller project and
footprint than envisaged in the 2012 PFS.
In response to the pandemic, the Company has
implemented measures to safeguard the health and
well-being of
its employees, contractors, consultants,
and community members. Many of the Company’s
employees worked remotely prior to the pandemic, but
through the last three quarters of 2020 all employees
have been working remotely during ongoing periods of
lockdown. The Company has reduced the scope of some
of the work programs at its projects that it had originally
20
ANNUAL REPORT 2020SEABRIDGE GOLD
MANAGEMENT’S DISCUSSION AND ANALYSIS
planned for 2020 in order to observe social distancing
and
implement preventative actions at exploration
camps. Although these measures limited the number of
personnel accommodated at the camps, the impact on
the effectiveness of the programs was minimal for 2020.
The Company has continued to move forward with its
exploration and development work at Iskut, Snowstorm
and 3 Aces projects but reduced certain programs at KSM
and reclamation activities at the Johnny Mountain Mine.
The Company’s engagement with potential joint venture
partners, or potential acquirors of KSM or Courageous
Lake did diminish somewhat in 2020 as major mining
companies have focused on addressing the needs of their
existing operations as a result of the pandemic.
The Company has not
The Company continues to have full access to
its
properties in Canada and the United States and has
managed to adequately staff its camps for planned
experienced
programs.
problems with obtaining the supplies needed for its
work programs. The Company has instituted and will
continue to
implement operational and monitoring
protocols to ensure the health and safety of its employees
local
and stakeholders, which follow the advice of
governments and health authorities where it operates.
The Company plans work programs on an annual basis
and adjusts its plans to the conditions it faces for funding
and executing programs as it plans and operates its work
programs. It fully expects to be able to continue operating
most of its programs on this basis going forward, as
required, and anticipates that the pandemic will continue
to have minimal impact on its exploration activities.
in cash resources,
Liquidity and Capital Resources
The Company’s working capital position at December 31,
2020, was $36.0 million, up from $12.5 million at December
31, 2019. Included in current liabilities at December 31,
2020 is $2.3 million of flow-through premium liability
which is a non-cash item (December 31, 2019 - $0.1 million)
and will be reduced as flow-through expenditures are
incurred. Increase
including cash
and cash equivalents and short-term deposits, was the
net result of cash raised through financings (discussed
below) and the exercise of options, offset by cash used in
acquisitions, environmental and exploration projects, and
corporate and administrative costs. In 2020, the Company
received $4.3 million upon the exercise of 390,153 stock
options. Subsequent to the year end, the Company
received $3.9 million upon exercise of 354,668 stock
options. As outlined below, in 2020, the Company was
successful in raising $200 million in net proceeds with the
issuance of common shares through various financings
and upon the exercise of stock options. This compares
to $31.5 million in 2019, prior to the COVID-19 pandemic.
The Company is confident in its ability to continue to
finance its operations when required, through similar
equity issuances and the exercise of stock options and
warrants. The Company did not rely on any local, regional,
or national government assistance, in 2020, to fund any of
its operations.
During the fourth quarter of 2019, the Company entered
into an agreement with two securities dealers, for an At-
The-Market offering program, entitling the Company, at
its discretion, and from time to time, to sell up to US$40
million in value of common shares of the Company.
During 2020, the Company issued 1,327,046 shares, at an
average selling price of $21.94 per share, for net proceeds
of $28.5 million under Company’s At-The-Market offering.
During the fourth quarter of 2019, the Company issued
231,084 shares, at an average selling price of $17.58 per
share, for net proceeds of $4.0 million under the offering.
Subsequent to the year end, the Company entered into
a new agreement with two securities dealers, for an At-
The-Market offering program, entitling the Company, at
its discretion, and from time to time, to sell up to US$75
million in value of common shares of the Company. This
program can be in effect until the Company’s current
US$775 million Shelf Registration Statement expires in
January 2023. Subsequent to the year end, the Company
issued 290,170 shares, at an average selling price of
$23.78 per share, for net proceeds of $6.8 million under
Company’s At-The-Market offering.
On December 4, 2020, the Company entered into an
agreement to sell, on a bought deal basis, 6,100,000
common shares of the Company, at US$17.25 per common
share, for gross proceeds of US$105 million. As part of
the agreement, the Company granted an option to the
underwriters to sell up to an additional 610,000 common
shares of the Company, at a price of US$17.25 per common
share, for gross proceeds of US$10.5 million. The financing
closed on December 9, 2020, and the underwriters
fully exercised their option to purchase the additional
common shares. In aggregate, 6,710,000 common shares
were issued, at a price of US$17.25 per common share, for
gross proceeds of US$115.7 million. In excess of 90% of the
intended use of the net proceeds of this financing was
to purchase the Snowfield property. The balance was to
be utilized in operations and for general working capital
purposes. The acquisition of Snowfield was completed
prior to year-end and residual funds not utilized for the
acquisition, including acquisition costs, will be used for
working capital and operations in 2021.
21
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
In June 2020, the Company issued 345,000 flow-through
common shares at $32.94 per common share
for
aggregate gross proceeds of $11.4 million. The Company
committed to renounce its ability to deduct qualifying
exploration expenditures for the equivalent value of the
gross proceeds of the flow-through financing and transfer
the deductibility to the purchasers of the flow-through
shares. The effective date of the renouncement was
December 31, 2020. In accordance with draft legislation
released on December 16, 2020 in relation to the COVID-19
pandemic, a 12-month extension has been proposed to
the normal timelines in which the qualifying exploration
expenditures should be incurred. At the time of issuance
of the flow-through shares, $3.9 million premium was
recognized as a liability on the consolidated statements
of financial position. During 2020, the Company incurred
$4.7 million of qualifying exploration expenditures and
$1.6 million of the premium was recognized through other
income on the consolidated statements of operations
and comprehensive loss. The intended use of the gross
proceeds of this financing was to incur exploration costs
in British Columbia. Of the $11.4 million raised, $6.7 million
remains to be spent and will be used for exploration
purposes at either or both of its KSM and Iskut projects
in 2021.
In April 2020, the Company closed a non-brokered private
placement of 1.2 million common shares, at a price of
$11.75 per common share, for gross proceeds of $14.1
million. As part of the private placement agreement, the
Company granted an option to increase the size of the
private placement by an additional 240,000 common
shares exercisable until May 15, 2020. The 240,000 options
were fully exercised on May 6, 2020 at a price of $11.75 per
share, for gross proceeds of $2.8 million. The intended use
of the net proceeds of this financing was for operations
including working capital, and if require, to deposit funds
with the Receiver General on behalf of flow through
investors that have been or will be reassessed based on
the audit of flow-through expenditures incurred in 2014
to 2016, discussed below. Within 2020, no deposits have
been made on the investors’ behalf. However, subsequent
to the year-end deposits of $2.4 million has been made. It
is anticipated that additional deposits will be made in 2021
but the timing is uncertain.
During the third quarter of 2019, the Company issued
100,000 flow-through common shares at $24.64 per
common share for aggregate gross proceeds of $2.5
million. The Company committed to renounce its ability
to deduct qualifying exploration expenditures for the
equivalent value of the gross proceeds of the flow-
through financing and transfer the deductibility to the
purchasers of the flow-through shares. The effective date
of the renouncement was December 31, 2019. At the
time of issuance of the flow-through shares, $0.5 million
premium was recognized as a liability on the consolidated
statements of financial position. During 2019, the
Company incurred $2.0 million of qualifying exploration
expenditures and $0.4 million of the premium was
recognized through other income on the consolidated
statements of operations and comprehensive loss. During
2020, the Company incurred another $0.5 million of
qualifying exploration expenditures and the remaining
$0.1 million premium was recognized through other
income on the consolidated statements of operations
and comprehensive loss. The intended use of the gross
proceeds of this financing was to incur exploration costs
in British Columbia. All of the $2.5 million has been spent
on exploration purposes at both KSM and Iskut projects.
the Company
In December 2018,
issued 250,000
flow-through common shares at $20.50 per share for
aggregate gross proceeds of $5.1 million. Proceeds of
this financing were used to fund the 2019 KSM and Iskut
programs. The Company committed to renounce its
ability to deduct qualifying exploration expenditures for
the equivalent value of the gross proceeds of the flow-
through financing and transfer the deductibility to the
purchasers of the flow-through shares. The effective
date of the renouncement was December 31, 2018. At
the time of issuance of the flow-through shares, $0.8
million premium was recognized as a liability on the
consolidated statements of financial position with the
balance recorded as share capital. During 2019, $5.1
million of qualifying exploration expenditures were
incurred and the entire $0.8 million premium was
recognized through other income on the consolidated
statement of operations and comprehensive loss. The
intended use of the gross proceeds of this financing was
to incur exploration costs in British Columbia. All of the
$5.1 million has been spent on exploration purposes at
either KSM or Iskut.
In August 2019, the Company closed a private placement
of 1.2 million common shares, at a price of $17.02 per
common share, for gross proceeds of $20.4 million. The
intended use of the proceeds of this financing was for
general working capital purposes. All of the proceeds
of this financing have been utilized in operations and
working capital in 2019 and into 2020.
During 2020, operating activities,
including working
capital adjustments, used $10.5 million cash compared to
$10.9 million cash used by operating activities in 2019. The
decrease in the year-over-year basis was mainly related
to $0.5 million decrease in environmental rehabilitation
disbursements, $0.4 million decrease in general and
administrative expenses and $0.4 million decrease in cash
used in working capital, partially offset by $0.6 million
foreign exchange loss. Lower general and administrative
expenses in 2020 was mainly related to lower travel
and conference costs due to the COVID-19 restrictions.
Operating activities in the near-term are not expected to
deviate significantly from the current year.
22
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
As reported in the Company’s 2018 and 2019 annual
financial statements, in early 2019 the Company received
a notice from the CRA that it proposed to reduce
the amount of expenditures reported, as Canadian
Exploration Expenses (CEE) for the three-year period
ended December 31, 2016. The Company has funded
certain of its exploration expenditures, from time-to-time,
with the proceeds from the issuance of flow-through
shares and renounced, to subscribers, the expenditures
which it determined to be CEE. The notice disputes the
eligibility of certain types of expenditures previously
audited and approved as CEE by the CRA. The Company
strongly disagrees with the notice and responded
to the CRA auditors with additional information for
their consideration. In January 2020, the CRA auditors
responded to the Company’s submission and, although
accepting additional expenditures as CEE, reiterated
that their position remains
largely unchanged and
issued reassessments to the Company
subsequently
reflecting the additional CEE expenditures accepted and
$2.3 million of Part Xll.6 tax owing. During the second
quarter in 2020, the Company filed an objection to the
Part Xll.6 tax owing and is awaiting a response. Based on
these reassessments, the Company anticipates that the
CRA will reassess investors with reduced CEE deductions.
The Company’s and investors’ reassessments can be
appealed to the courts. The Company has indemnified
the investors that subscribed for the flow-through shares.
The potential tax indemnification to the investors is
estimated to be $11.0 million. Accrued interest on the
potential estimated tax is estimated at $2.2 million. No
provision has been recorded related to the tax nor the
potential indemnity as the Company and its advisors do
not consider it probable that there will ultimately be an
amount payable. Subsequent to the year end, $2.4 million
was deposited with the Receiver General, on behalf of
certain investors in return for their agreement to object to
their respective assessments and agreement to repay the
Company with any and all recoveries upon the successful
resolution of the Company’s successful appeal.
Contractual Obligations
The Company has the following commitments:
During 2016, upon the completion of an audit of the
application by tax authorities of the British Columbia
Mineral Exploration Tax Credit (“BCMETC”) program,
the Company was reassessed $3.6 million,
including
accrued interest, for expenditures that the tax authority
has categorized as not qualifying for the BCMETC
program. The Company recorded a $3.6 million provision
within non-trade payables and accrued expenses on
the consolidated statements of financial position as at
December 31, 2016, with a corresponding increase to
mineral interests. In 2017 the Company filed an objection
to the reassessment with the appeals division of the tax
authorities and paid one-half of the accrued balance while
the objection is reviewed. In early 2019, the Company
received a decision from the appeals division that the
Company’s objection was denied, and the Company filed
a notice of appeal with the British Columbia Supreme
Court. The Attorney General of Canada replied to the facts
and arguments in the Company’s Notice of Appeal and
stated its position that the Company’s expenditures did
not qualify for the BCMETC program. The Company is now
in the discovery process with the Department of Justice
and will continue to move the appeal process forward
as expeditiously as possible. The Company intends to
continue to fully defend its position. The Canada Revenue
Agency (CRA) has withheld HST refunds due to the
Company that would fully cover the residual balance,
including interest, should the Company be unsuccessful
in its challenge.
The Company will continue its objective of advancing its
major gold projects, KSM and Courageous Lake, and to
further explore the Iskut, Snowstorm and 3 Aces projects
to either sell or enter into joint venture arrangements
with major mining companies. Given what seems to be a
growing demand for metals streams and royalty interests,
the Company will also determine the merits of disposing
of options it holds on non-core net profits interests and
net smelter returns.
($000s)
Mineral interests
Flow-through share expenditures
Payments due by years
Total
10,975
6,699
17,674
2021
1,098
6,699
7,797
2022-23
2024-25
2026-27
2,877
-
2,877
3,497
-
3,497
3,503
-
3,503
23
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
Outlook
As mentioned above, the COVID-19 pandemic has not
materially impacted the Company’s operations, financial
condition or financial performance, but it has caused it to
reduce the scale of certain programs and has hindered,
and may continue to hinder, the pace of advancement
at the affected projects. The Company was able to carry
out the 2020 exploration and monitoring programs at its
projects safely and within the constraints and measures
implemented and the pandemic had no material impact
to the results of operations. Based on its experience in
2020, the Company expects that the pandemic will again
not have a material impact on the results of operations.
Although the capital markets are relatively volatile, the
Company does not foresee limitations to access to capital
on acceptable terms. No disruptions to supply chains are
anticipated nor are any delays to project activity.
The pandemic has resulted in governments worldwide
enacting emergency measures to combat the spread
of the virus. These measures, which
include the
implementation of travel bans, self-imposed quarantine
periods and social distancing, have caused material
disruption to business globally resulting in an economic
slowdown. Governments and central banks have reacted
with significant monetary and fiscal
interventions
designed to stabilize economic conditions. Working
closely with the health authorities and with its business
partners, the Company developed effective procedures for
operating safely in the current global health crisis.
With the increase in the price of gold since the start of the
pandemic, the Company has enjoyed favourable capital
markets and has continued to raise funds under its ATM
offering of common shares and its financial condition
has not been adversely impacted by the pandemic. As a
company without revenue from operations, its financial
performance has not been impacted by the pandemic.
The Company will continue to monitor developments of
the pandemic and continuously assess the pandemic’s
potential further impact on the Company’s operations
and business.
In 2021 at KSM, the Company’s objective is to integrate
Snowfield into KSM’s development plans. Drilling and
metallurgical work will be completed on the Snowfield
deposit to complete the work required to advance a new
PFS that integrates Snowfield into the overall KSM Project.
The Company has commenced work on a new PFS which
is expected to be completed over the next 12 months.
The Company will also be completing substantial
work ensuring that KSM’s Environmental Assessment
Certificate remains in good standing as well as collecting
additional data that will be required for a final feasibility
study.
Engineering study work will also be conducted on
various, significant, components of the eventual design,
including the Treaty Creek Terminal connection to BC
Hydro’s Northern Transmission Line. As well, additional
bonding will be required for BC Hydro and for applications
for federal permits related to fish habitat offsetting
agreements.
The Company intends to continue its pursuit of a joint
venture agreement on the KSM Project with a suitable
partner on terms advantageous to the Company, since
it does not intend to build or operate the project alone.
The KSM Project includes multiple deposits and provides
a joint venture partner, or purchaser, flexibility in the
design of the project. In accordance with its priorities
and risk tolerance, the Company believes that it does
not make sense for it to start preparing a feasibility
study on the KSM Project on its own. The current KSM
PFS includes recommendations on additional work that
could be completed to advance the project, including
budget estimates. The work that a joint venture partner
might choose to complete might include some or all of
this recommended work and might include significantly
more work, and so the timing and cost for a joint venture
partner to conclude the recommended work or a
feasibility study is impossible to predict. The Company
plans its work to advance the KSM Project on an annual
basis, when the results of one year’s work have been
received and analyzed, planning for the next year begins.
When planning its programs, the Company will consider
the recommended work in the PFS, but the Company
will decide work based on its priorities, the results of its
advancement work and the items it believes are best left
for a joint venture partner to decide. Plans for each year
are typically announced in the second quarter of the year
and budgets are established at the beginning of the year.
At Iskut, the Company will continue exploration activities
focusing on a potential porphyry deposit below the
Quartz Rise lithocap. The 2020 drill campaign confirmed
the presence of a favourable mineralized intrusion with
the presence of gold and copper. Additional geophysical
surveys and two deeper drill holes have been designed
to evaluate the potential source of the 2020 findings
and should determine whether the porphyry related
systems on the property have potential for drill targeting.
Environmental work will also continue on the reclamation
and closure plan for the Johnny Mountain mine. Work will
entail water quality and quantity sampling and analysis,
tailings management
relocation
of waste rock and general cleanup of certain areas
surrounding the mill.
facility monitoring,
At Snowstorm, the Company plans to complete the drill
program commenced in 2020 and undertake a follow-up
drill program based on the evaluation of those results.
24
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
At the Company’s new project, 3 Aces, an exploration
program is expected to commence including geophysics
and mapping to be followed by an initial drill program
focused on high grade mineralized targets.
The Company will also continue to build on its social
license at all of its projects and continue dialogue with
all stakeholders regarding the Company’s corporate
responsibility initiatives.
IFRS. Management
in accordance with
Internal Controls Over Financial Reporting
The Company’s management under the supervision of
the Chief Executive Officer and Chief Financial Officer
are responsible for designing adequate internal controls
over financial reporting or causing them to be designed
under their supervision in order to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes
is
responsible for establishing and maintaining adequate
internal controls over financial reporting. Management
evaluated the effectiveness of the Company’s internal
controls over financial reporting as of December 31,
2020 based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO). Based on that evaluation of the internal controls
at December 31, 2020, management has concluded
that the Company’s internal controls and procedures
are appropriately designed and operating effectively.
The registered public accounting firm that audited the
Company’s consolidated financial statements has issued
their attestation report on management’s assessment
of the effectiveness of internal control over financial
reporting as of December 31, 2020.
Changes to Internal Controls Over Financial
Reporting
There was no change in the Company’s internal controls
over financial reporting that occurred during the period
beginning on October 1, 2020 and ended on December
31, 2020 that has materially affected, or is reasonably likely
to materially affect, the Company’s internal controls over
financial reporting.
Disclosure Controls and Procedures
Disclosure controls and procedures have been designed
to ensure that information required to be disclosed by
the Company is recorded, processed, summarized and
reported within the time periods specified in the rules
and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed
to ensure that information required to be disclosed by
the Company is accumulated and communicated to
25
management as appropriate, to allow timely decisions
regarding required disclosure. The Company’s Chief
Executive Officer and Chief Financial Officer have
concluded, based on their evaluation of the design of the
disclosure controls and procedures as of December 31,
2020, that they are appropriately designed and effective.
Limitations of Controls and Procedures
The Company’s management, including the Chief Executive
Officer and Chief Financial Officer, believe that any
internal controls over financial reporting and disclosure
controls and procedures, no matter how well designed,
limitations. Therefore, even those
can have
systems determined to be effective can provide only
reasonable assurance that the objectives of the control
system are met.
inherent
Shares Issued and Outstanding
At March 23, 2021, the issued and outstanding common
shares of the Company totaled 74,807,664. In addition,
there were 2,257,023 stock options, 135,450 RSUs and
500,000 warrants outstanding. Assuming the conversion
of all of these instruments outstanding, there would be
77,700,137 common shares issued and outstanding.
Related Party Transactions
During year ended December 31, 2020 and 2019,
there were no payments to related parties other than
compensation paid to key management personnel. These
transactions were in the normal course of operations and
were measured at the exchange amount, which is the
amount of consideration established and agreed to by the
related parties.
Recent Accounting Pronouncements
Refer to Note 3 (M) in the Company’s audited consolidated
financial statements for the year ended December 31,
2020.
Critical Accounting Estimates
Critical accounting estimates used in the preparation
of the consolidated financial statements include the
Company’s estimate of recoverable value of its mineral
properties and related deferred exploration expenditures,
the value of stock-based compensation, asset retirement
obligations, deferred
income tax, and potential tax
contingencies. All of these estimates involve considerable
judgment and are, or could be, affected by significant
factors that are out of the Company’s control.
The factors affecting stock-based compensation include
estimates of when stock options and compensation
warrants might be exercised and the stock price volatility.
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
Forward Looking Statements
The consolidated financial statements and management’s
discussion and analysis and any other materials included
with them, 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, estimates,
plans, objectives, assumptions, intentions or statements
about future events or performance. Forward-looking
information may include reserve and resource estimates
and expected changes to them, estimates of future
production and related financial analysis, 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.
information
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
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
required
by law.
information, except as
The timing for exercise of options is out of the Company’s
control and will depend upon a variety of factors,
including the market value of the Company’s shares
and financial objectives of the stock-based instrument
holders. The Company used historical data to determine
volatility. However, the future volatility is uncertain.
The recoverability of the carrying value of mineral
properties and associated deferred exploration expenses
is based on market conditions for minerals, underlying
mineral resources associated with the properties and
future costs that may be required for ultimate realization
through mining operations or by sale. The Company is
in an industry that is dependent on a number of factors
including environmental, legal and political risks, the
existence of economically recoverable reserves, the ability
of the Company and its subsidiaries to obtain necessary
financing to complete the development, and future
profitable production or the proceeds of disposition
thereof.
The provision for asset retirement obligations is the
best estimate of the present value of the future costs of
reclaiming the environment that has been subject to
disturbance through exploration activities or historical
mining activities. The Company uses assumptions and
evaluates technical conditions for each project that have
inherent uncertainties, including changes to laws and
practices and to changes in the status of the site from
time-to-time. The timing and cost of the rehabilitation
is also subject to uncertainty. These changes, if any, are
recorded on the consolidated statements of financial
position as incurred.
The Company has net assets in Canada and the United
States and files corporate tax returns in each. Deferred tax
liabilities are estimated for tax that may become payable
in the future. Future payments could be materially
different from our estimated deferred tax liabilities. We
have deferred tax assets related to non-capital losses and
other deductible temporary differences. Deferred tax
assets are only recognized to the degree that it shelters
tax liabilities or when it is probable that we will have
enough taxable income in the future to recover them.
Risks and Uncertainties
The risks and uncertainties are discussed within the
Company’s most recent Annual Information Form filed
on SEDAR at www.sedar.com, and the Annual Report on
Form 40-F filed on EDGAR at www.sec.gov/edgar.shtml.
26
ANNUAL REPORT 2020SEABRIDGE GOLD MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Responsibility
for Financial Statements
The accompanying consolidated financial statements
have been prepared by management in accordance with
International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board.
Financial statements include certain amounts based on
estimates and judgments. When an alternative method
exists under IFRS, management has chosen a policy it
deems most appropriate in the circumstances in order
to ensure that the consolidated financial statements are
presented fairly, in all material respects, in accordance
with IFRS.
and to satisfy itself that each party is properly discharging
its responsibilities. The Audit Committee also reviews
the consolidated financial statements, management’s
discussion and analysis, the external auditors’ reports,
examines the fees and expenses for audit services,
and considers the engagement or reappointment of
the external auditors. The Audit Committee reports its
findings to the Board of Directors for its consideration
when approving the consolidated financial statements
for issuance to the shareholders. KPMG LLP, the external
auditors, have full and free access to the Audit Committee.
The Company maintains adequate systems of internal
controls. Such systems are designed to provide reasonable
assurance that transactions are properly authorized
and recorded, the Company’s assets are appropriately
accounted for and adequately safeguarded and that the
financial information is relevant and reliable.
The Board of Directors of the Company is responsible for
ensuring that management fulfills
its responsibilities
for financial reporting and is ultimately responsible for
reviewing and approving the consolidated financial
statements and
the accompanying management’s
discussion and analysis. The Board of Directors carries out
this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of
Directors and all of its members are non-management
directors. The Audit Committee meets periodically with
management and the external auditors to discuss internal
controls, auditing matters and financial reporting issues,
Rudi P. Fronk
Chairman & CEO
March 23, 2021
Christopher J. Reynolds
Vice President, Finance and Chief Financial Officer
March 23, 2021
27
ANNUAL REPORT 2020SEABRIDGE GOLD REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent
Registered Public Accounting Firm
To the Shareholders and Board of Directors of Seabridge
Gold Inc.:
to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
Opinion on the Consolidated Financial
loss, changes
Statements
We have audited
the accompanying consolidated
statements of financial position of Seabridge Gold Inc.
(the Company) as of December 31, 2020 and 2019, the
related consolidated statements of operations and
comprehensive
in shareholders’ equity,
and cash flows for each of the years then ended and the
related notes (collectively, the consolidated financial
statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the
financial position of the Company as of December 31,
2020 and 2019, and its financial performance and its cash
flows for each of the years then ended, in conformity with
International Financial Reporting Standards as issued by
the International Accounting Standards Board.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control
over financial reporting as of December 31, 2020, based
on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our
report dated March 23, 2021 expressed an unqualified
opinion on the effectiveness of the Company’s internal
control over financial reporting.
We conducted our audits
in accordance with the
standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement, whether
due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to
error or fraud, and performing procedures that respond
to those risks. Such procedures
included examining,
on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles
used and significant estimates made by management,
as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
are matters arising
from the current period audit
of the consolidated financial statements that were
communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication
Basis for Opinion
These consolidated financial
the
responsibility of the Company’s management. Our
responsibility
these
consolidated financial statements based on our audits.
We are a public accounting firm registered with the
PCAOB and are required to be independent with respect
to express an opinion on
statements are
is
28
ANNUAL REPORT 2020SEABRIDGE GOLD REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to
which they relate.
internal controls related to the Company’s assessment of
the uncertain tax positions including controls related to
the interpretation of tax law. We involved tax professionals
with specialized skills and knowledge who assisted in,
evaluating the Company’s tax position by:
• inspecting the notice and other correspondence with
the tax authority,
• evaluating conclusions obtained by the Company from
external counsel,
• evaluating the Company’s analysis and conclusions
regarding its assertion, which included an assessment
of the Company’s analysis of tax laws and regulations,
and
• performing an
independent assessment of
the
Company’s uncertain tax positions based on our
understanding and
laws and
comparing it to the Company’s assessment.
interpretation of tax
Chartered Professional Accountants,
Licensed Public Accountants
We have served as the Company’s auditor since 2002.
Toronto, Canada
March 23, 2021
Uncertain Tax Positions
As discussed in Note 3c and 17 to the consolidated
financial statements, in 2019 the Company received a
notice of re-assessment from the Canadian Revenue
Agency (tax authority) that reduces the amount of
expenditures reported, as Canadian Exploration Expenses
(CEE) for the three-year period ended December 31, 2016.
In connection with the issuance of flow-through shares
which financed the CEE, the Company has indemnified
investors for any disallowed renouncements of CEE.
The Company has not recorded any expense related to
this uncertain tax position as the Company believes it is
probable its tax position will be upheld.
We identified the Company’s evaluation of the uncertain
tax position related to CEE as a critical audit matter. This
critical audit matter required a high degree of auditor
judgment to evaluate the Company’s
interpretation
of, and compliance with, the income tax laws and the
probability of the ultimate resolution of its CEE filing
positions.
The following are the primary procedures we performed
to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain
29
ANNUAL REPORT 2020SEABRIDGE GOLD REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent
Registered Public Accounting Firm
To the Shareholders and Board of Directors of Seabridge
Gold Inc.:
Opinion on Internal Control Over Financial
Reporting
We have audited Seabridge Gold Inc.’s (the Company)
internal control over financial reporting as of December
31, 2020, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting
as of December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the
Treadway Commission.
We also have audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated statements of financial
position of the Company as of December 31, 2020 and
2019, the related consolidated statements of operations
and comprehensive loss, changes in shareholders’ equity,
and cash flows for each of the years then ended and the
related notes (collectively, the consolidated financial
statements), and our report dated March 23, 2021
expressed an unqualified opinion on those consolidated
financial statements.
is
responsible
Basis for Opinion
for
The Company’s management
maintaining effective
internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting, appearing under
the heading Internal Control over Financial Reporting in
Management’s Discussion and Analysis for the year ended
December 31, 2020. Our responsibility is to express an
opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange
Commission and the PCAOB.
audit of internal control over financial reporting included
internal control over
obtaining an understanding of
financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing
such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control
Over Financial Reporting
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements
in accordance with generally accepted accounting
receipts and expenditures of
principles, and
that
the company are being made only
in accordance
with authorizations of management and directors of
the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial
statements.
its
inherent
limitations,
Because of
internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance
about whether effective internal control over financial
reporting was maintained in all material respects. Our
Chartered Professional Accountants,
Licensed Public Accountants
Toronto, Canada
March 23, 2021
30
ANNUAL REPORT 2020SEABRIDGE GOLD CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of
Financial Position
(Expressed in thousands of Canadian dollars)
Assets
Current assets
Cash and cash equivalents
Short-term deposits
Amounts receivable and prepaid expenses
Investment in marketable securities
Non-current assets
Convertible notes receivable
Investment in associate
Mineral interests
Right to use asset
Reclamation deposits
Total assets
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities
Flow-through share premium
Lease obligations
Provision for reclamation liabilities
Non-current liabilities
Deferred income tax liabilities
Lease obligations
Provision for reclamation liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Note
December 31, 2020
December 31, 2019
4
4
5
6
7
6
8
9
11
10
12
9
11
16
9
11
12
$
17,528
19,905
4,970
3,826
46,229
529
2,611
591,446
235
6,767
601,588
$
8,793
4,114
3,274
3,032
19,213
529
2,361
425,671
271
1,327
430,159
$
647,817
$
449,372
$
5,377
2,276
41
2,500
10,194
19,034
207
3,664
22,905
33,099
$
4,692
92
46
1,860
6,690
22,426
228
5,005
27,659
34,349
614,718
415,023
$
647,817
$
449,372
Subsequent events (Notes 7, 12 and 17), commitments and contingencies (Note 17)
The accompanying notes form an integral part of these consolidated financial statements.
These financial statements were approved by the Board of Directors and were signed on its behalf:
Rudi P. Fronk
Director
Richard C. Kraus
Director
31
ANNUAL REPORT 2020SEABRIDGE GOLD
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of
Operations and Comprehensive Loss
(Expressed in thousands of Canadian dollars except common share and per common share amounts)
Corporate and administrative expenses
Other income - flow-through shares
Equity loss of associate
Interest income
Finance expense and other expense
Loss before income taxes
Income tax recovery
Loss for the year
Other comprehensive income (loss)
Items that will not be reclassified to net income or loss
Change in fair value of marketable securities, net of income taxes
Comprehensive loss for the year
Basic and diluted net loss per common share
Basic and diluted weighted average number of common shares out-
standing
Note
Year Ended
December 31, 2020
Year Ended
December 31, 2019
14
12
6
16
6
12
12
$
(16,530)
$
(13,340)
1,676
(187)
114
(815)
(15,742)
800
$
(14,942)
$
$
$
688
(14,254)
(0.23)
1,218
(200)
279
(267)
(12,310)
697
(11,613)
284
(11,329)
(0.19)
$
$
$
$
66,369,942
62,359,725
The accompanying notes form an integral part of these consolidated financial statements.
32
ANNUAL REPORT 2020SEABRIDGE GOLD CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of
Changes in Shareholders’ Equity
(Expressed in thousands of Canadian dollars except number of shares)
Number of
shares
Share
capital Warrants
Stock-based
compensation
Contributed
surplus
Deficit
Accumulated
other
comprehensive
gain (loss)
Total
equity
As at December 31, 2019
63,510,487 $ 494,857
$
3,275
$
18,820 $
36,073 $ (135,936)
$
(2,066) $ 415,023
Share issuance – Bought
deal
Share issuance - Private
placement
Share issuance - At-The-
Market offering
Share issuance – Other
Share issuance - Options
exercised
Share issuance - RSUs
vested
Share issuance costs
Deferred tax on share
issuance costs
Stock-based compensation
Expired options
Other comprehensive
income
Net loss for the year
6,710,000
148,192
1,785,000
24,424
1,327,046
29,116
300,000
390,153
6,564
6,548
139,600
2,351
-
-
-
-
-
-
(10,151)
2,698
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,246)
(2,351)
-
-
8,804
(16)
-
-
-
-
-
-
-
-
-
-
-
16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
688
148,192
24,424
29,116
6,564
4,302
-
(10,151)
2,698
8,804
-
688
(14,942)
-
(14,942)
As at December 31, 2020
74,162,286 $ 704,599 $
3,275
$
23,011 $
36,089
$ (150,878)
$
(1,378) $ 614,718
As at December 31, 2018
61,232,572 $ 457,073
$
3,275
$
16,840 $
36,040
$
(124,323)
$
(2,350) $ 386,555
Share issuance - Private
placement
Share issuance - At-The-
Market offering
Share issuance - Other
Share issuance - Options
exercised
Share issuance - RSUs
vested
Share issuance costs
Deferred tax on share
issuance costs
Stock-based compensation
Expired options
Other comprehensive
income
Net loss for the year
1,300,000
22,376
231,084
4,063
175,000
503,831
3,189
7,561
68,000
1,051
-
-
-
-
-
-
(622)
166
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,333)
(1,051)
-
-
5,397
(33)
-
-
-
-
-
-
-
-
-
-
33
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
284
22,376
4,063
3,189
5,228
-
(622)
166
5,397
-
284
(11,613)
-
(11,613)
As at December 31, 2019
63,510,487 $ 494,857 $
3,275
$
18,820 $
36,073
$
(135,936)
$
(2,066) $ 415,023
The accompanying notes form an integral part of these consolidated financial statements.
33
ANNUAL REPORT 2020SEABRIDGE GOLD CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Operating Activities
Net loss
Adjustment for non-cash items:
Stock-based compensation
Other income - flow-though shares
Income tax recovery
Equity loss of associate
Finance costs
Depreciation charge on right-of-use assets
Adjustment for cash items:
Environmental rehabilitation disbursements
Changes in working capital items:
Amounts receivable and prepaid expenses
Accounts payable and accrued liabilities
Net cash used in operating activities
Investing Activities
Mineral interests
Investment of short-term deposits
Redemption of short-term deposits
Investment in convertible notes receivable
Investment in associate
Investment in reclamation deposits
Cash proceeds from sale of investments
Net cash used in investing activities
Financing Activities
Share issuance net of costs
Exercise of options
Payment of lease liabilities
Net cash from financing activities
Year Ended
December 31, 2020
Year Ended
December 31, 2019
$
(14,942)
$
(11,613)
8,804
(1,676)
(800)
187
110
36
(811)
(1,696)
266
(10,522)
(158,795)
(29,816)
14,024
-
(437)
(5,440)
-
(180,464)
195,440
4,302
(21)
199,721
8,735
8,793
17,528
5,397
(1,218)
697
200
122
36
(1,325)
(1,664)
(134)
(10,896)
(27,201)
(18,133)
31,087
(529)
(101)
(4)
110
(14,771)
26,328
5,228
(24)
31,532
5,865
2,928
8,793
$
Net increase in cash and cash equivalents during the year
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
$
The accompanying notes form an integral part of these consolidated financial statements.
34
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the year ended December 31, 2020 and 2019
consideration over such fair value being recorded
as goodwill and allocated to cash generating units.
in an acquisition may
Non-controlling
be measured at either fair value or at the non-
controlling interest’s proportionate share of the fair
value of the acquiree’s net identifiable assets.
interest
the
fair value of the net assets acquired
If the
exceeds
the
difference is recognized immediately as a gain
in the consolidated statement of operations and
comprehensive loss.
consideration,
purchase
is achieved
fair value and any
Where a business combination
in
stages, previously held non-controlling equity
in the acquiree are re-measured at
interests
acquisition-date
resulting
gain or loss is recognized in the consolidated
statement of operations and comprehensive loss
or other comprehensive income, as appropriate.
Acquisition related costs are expensed during
the period in which they are incurred, except for
the cost of debt or equity instruments issued in
relation to the acquisition which is included in the
carrying amount of the related instrument. Certain
fair values may be estimated at the acquisition
date pending confirmation or completion of the
valuation process. Where provisional values are
used in accounting for a business combination,
they may be adjusted retrospectively during the
measurement period. However, the measurement
period will not exceed one year from the acquisition
date.
(ii) Associates
influence
An associate is an entity over which the Company
has significant influence but not control nor joint
control. Significant
is presumed to
exist where the Company has between 20% and
50% of the voting rights but can also arise where
the Company has less than 20% if influence is
exerted over policy decisions that affect the entity.
The Company’s share of the net assets and net
income or loss of associates is accounted for in the
consolidated financial statements using the equity
method of accounting.
1. Reporting entity
Inc.
is comprised of Seabridge
Seabridge Gold
Gold Inc. (“Seabridge” or the “Company”) and its
subsidiaries, KSM Mining ULC, Seabridge Gold (NWT)
Inc., Seabridge Gold (Yukon) Inc., Seabridge Gold
Corp., SnipGold Corp. and Snowstorm Exploration
(LLC), and is a company engaged in the acquisition
and exploration of gold properties located in North
America. The Company was incorporated under the
laws of British Columbia, Canada on September 4, 1979
and continued under the laws of Canada on October
31, 2002. Its common shares are listed on the Toronto
Stock Exchange trading under the symbol “SEA” and
on the New York Stock Exchange under the symbol
“SA”. The Company is domiciled in Canada, the address
of its registered office is 10th Floor, 595 Howe Street,
Vancouver, British Columbia, Canada V6C 2T5 and the
address of its corporate office is 106 Front Street East,
4th Floor, Toronto, Ontario, Canada M5A 1E1.
2. Basis of preparation
A. Statement of compliance
These consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards
issued by the
International Accounting Standards Board (“IASB”).
These financial statements were authorized
for
issuance by the Board of Directors of the Company on
March 23, 2021.
(“IFRS”) as
B. Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities over which the Company
has control. Control over an entity exists when the
Company is exposed or has rights to returns from
its involvement with the entity and has the ability
to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the
Company. They are deconsolidated from the date
on which control ceases.
Business acquisitions are accounted for using the
acquisition method whereby acquired assets and
liabilities are recorded at fair value as of the date
of acquisition with the excess of the purchase
35
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant accounting policies
Mineral reserves and resources
The significant accounting policies used
in the
preparation of these consolidated financial statements
are described below.
A. Basis of measurement
The consolidated financial statements have been
prepared on the historical cost basis, except certain
financial instruments described in note “L”, which are
measured at fair value.
B. Translation of foreign currencies
These consolidated financial statements are presented
in Canadian dollars, which is the Company’s, and each
of its subsidiaries’, functional currency.
into
Foreign currency transactions are translated
Canadian dollars using the exchange rates prevailing
at the dates of the transactions or valuation where
items are re-measured. Foreign exchange gains
and losses resulting from the settlement of such
in the consolidated
transactions are recognized
statement of operations and comprehensive loss.
Monetary assets and
liabilities of the Company
denominated in a foreign currency are translated
into Canadian dollars at the rate of exchange at the
statement of financial position date. Non-monetary
assets and liabilities are translated at historical rates.
Revenues and expenses are translated at average
exchange rates prevailing during the period. Exchange
gains and losses are included in the determination of
profit or loss for the year.
C. Critical accounting judgments and estimation
uncertainty
In applying the Company’s accounting policies in
conformity with IFRS, management is required to
make judgments, estimates and assumptions about
the carrying amounts of certain assets and liabilities.
judgments are continually
These estimates and
evaluated and are based on historical experience
and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances. Actual results may differ from these
estimates.
(i) Critical accounting judgments
The following are the critical judgments that the
Company has made in the process of applying the
Company’s accounting policies and that have the
most significant effect on the amounts recognized
in the consolidated financial statements (refer to
appropriate accounting policies for details).
36
assumptions
and evaluates
To calculate reserves and resources, the Company
uses
technical,
economic and geological conditions for each ore
body. Measured grade of the ore and geotechnical
considerations can have a significant effect on the
carrying value of mineral properties and therefore
the recoverability of costs. Future market prices for
gold and copper and other commodities are also
factored into valuation models. Changes to these
factors can affect the recoverability of mineral
properties and impairment.
Impairment of assets
When the Company has judged that an indication
of
impairment exists, such as a significant or
prolonged decline in the fair value of an investment
in marketable securities or an indication that the
carrying amount of the mineral interest exceeds
its estimated recoverable amount, the investment
value or carrying value is written down to fair value
or recoverable amount and the loss is recognized
in the statement of operations and comprehensive
loss. Also, the Company performs an impairment
test if the period for which the Company has the
right to explore within the project has expired
during the period or will expire in the near future
and is not expected to be renewed.
Asset retirement obligations
judged
the Company has
legal obligation exists
that a
When
for
constructive or
reclamation and
rehabilitation activities on
mineral claims disturbed, an estimate of future
costs
the
statement of operations and comprehensive loss.
recognized as an expense on
is
(ii) Key sources of estimation uncertainty
Mineral properties
is based on market conditions
The recoverability of the carrying value of mineral
properties and associated deferred exploration
expenses
for
minerals, underlying mineral resources associated
with the properties and future costs that may be
required for ultimate realization through mining
operations or by sale. The Company is in an industry
that is dependent on a number of factors including
the
environmental,
existence of economically recoverable reserves, the
ability of the Company and its subsidiaries to obtain
necessary financing to complete the development,
and future profitable production or the proceeds of
disposition thereof.
legal and political
risks,
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Asset retirement obligations
Contingencies
The provision
for asset retirement obligations
is the best estimate of the present value of the
the environment
reclaiming
future costs of
that has been subject to disturbance through
exploration activities or historical mining activities.
The Company uses assumptions and evaluates
technical conditions for each project that have
inherent uncertainties, including changes to laws
and practices and changes in the status of the
site from time-to-time. The timing and cost of
the rehabilitation is also subject to uncertainty.
For the Closed Sites, these changes, if any, and
changes in discount rates are charged directly
to the consolidated statement of operations and
loss. The periodic unwinding
comprehensive
of the discount
in earnings as
is recognized
accretion expense included in finance costs in
the consolidated statement of operations and
comprehensive loss.
Share based payments
The factors affecting stock-based compensation
include estimates of when stock options and
restricted
share units might be exercised
share price volatility and the assessment of the
probability and timing of those instruments that
have non-market performance vesting criteria.
The timing for exercise of options is out of the
Company’s control and will depend upon a
variety of factors, including the market value of
the Company’s shares and financial objectives
instrument holders. The
of
Company uses historical data
to determine
volatility in accordance with appropriate fair value
methodology. However, the
is
uncertain, and the model has its limitations.
the share-based
future volatility
Deferred Income taxes
The Company has operations in Canada and the
United States and files corporate tax returns in
each. Deferred tax liabilities are estimated for tax
that may become payable in the future. Future
payments could be materially different from our
estimated deferred tax liabilities. We have deferred
tax assets related to non-capital losses and other
deductible temporary differences. Deferred tax
assets are only recognized to the degree that it
shelters tax liabilities or when it is probable that
there will be sufficient taxable income in the future
to recover them.
37
to
subscribers,
The Company funds certain of
its exploration
expenditures, from time-to-time, with the proceeds
from the issuance of flow-through shares and
renounces,
the expenditures
which it determines to be Canadian Exploration
Expenses (“CEE”). The Canada Revenue Agency
(“CRA”) has disputed the eligibility of certain types
of expenditures within the years 2014 to 2016. The
Company strongly disagrees with their position and
intends to fully defend the Company’s tax filings.
No provision has been recorded related to the
contingent taxes if the Company does not consider
it probable that there will ultimately be an amount
payable.
D. Mineral interests
Mineral resource properties are carried at cost. The
Company considers exploration and development
costs and expenditures to have the characteristics of
property and equipment and, as such, the Company
capitalizes all exploration costs, which
include
acquisition costs, advance royalties, holding costs, field
exploration and field supervisory costs and all costs
associated with exploration and evaluation activities
relating to specific properties as incurred, until those
properties are determined to be economically viable
for mineral production. General and administrative
costs are only
in the measurement of
exploration and evaluation costs where they are
related directly to activities in a particular area of
interest. The fair value of any recoveries from the
disposition or optioning of a mineral property is
credited to the carrying value of mineral properties.
included
Once a project has been established as commercially
viable and technically feasible, related development
expenditures are capitalized. This
includes costs
incurred in preparing the site for mining operations.
Capitalization ceases when the mine is capable of
operating as intended by management.
of
value
actual
recoverable
The
capitalized
expenditures for mineral properties and deferred
exploration costs will be contingent upon the
discovery of economically viable reserves and the
Company’s financial ability at that time to fully exploit
these properties or determine a suitable plan of
disposition.
to proceed with
is made
When a decision
development in respect of a particular area of interest,
the relevant exploration and evaluation asset
is
tested for impairment, reclassified to development
properties, and then amortized over the life of the
reserves associated with the area of interest once
mining operations have commenced.
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Leasing arrangements
Leases are recognized as a right-of-use (“ROU”) asset
and a corresponding liability at the date at which
the leased asset is available for use by the Company.
Each lease payment is allocated between the liability
and finance cost. The finance cost is charged to
profit or loss over the lease period. The ROU asset is
depreciated over the shorter of the asset's useful life
and the lease term on a straight-line basis. Payments
associated with short-term leases and leases of low-
value assets are recognized on a straight-line basis
as an expense in profit or loss. Short-term leases are
leases with a lease term of 12 months or less.
F. Impairment and reversal of impairment
(i) Financial assets
Financial assets measured at amortized cost are
reviewed for impairment at each reporting date to
determine whether there is any objective evidence
of impairment. A financial asset is considered to
be impaired if objective evidence, that can be
estimated reliably,
indicates that one or more
events have had a negative effect on the estimated
future cash flows of that asset.
An impairment charge in respect of a financial
asset measured at amortized cost is calculated as
the difference between its carrying amount and
the present value of the estimated future cash flows
discounted at the original effective interest rate.
impairment charge
is reviewed
A prior period
for possible reversal of impairment whenever an
event or change in circumstance indicates the
impairment may have reversed. If it has been
impairment has reversed,
determined that the
the carrying amount of the asset is increased
to its recoverable amount to a maximum of the
carrying amount that would have been determined
had no impairment charge been recognized in
prior periods. Impairment charge reversals are
recognized
in the Consolidated Statement of
Operations and Comprehensive Loss.
(ii) Non-financial assets
by its development or sale. If any indication of
impairment exists, an estimate of the asset's
recoverable amount is calculated to determine
the extent of the impairment loss, if any. The
recoverable amount is determined as the higher
of the fair value less costs of disposal for the asset
and the asset's value in use. In assessing value in
use, the estimated future cash flows are discounted
to their present value using a discount rate that
reflects current market assessments of the time
value of money and the risks specific to the asset
for which the estimates of future cash flows have
not been adjusted.
impairment
impairment on an
Impairment is determined on an asset by asset
basis, whenever possible. If it is not possible to
individual asset
determine
basis, then
is considered on the
basis of a cash generating unit (“CGU”). CGUs
represent the lowest level for which there are
separately identifiable cash inflows that are largely
independent of the cash flows from other assets or
other group of assets.
If the carrying amount of the asset exceeds its
recoverable amount, the asset is impaired, and
an impairment loss is charged immediately to
comprehensive
loss within the statement of
operations and comprehensive loss so as to reduce
the carrying amount to its recoverable amount.
An assessment is made at each reporting date as
to whether there is any indication that previously
recognized impairment losses may no longer exist
or may have decreased. If such indication exists, the
Company makes an estimate of the recoverable
amount.
A previously recognized impairment loss is reversed
only if there has been a change in the estimates
used to determine the asset's recoverable amount
since the last impairment loss was recognized. If
this is the case, the carrying amount of the asset is
increased to its recoverable amount. The increased
amount cannot exceed the carrying amount that
would have been determined had no impairment
loss been recognized for the asset in prior years.
Such reversal is recognized in the statement of
operations and comprehensive loss.
for
is assessed
The carrying value of the Company's mineral
interests
impairment when
indicators of such impairment exist. Indicators may
include the loss of the right to explore in the area;
the Company deciding not to continue exploring
or incur substantial additional expenditures on
the project; or it is determined that the carrying
amount of the project is unlikely to be recovered
38
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. Reclamation liabilities
H. Income taxes
Income tax expense comprises current and deferred
tax. Current and deferred tax are recognized
in
profit or loss except to the extent that it relates to a
business combination or items recognized directly in
equity. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognized using the asset and liability
method, providing for temporary differences between
the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes.
Deferred tax
is measured at the rates that are
expected to be applied to temporary differences
when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting
date. Deferred tax is not recognized for the following
temporary differences; the initial recognition of assets
or liabilities in a transaction that is not a business
combination and that affects neither accounting
nor taxable profit or loss, and differences relating
to investments in subsidiaries and jointly controlled
entities to the extent that it is probable that they will
not reverse in the foreseeable future where the timing
of the reversal of the temporary differences can be
controlled by the parent. In addition, deferred tax
is not recognized for taxable temporary differences
arising on the initial recognition of goodwill which is
not deductible for tax purposes.
A deferred tax asset is recognized only to the extent
that it is probable that future taxable profits will be
available against which the asset can be utilized.
Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
The Company has certain non-monetary assets and
is
liabilities for which the tax reporting currency
different from its functional currency. Any translation
gains or losses on the remeasurement of these items
at current exchange rates versus historic exchange
rates that give rise to a temporary difference
is
recorded as a deferred tax asset or liability.
for
restoration
Provisions
are
environmental
recognized when: (i) the Company has a present
legal or constructive obligation as a result of past
exploration, development or production events; (ii)
it is probable that an outflow of resources will be
required to settle the obligation; (iii) and the amount
can be reliably estimated. Provisions do not include
obligations which are expected to arise from future
disturbance.
Provisions are measured at the present value of
the expenditures expected to be required to settle
incorporating risks specific to the
the obligation
obligation using a pre-tax rate that reflects current
market assessments of the time value of money.
When estimates of obligations are revised, the present
value of the changes in obligations is recorded in the
period by a change in the obligation amount and a
corresponding adjustment to the mineral interest
asset.
The amortization or
‘unwinding’ of the discount
in establishing the net present value of
applied
provisions due to the passage of time is charged to the
statement of operations and comprehensive loss in
each accounting period.
The ultimate cost of environmental remediation is
uncertain and cost estimates can vary in response to
many factors including changes to the relevant legal
requirements, the emergence of new restoration
techniques or experience at other mine sites. The
expected timing of expenditure can also change, for
example in response to changes in ore reserves or
production rates. As a result, there could be significant
adjustments to the provisions for restoration and
environmental cleanup, which would affect future
financial results.
Funds on deposit with third parties provided as
security for future reclamation costs are included in
reclamation deposits on the statement of financial
position.
39
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. Stock-based compensation (options and restricted
share units)
The Company applies the fair value method for
stock-based compensation and other stock-based
payments. The fair value of options is valued using the
Black Scholes option-pricing model and other models
for the two-tiered options and restricted share units
as may be appropriate. The grant date fair value of
stock-based payment awards granted to employees
is recognized as an employee expense, with a
corresponding increase in equity, over the period that
the employees unconditionally become entitled to
the awards. The amount recognized as an expense is
adjusted to reflect the number of awards for which the
related service and non-market vesting conditions are
expected to be met, such that the amount ultimately
recognized as an expense is based on the number of
awards that meet the related service and non-market
performance conditions at the vesting date (Note 12).
The Company reviews estimated forfeitures of options
on an ongoing basis.
J. Flow-through shares
for
the
shares. Consideration
The Company finances a portion of its exploration
activities through the
issuance of flow-through
common shares. The tax deductibility of qualifying
expenditures is transferred to the investor purchasing
the
transferred
deductibility of the qualifying expenditures is often
paid through a premium price over the market price
of the Company’s shares. The Company reports this
premium as a liability on the statement of financial
position and the balance
is reported as share
capital. At each reporting period, and as qualifying
expenditures have been
is
reduced on a proportionate basis and income is
in the statement of operations and
recognized
comprehensive loss.
incurred, the
liability
K. Net profit (loss) per common share
Basic profit (loss) per common share is computed
based on the weighted average number of common
shares outstanding during the year. The Company
uses the treasury stock method
for calculating
diluted earnings per share which assumes that stock
options and RSUs with an exercise price lower than
the average quoted market price were exercised at
the later of the beginning of the year, or time of issue.
Stock options with an exercise price greater than the
average quoted market price of the common shares
and RSUs are not included in the calculation of diluted
profit (loss) per share as the effect is anti-dilutive.
40
L. Financial instruments
The Company recognizes financial assets and financial
liabilities on the date the Company becomes a party
instruments.
to the contractual provisions of the
A financial asset is derecognized either when the
Company has transferred substantially all the risks
and rewards of ownership of the financial asset
or when cash flows expire. A financial liability is
derecognized when the obligation specified in the
contract is discharged, canceled or expired. Certain
financial instruments are recorded at fair value in the
consolidated statement of financial position. Refer to
note 13 on fair value measurements.
Non-derivative financial instruments
Non-derivative financial instruments are recognized
initially at fair value plus attributable transaction
instruments
costs, where applicable for financial
not classified as fair value through profit or loss.
Subsequent
recognition, non-derivative
financial instruments are classified and measured as
described below.
initial
to
Financial assets at fair value through profit or loss
Cash and cash equivalents and short-term deposits
are classified as financial assets at fair value through
profit or loss and are measured at fair value. Cash
equivalents are short-term deposits with maturities
of up to 90 days at the date of purchase. Short-term
deposits consist of investments with maturities from
91 days to one year at the date of purchase. Convertible
notes receivable are recorded at fair value through
profit or loss.
Financial assets at amortized cost
Trade and other receivables and are classified as
and measured at amortized cost using the effective
interest rate method, less impairment losses, if any.
Financial assets at
comprehensive income
fair value
through other
investments
The Company’s
in equity marketable
securities are designated as financial assets at fair
value through other comprehensive income and are
recorded at fair value on the trade date with directly
attributable transaction costs included in the recorded
amount. Subsequent changes
fair value are
recognized in other comprehensive income.
in
Non-derivative financial liabilities
Accounts payable and accrued liabilities are accounted
for at amortized cost, using the effective interest rate
method.
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
will require companies to distinguish between
costs associated with producing and selling items
before the item of property, plant and equipment
is available for use and costs associated with
making the item of property, plant and equipment
available for its intended use. The amendment is
effective for annual periods beginning on or after
January 1, 2022, with earlier application permitted.
The amendments apply retrospectively, but only
to assets brought to the location and condition
necessary for them to be capable of operating in
the manner intended on or after the beginning
of the earliest period presented in the financial
statements in which the Company first applies the
amendments. The Company does not expect the
adoption of this pronouncement to have a material
impact on its consolidated financial statements.
Other pronouncements have been issued by the IASB
that are not mandatory for the current period and
have not been early adopted. These pronouncements
are not expected to have a material impact on the
Company's consolidated financial statements upon
adoption.
4. Cash and cash equivalents
and short-term deposits
($000s)
Cash and cash equivalents
Short-term deposits
December 31,
2020
December 31,
2019
17,528
19,905
37,433
8,793
4,114
12,907
All of the cash and cash equivalents are held in a
Canadian Schedule I bank. Short-term deposits consist
of Canadian Schedule I bank guaranteed deposits and
are cashable in whole or in part with interest at any
time to maturity.
5. Amounts receivable and prepaid expenses
($000s)
HST
Prepaid expenses and other
receivables
December 31,
2020
December 31,
2019
2,793
2,177
4,970
2,212
1,062
3,274
M. Accounting pronouncements
New and amended standards and interpretations
issued and effective:
Adoption of Definition of a Business (Amendments to
IFRS 3)
The Company has adopted the amendments to
IFRS 3 for the first time in the current year. The
amendments clarify that while businesses usually
have outputs, outputs are not required for an
integrated set of activities and assets to qualify
as a business. To be considered a business an
acquired set of activities and assets must include,
at a minimum, an input and a substantive process
that together significantly contribute to the ability
to create outputs. The amendments remove
the assessment of whether market participants
are capable of replacing any missing inputs or
processes and continuing to produce outputs. The
amendments also introduce additional guidance
that helps to determine whether a substantive
process has been acquired.
an
introduce
amendments
test
optional
The
concentration
that permits a simplified
assessment of whether an acquired set of activities
and assets is not a business. Under the optional
concentration test, the acquired set of activities and
assets is not a business if substantially all of the fair
value of the gross assets acquired is concentrated
in a single identifiable asset or group of similar
assets. The amendments are applied prospectively
to all business combinations and asset acquisitions
for which the acquisition date is on or after January
1, 2020. The amendments were applied to the
Company's acquisition of 3 Aces gold project and
Snowfield property, where the Company concluded
that the acquired set of activities and assets was
not a business. Refer to Note 8 for further details.
New accounting standards
effective:
issued but not yet
Amendments to
IAS
Equipment: Proceeds before Intended Use
16
- Property, Plant and
IAS
IASB
issued an amendment to
16,
The
Property, Plant and Equipment to prohibit the
deducting from property, plant and equipment
amounts received from selling items produced
while preparing an asset for its intended use.
Instead, sales proceeds and its related costs must
be recognized in profit or loss. The amendment
41
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Investments
($000s)
Current assets:
January 1,
2020
Disposition
Fair value
through other
comprehensive
loss
Loss of
associates
Additions
December 31,
2020
Investment in marketable securities
3,032
Non-current assets:
Investment in associate
2,361
-
-
794
-
-
3,826
-
(187)
437
2,611
($000s)
Current assets:
January 1,
2019
Disposition
Fair value
through other
comprehensive
loss
Loss of
associates
Additions
December 31,
2019
Investment in marketable securities
2,858
(110)
(284)
-
-
3,032
Non-current assets:
Investment in associate
2,460
-
-
(200)
101
2,361
7. Convertible notes receivable
In September 2019, the Company participated
in
a private placement to purchase US$410,000, at
face value, of secured convertible notes issued by
Paramount. Each convertible note had an issue price
of US$975 per US$1,000 face value with a four-year
maturity. The Company purchased 410 convertible
notes for a total of $0.5 million (US$399,750). The
convertible notes bear interest at a rate of 7.5% per
annum, payable semi-annually. At any time after the
issuance of the convertible notes, the Company can
convert all or any portion of the outstanding amount
into common shares of Paramount at a price of
US$1.00 per common share. The convertible notes
receivable are recorded at fair value through profit or
loss (“FVTPL”). The fair value of the convertible notes
receivable is determined by using the Binomial Option
Pricing model.
During 2020, the Company received 25,794 common
shares of Paramount for payment of
interest on
the secured convertible notes accrued between
September 2019 and June 2020. Subsequent to
December 31, 2020, the Company received 14,236
for payment of
common shares of Paramount
interest on the secured convertible notes accrued and
receivable as at December 31, 2020.
The Company holds common shares of several mining
companies that were received as consideration for
optioned mineral properties and other short-term
investments, including one gold exchange traded
receipt. These financial assets are recorded at fair
value of $3.8 million (December 31, 2019 - $3.0 million)
in the consolidated statements of financial position. At
December 31, 2020, the Company revalued its holdings
in its investments and recorded a fair value increase of
$0.8 million on the statement of comprehensive loss.
During 2019, the Company disposed its holdings in one
investment with a fair value of $0.1 million.
Investment in associate relates to Paramount Gold
Nevada Corp (“Paramount”). As at December 31, 2020,
the Company holds 7.42% (December 31, 2019 – 8.16%)
interest in Paramount for which it accounts using the
equity method on the basis that the Company has
the ability to exert significant influence through its
representation on Paramount’s board of directors.
During 2020, the Company recorded its proportionate
share of Paramount’s net loss of $0.2 million (2019
– $0.2 million) within equity loss of associate on
the consolidated statements of operations and
comprehensive loss. As at December 31, 2020, the
in
carrying value of the Company’s
Paramount was $2.6 million (December 31, 2019 - $2.4
million).
investment
In June 2020, the Company participated in a non-
brokered registered direct offering and purchased
288,460 common shares of Paramount at US$1.04 per
common share for a total of $0.4 million.
42
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Mineral interests
Mineral interest expenditures on projects are considered as exploration and evaluation and their related costs consist of
the following:
($000s)
KSM
Courageous Lake
Iskut
Snowstorm
3 Aces
Grassy Mountain
($000s)
KSM
Courageous Lake
Iskut
Snowstorm
Grassy Mountain
Balance
January 1, 2020
296,509
75,721
32,215
20,455
-
771
425,671
Acquisitions
2020
127,530
-
-
-
6,564
-
134,094
Expenditures
2020
Balance
December 31, 2020
20,128
801
5,734
4,469
549
-
31,681
444,167
76,522
37,949
24,924
7,113
771
591,446
Balance
January 1, 2019
Acquisitions
2019
Expenditures
2019
Balance
December 31, 2019
276,586
73,647
29,031
15,269
771
395,304
2,662
-
-
528
-
3,190
17,261
2,074
3,184
4,658
-
27,177
296,509
75,721
32,215
20,455
771
425,671
Continued exploration of the Company’s mineral properties is subject to certain lease payments, project holding costs,
rental fees and filing fees.
a) KSM (Kerr-Sulphurets-Mitchell)
In 2001, the Company purchased a 100% interest
in contiguous claim blocks in the Skeena Mining
Division, British Columbia. The vendor maintains a 1%
net smelter royalty interest on the project, subject to
maximum aggregate royalty payments of $4.5 million.
The Company is obligated to purchase the net smelter
royalty interest for the price of $4.5 million in the event
that a positive feasibility study demonstrates a 10% or
higher internal rate of return after tax and financing
costs.
In July 2009, the Company agreed to acquire various
mineral claims immediately adjacent to the KSM
property for further exploration and possible mine
infrastructure use. The acquired claims were subject
to a 4.5% net smelter royalty. In January 2019, the
Company issued 100,000 common shares at $17.30
per common share, for total fair value of $1.7 million,
to the holder of the net smelter return royalty on the
claims and fully extinguished the royalties on those
claims. The total fair value of the common shares was
recorded to the mineral interest at KSM Project.
In 2011 and 2012, the Company completed agreements
granting a third party an option to acquire a 2% net
smelter royalty on all gold and silver production sales
from KSM for a payment equal to the lesser of $160
million or US$200 million. The option is exercisable
for a period of 60 days following the announcement
of receipt of all material approvals and permits, full
project financing and certain other conditions for the
KSM Project.
During 2019, as part of a cooperative and benefit
agreement between the Company and the Tahltan
Nation, the Company issued 50,000 common shares
with a fair value of $18.63 per common share, for a total
fair value of $0.9 million.
In December 2020, the Company purchased the
Snowfield property from Pretium Resources
Inc.
The Snowfield property, located in the same valley
that hosts KSM's Mitchell deposit, was purchased
for US$100 million ($127.5 million) in cash, a 1.5% net
smelter royalty on Snowfield property production,
and a conditional payment of US$20 million, payable
following
(i) commencement of
commercial production from Snowfield property, and
(ii) announcement by the Company of a bankable
feasibility study which includes production of reserves
from the Snowfield property. US$15 million of the
conditional payment can be credited against future
royalty payments.
the earlier of
43
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
b) Courageous Lake
In 2002, the Company purchased a 100% interest in
the Courageous Lake gold project from Newmont
(Canada)
Canada Limited and Total Resources
Limited for US$2.5 million. The Courageous Lake gold
project consists of mining leases located in Northwest
Territories of Canada.
c) Iskut
On June 21, 2016, the Company purchased 100% of
the common shares of SnipGold Corp. which owns
the Iskut Project,
in northwestern British
Columbia.
located
d) Snowstorm
In 2017, the Company purchased 100% of the common
shares of Snowstorm Exploration LLC which owns the
Snowstorm Project, located in northern Nevada. On
the acquisition date, the Company issued 700,000
common shares, with a fair value of $14.39 per share
and 500,000 common share purchase warrants with
a fair value of $6.55 per common share purchase
warrant for a combined fair value of $13.3 million. The
common share purchase warrants are exercisable
for four years from the date of acquisition, at $15.65
per share. In addition, the Company has agreed to
make a conditional cash payment of US$2.5 million if
exploration activities at the Snowstorm Project result
in defining a minimum of five million ounces of gold
resources compliant with National Instrument 43-101
and a further cash payment of US$5.0 million on the
delineation of an additional five million ounces of gold
resources.
In 2019, the Company purchased the Goldstorm
Project in northern Nevada from Mountain View Gold
Corp. in exchange for 25,000 common shares of the
Company at a fair value of $21.11 per common share for
a total fair value of $0.5 million.
e) 3 Aces
In 2020, the Company acquired a 100% interest in
the 3 Aces gold project in the Yukon, Canada from
Golden Predator Mining Corp. through the issuance
of 300,000 common shares valued at $6.6 million.
Should the project attain certain milestones, including
the confirmation of a National Instrument 43-101
compliant mineral resource of 2.5 million ounces of
gold and upon confirmation of an aggregate mineral
resource of 5 million ounces of gold, the Company will
potentially pay an additional $2.25 million.
f) Grassy Mountain
In 2013, the Company sold 100% of interest in the
Grassy Mountain Project with a net book value of
$771,000 retained within mineral properties, related
to the option to either receive, at the discretion of the
Company, a 10% net profits interest royalty or a $10
million cash payment. Settlement is due four months
after the later of: the day that the Company receives
a feasibility study on the project; and the day that the
Company is notified that permitting and bonding for
the mine is in place. The current owner of the Grassy
Mountain Project is Paramount who completed a
feasibility study in 2020 but they have not notified the
Company that permitting and bonding for the mine is
in place.
9. Leases
($000s)
Right of use assets
($000s)
Right of use assets
($000s)
Current
Non-current
Total discounted lease liability
Balance
January 1, 2020
271
Additions
Depreciation
Balance
December 31, 2020
-
(36)
235
Balance
December 31, 2018
Adoption of IFRS 16 on
January 1, 2019
-
307
Depreciation
(36)
Balance
December 31, 2019
271
December 31, 2020
December 31, 2019
41
207
248
46
228
274
44
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Accounts payable and accrued liabilities
11. Provision for reclamation liabilities
December 31,
2020
December 31,
2019
($000s)
December 31,
2020
December 31,
2019
Beginning of the period
6,865
8,069
Disbursements
Accretion
(811)
(1,325)
110
121
End of the period
6,164
6,865
Provision for reclamation
liabilities - current
Provision for reclamation
liabilities - long-term
2,500
1,860
3,664
6,164
5,005
6,865
for
reclamation
the provision
The estimate of
obligations, as at December 31, 2020, was calculated
using the estimated discounted cash flows of future
reclamation costs of $6.2 million
(December 31,
2019 - $6.9 million) and the expected timing of cash
flow payments required to settle the obligations
between 2021 and 2026. As at December 31, 2020, the
undiscounted future cash outflows are estimated
at $6.2 million (December 31, 2019 – $7.0 million)
primarily over the next two years. The discount rate
used to calculate the present value of the reclamation
obligations was 0.2% at December 31, 2020 (1.7% -
December 31, 2019). Offsetting the increase in the
present value of the
liability, for the decreasing
discount rate, is a comparable decrease in reported
and anticipated inflation rates.
For the year ended December 31, 2020, reclamation
disbursements amounted to $0.8 million (2019 - $1.3
million).
In 2020, the Company placed $5.2 million on deposit
with a financial institution pledged as security for the
Fish Habitat Offsetting Plan obligation at KSM. As at
December 31, 2020, the Company has placed a total
of $6.8 million (December 31, 2019 - $1.3 million) on
deposit with financial institutions or with government
regulators that are pledged as security against
reclamation liabilities.
($000s)
Trade payables
Trade and other payables
due to related parties
Non-trade payables and
accrued expenses (a)
2,466
57
2,191
61
2,854
2,440
5,377
4,692
(a) During 2016, upon the completion of an audit of
the application by tax authorities of the British
Columbia Mineral Exploration Tax Credit (“BCMETC”)
program, the Company was reassessed $3.6 million,
including accrued
interest, for expenditures that
the tax authority has categorized as not qualifying
for the BCMETC program. The Company recorded a
$3.6 million provision within non-trade payables and
accrued expenses on the consolidated statements of
financial position as at December 31, 2016. In 2017 the
Company filed an objection to the reassessment with
the appeals division of the tax authorities and paid
one-half of the accrued balance while the objection
is reviewed. In early 2019, the Company received a
decision from the appeals division that the Company’s
objection was denied, and the Company filed a
notice of appeal with the British Columbia Supreme
Court. The Attorney General of Canada replied to
the facts and arguments in the Company’s Notice of
Appeal and stated its position that the Company’s
expenditures did not qualify
the BCMETC
program. As at December 31, 2020, the Company
is in the discovery process with the Department of
Justice and will continue to move the appeal process
forward as expeditiously as possible. The Company
intends to continue to fully defend its position. As
at December 31, 2020, the Canada Revenue Agency
(CRA) has withheld $2.0 million of HST credits due
to the Company that would fully cover the residual
balance, including interest, should the Company be
unsuccessful in its challenge.
for
45
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Shareholders’ equity
The Company is authorized to issue an unlimited
number of preferred shares and common shares with
no par value. No preferred shares have been issued or
were outstanding at December 31, 2020 or December
31, 2019.
The Company manages
its capital structure and
makes adjustments to it, based on the funds available
to the Company, in order to support the acquisition,
exploration and development of mineral properties.
The Board of Directors does not establish quantitative
return on capital criteria for management, but rather
relies on the expertise of the Company's management
to sustain future development of the business.
The properties in which the Company currently has
an interest are in the exploration stage, as such the
is dependent on external financing to
Company
fund its activities. In order to carry out the planned
exploration and pay for administrative costs, the
Company will spend its existing working capital and
raise additional amounts as needed.
reviews
Management
its capital management
approach on an ongoing basis and believes that this
approach, given the relative size of the Company, is
reasonable. There were no changes in the Company's
approach to capital management during 2020. The
Company considers its capital to be share capital,
stock-based compensation, warrants, contributed
surplus and deficit. The Company is not subject to
externally imposed capital requirements.
a) Equity financings
During the fourth quarter of 2019, the Company
entered into an agreement with two securities dealers,
for an At-The-Market offering program, entitling the
Company, at its discretion, and from time to time, to
sell up to US$40 million in value of common shares
of the Company. During 2020, the Company issued
1,327,046 shares, at an average selling price of $21.94
per share, for net proceeds of $28.5 million under
Company’s At-The-Market offering. During the fourth
quarter of 2019, the Company issued 231,084 shares,
at an average selling price of $17.58 per share, for net
proceeds of $4.0 million under the offering.
Subsequent to the year end, the Company entered
into a new agreement with two securities dealers,
for an At-The-Market offering program, entitling the
Company, at its discretion, and from time to time, to
sell up to US$75 million in value of common shares of
the Company. This program can be in effect until the
Company’s current US$775 million Shelf Registration
Statement expires in January 2023. Subsequent to
the year end, the Company issued 290,170 shares, at
an average selling price of $23.78 per share, for net
proceeds of $6.8 million under Company’s At-The-
Market offering.
On December 4, 2020, the Company entered into an
agreement to sell, on a bought deal basis, 6,100,000
common shares of the Company, at US$17.25 per
common share, for gross proceeds of US$105.0 million.
As part of the agreement, the Company granted an
option to the underwriters to sell up to an additional
610,000 common shares of the Company, at a price
of US$17.25 per common share, for gross proceeds of
US$10.5 million. The financing closed on December
9, 2020, and the underwriters fully exercised their
option to purchase the additional common shares.
In aggregate, 6,710,000 common shares were issued,
at a price of US$17.25 per common share, for gross
proceeds of US$115.7 million.
In June 2020, the Company issued 345,000 flow-
through common shares at $32.94 per common
share for aggregate gross proceeds of $11.4 million.
The Company committed to renounce its ability to
deduct qualifying exploration expenditures for the
equivalent value of the gross proceeds of the flow-
through financing and transfer the deductibility
to the purchasers of the flow-through shares. The
effective date of the renouncement was December
31, 2020. In accordance with draft legislation released
on December 16, 2020 in relation to the COVID-19
pandemic, a 12-month extension has been proposed
in which the qualifying
to the normal timelines
46
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
exploration expenditures should be incurred. At the
time of issuance of the flow-through shares, $3.9
million premium was recognized as a liability on
the consolidated statements of financial position.
During 2020, the Company incurred $4.7 million of
qualifying exploration expenditures and $1.6 million of
the premium was recognized through other income
on the consolidated statements of operations and
comprehensive loss.
In April 2020, the Company closed a non-brokered
private placement of 1.2 million common shares, at a
price of $11.75 per common share, for gross proceeds
of $14.1 million. As part of the private placement
agreement, the Company granted an option to
increase the size of the private placement by an
additional 240,000 common shares exercisable until
May 15, 2020. The 240,000 options were fully exercised
on May 6, 2020 at a price of $11.75 per share, for gross
proceeds of $2.8 million.
During the third quarter 2019, the Company issued
100,000 flow-through common shares at $24.64 per
common share for aggregate gross proceeds of $2.5
million. The Company committed to renounce its
ability to deduct qualifying exploration expenditures
for the equivalent value of the gross proceeds of the
flow-through financing and transfer the deductibility
to the purchasers of the flow-through shares. The
effective date of the renouncement was December
31, 2019. At the time of issuance of the flow-through
shares, $0.5 million premium was recognized as a
liability on the consolidated statements of financial
position. During 2019, the Company incurred $2.0
million of qualifying exploration expenditures and
$0.4 million of the premium was recognized through
other
income on the consolidated statements of
operations and comprehensive loss. During 2020, the
Company incurred another $0.5 million of qualifying
exploration expenditures and the remaining $0.1
million premium was recognized through other
income on the consolidated statements of operations
and comprehensive loss.
In August 2019, the Company closed a private
placement of 1.2 million common shares, at a price of
$17.02 per common share, for gross proceeds of $20.4
million.
issued 250,000
In December 2018, the Company
flow-through common shares at $20.50 per share for
aggregate gross proceeds of $5.1 million. Proceeds
of this financing were used to fund the 2019 KSM
and Iskut programs. The Company committed to
renounce its ability to deduct qualifying exploration
expenditures for the equivalent value of the gross
proceeds of the flow-through financing and transfer
the deductibility to the purchasers of the flow-through
shares. The effective date of the renouncement was
December 31, 2018. At the time of issuance of the flow-
through shares, $0.8 million premium was recognized
as a
liability on the consolidated statements of
financial position with the balance recorded as
share capital. During 2019, $5.1 million of qualifying
exploration expenditures were incurred and the entire
$0.8 million premium was recognized through other
income on the consolidated statement of operations
and comprehensive loss.
b) Warrants
As part of the acquisition agreement of Snowstorm
Exploration LLC in June 2017, the Company issued
500,000 common share purchase warrants exercisable
for four years at $15.65 per share, which are still
outstanding as at December 31, 2020.
47
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
c) Stock options and restricted share units
The Company provides compensation to directors and
employees in the form of stock options and Restricted
Share Units (“RSU”s).
Pursuant to the Share Option Plan, the Board of
Directors has the authority to grant options, and to
establish the exercise price and life of the option at
the time each option is granted, at a price not less
than the closing price of the common shares on the
Toronto Stock Exchange on the date of the grant of
such option and for a period not exceeding five years.
All exercised options are settled in equity.
Pursuant to the Company’s RSU Plan, the Board of
Directors has the authority to grant RSUs, and to
establish terms of the RSUs including the vesting
criteria and the life of the RSU. The life of the RSU is not
to exceed two years.
Stock option and RSU transactions were as follows:
Options
RSUs
Total
Weighted
Average
Exercise
Price ($)
Amortized
Value of
options
($000s)
Amortized
Value
of RSUs
($000s)
Stock-based
Compensation
($000s)
Number
of RSUs
18,546
139,600
-
135,450
274
487
(2,246)
(139,600)
(2,351)
(16)
6,240
-
-
-
2,077
487
Options
RSUs
Total
Weighted
Average
Exercise
Price ($)
Amortized
Value of
options
($000s)
Amortized
Value
of RSUs
($000s)
Stock-based
Compensation
($000s)
Number
of RSUs
12.32
-
11.03
6.30
11.95
17.72
10.38
6.30
16,657
68,000
168
139,600
183
274
(2,333)
(68,000)
(1,051)
(33)
4,087
-
-
-
868
274
18,820
487
(4,597)
(16)
8,317
23,011
16,840
442
(3,384)
(33)
4,955
18,820
Outstanding January 1, 2020
Granted
Exercised option or vested RSU
Expired
Number of
Options
3,003,150
-
(390,153)
(1,309)
Amortized value of stock-based compensation
-
-
Outstanding at December 31, 2020
Exercisable at December 31, 2020
2,611,691
2,608,357
12.51
22,524
135,450
Outstanding January 1, 2019
Granted
Exercised option or vested RSU
Expired
Number of
Options
3,458,805
50,000
(503,831)
(1,824)
Amortized value of stock-based compensation
-
-
Outstanding at December 31, 2019
3,003,150
12.32
18,546
139,600
Exercisable at December 31, 2019
911,816
48
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The outstanding share options at December 31, 2020 expire at various dates between February 2021 and June 2024. A
summary of options outstanding, their remaining life and exercise prices as at December 31, 2020 is as follows:
Options outstanding
Options exercisable
Exercise price
Number outstanding
Remaining contractual life
Number exercisable
$13.52
$9.00
$17.16
$17.14
$10.45
$13.14
$16.94
$15.46
$17.72
$6.30
100,000
425,000
50,000
50,000
755,833
560,002
50,000
568,000
50,000
2,856
2,611,691
3 months
4 months
5 months
5 months
1 year
2 years
2 years 10 months
3 years
3 years 6 months
2 months
100,000
425,000
50,000
50,000
755,833
560,002
50,000
564,666
50,000
2,856
2,608,357
During the year ended December 31, 2020, 390,153
options were exercised (year ended December 31,
2019, 503,831) for proceeds of $4.3 million (year ended
December 31, 2019, $5.2 million) and 139,600 RSUs
vested (year ended December 31, 2019, 68,000). In
total, 529,753 common shares were issued (year ended
December 31, 2019, 571,831). The weighted average
share price at the date of exercise of options exercised
during the year ended December 31, 2020 was $24.03
(year ended December 31, 2019 – $17.70).
On June 25, 2020, shareholders resolved to approve
that 425,000 options that were granted to the
directors of the Company in 2015 and due to expire in
April 2020, be extended for one year. These options
vested in December 2020 upon the acquisition of the
Snowfield property. The $4.4 million fair value of the
extension was charged to the statement of operations
and comprehensive loss at that time, matching the
revised estimated service period.
In December 2018, 568,000 five-year options with
an exercise price of $15.46, to purchase common
shares of the Company, with a grant-date fair value
of $4.3 million, were granted. Of these, 408,000
options were granted to board members that were
subject to shareholder approval. 150,000 options were
granted to members of senior management. The
remaining 10,000 options were granted to a member
of management and vest over a three-year period. At
the end of the second quarter of 2019, shareholders
approved the 408,000 options granted to the board
members, and the fair value was re-estimated, at the
time, resulting in an additional $0.4 million fair value
to be recognized over the estimated service period.
During the second quarter of 2019, the shareholders
also approved the grant of 50,000 five-year options to
a new board member, with an exercise price of $17.72
and fair value of $0.4 million. The options granted to
board members and senior management vested in
December 2020 upon the acquisition of the Snowfield
property and $1.6 million of the fair value of these
options, not previously expensed, was charged to the
statement of operations and comprehensive
loss
on an accelerated basis to match the change in the
estimate of the service period.
In October 2018, 50,000 five-year options with an
exercise price of $16.94, to purchase common shares
of the Company, with a grant-date fair value of $0.4
million, were granted to a new Board member. These
options also vested in December 2020 upon the
acquisition of the Snowfield property and $0.1 million
of the fair value of these options, not previously
expensed, was charged to the statement of operations
and comprehensive loss on an accelerated basis, to
match the change in the estimated service period.
During 2020, the Company did not grant any new
options. The fair value of the options granted in 2019
was estimated on the dates of grant using a Black
Scholes option-pricing model with the
following
assumptions:
Dividend yield
Expected volatility
Risk-free rate of return
Expected life of options
2019
Nil
54%
1.40%
5 year
In December 2020, the Board granted 135,450 RSUs.
Of these, 28,000 RSUs were granted to the board
members, 80,300 RSUs were granted to members of
senior management, and the remaining 27,150 RSUs
49
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
were granted to other employees of the Company. The
fair value of the grants, of $3.4 million, was estimated
as at the grant date will be amortized over the
expected service period of the grants. The expected
service period of approximately four months from the
date of the grant was dependent on certain corporate
objectives being met. As at December 31, 2020, $0.5
million of the fair value of the grants was amortized.
In December 2019, the Board granted 139,600 RSUs.
Of these, 32,500 RSUs were granted to the board
members, 74,200 RSUs were granted to members of
senior management, and the remaining 32,900 RSUs
were granted to other employees of the Company. The
fair value of the grants, of $2.4 million, was estimated
as at the grant date to be amortized over the expected
service period of the grants. The expected service
period of approximately six months from the date
of the grant was dependent on certain corporate
objectives being met. During the second quarter 2020,
all 139,600 RSUs were vested. Of the $2.4 million total
fair value of the RSUs, $0.3 million was amortized in
December 2019, and the remaining $2.1 million was
amortized during first half of 2020.
Subsequent to December 31, 2020, 354,668 options
were exercised for proceeds of $3.9 million.
d) Basic and diluted net loss per common share
For the years ended December 31, 2020 and 2019,
basic and diluted net loss per common share are
computed by dividing the net loss for the period by
the weighted average number of common shares
outstanding for the year. The potential effect of stock
options, RSUs and warrants has been excluded from
the calculation of diluted loss per common share as
the effect would be anti-dilutive. At December 31, 2020,
there was a total of 2,611,691 stock options and 135,450
RSUs outstanding (December 31, 2019 – 3,003,150 and
139,600 respectively).
13. Fair value of financial assets and liabilities
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date. The fair value hierarchy
establishes three
inputs to
valuation techniques used to measure fair value.
levels to classify the
Level 1: Inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities.
Level 2: Inputs are quoted prices in markets that
are not active, quoted prices for similar assets
or liabilities in active markets, inputs other than
quoted prices that are observable for the asset
or liability (for example, interest rate and yield
curves observable at commonly quoted intervals,
50
forward pricing curves used to value currency and
commodity contracts, volatility measurements used
to value option contracts and observable credit
default swap spreads to adjust for credit risk where
appropriate), or inputs that are derived principally
from or corroborated by observable market data or
other means.
Level 3: Inputs are unobservable (supported by little
or no market activity).
The fair value hierarchy gives the highest priority to
Level 1 inputs and the lowest priority to Level 3 inputs.
securities,
The Company’s financial assets and liabilities as at
December 31, 2020 and December 31, 2019 are cash
and cash equivalents, short-term deposits, accounts
receivable, marketable
convertible
notes receivable and accounts payable. Other than
investments and convertible notes receivable, the
carrying values approximate their fair values due
to the immediate or short-term maturity of these
financial instruments and are classified as a Level 1
measurement. The Company’s equity
investments
are measured at fair value based on quoted market
prices and are classified as a level 1 measurement. The
convertible notes receivable are measured at fair value
and are classified as a level 3 measurement.
The Company's financial risk exposures and the
impact on the Company's financial instruments are
summarized below:
Credit Risk
The Company's credit risk is primarily attributable
to short-term deposits, convertible notes receivable,
and receivables included in amounts receivable and
prepaid expenses. The Company has no significant
concentration of credit risk arising from operations.
The short-term deposits consist of Canadian Schedule
I bank guaranteed notes, with terms up to one year
but are cashable in whole or in part with interest
at any time to maturity, for which management
believes the risk of loss to be remote. Management
believes that the risk of loss with respect to financial
instruments
in amounts receivable and
prepaid expenses to be remote.
included
Liquidity Risk
The Company's approach to managing liquidity risk
is to ensure that it will have sufficient liquidity to
meet liabilities when due. As at December 31, 2020,
the Company had a cash and cash equivalents of
$17.5 million and short-term deposits of $19.9 million
(2019 - $8.8 million and $4.1 million, respectively) for
settlement of current financial liabilities of $5.4 million
(2019 - $4.7 million). The short-term deposits consist of
Canadian Schedule I bank guaranteed deposits and
are cashable in whole or in part with interest at any
time to maturity. The Company's financial liabilities
ANNUAL REPORT 2020SEABRIDGE GOLD NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
primarily have contractual maturities of 30 days and
are subject to normal trade terms. The Company’s
ability to fund its operations and capital expenditures
and other obligations as they become due
is
dependent upon market conditions.
As the Company does not generate cash inflows from
operations, the Company is dependent upon external
sources of financing to fund its exploration projects
and on-going activities. If required, the Company will
seek additional sources of cash to cover its proposed
exploration and development programs at its key
projects, in the form of equity financings and from the
sale of non-core assets. Refer to note 12 for details on
equity financings.
Market Risk
(a) Interest Rate Risk
The Company has no
interest-bearing debt. The
Company's current policy is to invest excess cash
in Canadian bank guaranteed notes
(short-term
deposits). The short-term deposits can be cashed in at
any time and can be reinvested if interest rates rise.
transacted
(b) Foreign Currency Risk
The Company's functional currency is the Canadian
dollar and major purchases are
in
Canadian and US dollars. The Company funds certain
operations, exploration and administrative expenses in
the United States on a cash call basis using US dollar
cash on hand or converted from its Canadian dollar
cash. Management believes the foreign exchange risk
derived from currency conversions is not significant
to its operations and therefore does not hedge its
foreign exchange risk. As at December 31, 2020,
$10.1 million of cash and cash equivalents and $0.5
million of accounts payable and accrued liabilities are
denominated in US dollars.
(c) Investment Risk
The Company has
in other publicly
investments
listed exploration companies which are included in
investments. These shares were received as option
payments on certain exploration properties the
Company owns or has sold. In addition, the Company
holds $3.6 million in a gold exchange traded receipt
that is recorded on the consolidated statements of
financial position in investments. The risk on these
investments is significant due to the nature of the
investment but the amounts are not significant to the
Company.
14. Corporate and administrative expenses
($000s)
Employee compensation
Stock-based compensation
Professional fees
Other general and administrative
2020
4,815
8,804
1,106
1,805
16,530
2019
4,635
5,397
1,105
2,203
13,340
15. Related party disclosures
Compensation to key management personnel of the
Company:
($000s)
2020
2019
Compensation of directors:
Directors fees
Stock-based compensation
713
1,609
2,322
Compensation of key management personnel:
Salaries and consulting fees
Stock-based compensation
5,269
5,637
10,906
13,228
408
1,011
1,419
4,892
3,506
8,398
9,817
During year ended December 31, 2020 and 2019,
there were no payments to related parties other than
compensation paid to key management personnel.
These transactions were in the normal course of
operations and were measured at the exchange
amount, which
is the amount of consideration
established and agreed to by the related parties.
16. Income taxes
($000s)
Deferred tax recovery
Tax expense (recovery) recognized in other
comprehensive income or directly in equity
($000s)
Financing costs - recognized in
statement of equity
Unrealized gain or loss on marketable
securities - recognized in OCI
2020
(800)
(800)
2019
(697)
(697)
2020
(2,698)
2019
(166)
106
-
(2,592)
(166)
51
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2020, the Company recognized income tax recovery
of $0.8 million (2019 - income tax recovery of $0.7
million) primarily related to deferred tax recovery
arising from the losses in the current year, partially
offset by a deferred tax expense arising due to the
renouncement of expenditures related to 2019 and
2020 flow-through shares which are capitalized for
accounting purposes.
(a) Rate reconciliation
The provision for
income taxes differs from the
amount that would have resulted by applying
the combined Canadian Federal, Ontario, British
Columbia, Northwest Territories and Yukon statutory
income tax rates of 26.58% (2019 - 26.60%).
(c) Unrecognized deferred tax assets
The company has not recognized deferred income
tax assets in respect of the following tax effected
deductible temporary differences:
($000s)
Marketable securities
Loss carryforwards
Investment tax credits
Foreign tax credits
Mineral properties
Provision for reclamation liabilities
December
31, 2020
December
31, 2019
167
742
1,481
268
153
241
227
869
1,481
268
200
1,183
Deferred tax has not been recognized on the
deductible temporary difference of $3.5 million (2019
- $3.7 million) relating to investments in subsidiaries
as these amounts will not be distributed in the
foreseeable future.
The tax losses not recognized expire as per the
amount and years noted below. The deductible
temporary differences do not expire under the current
tax legislation. Deferred tax assets have not been
recognized in respect of these items because it is not
probable that future taxable profit would be available
against which the Company can utilize the benefits
there from.
(d) Income tax attributes
As at December 31, 2020, the Company had the
following income tax attributes to carry forward.
Canadian non-capital losses
Canadian capital losses
($000s)
Expiry
date
107,611
2040
2,571
Indefinite
Canadian tax basis of mineral interest
363,263
Indefinite
U.S. non-capital losses
U.S. capital losses
384
1,641
2040
2024
U.S. tax basis of mineral interest
12,329
Indefinite
($000s)
Loss before income taxes
Tax expense calculated
Using statutory rates
Non-deductible items
Difference in foreign tax rates
Change in deferred tax rates
2020
2019
(15,742)
(12,310)
26.58%
26.60%
(4,184)
(3,274)
1,897
10
1,217
1,113
11
(89)
(395)
-
1,904
33
(697)
Movement in tax benefits not recognized
(1,078)
Impact of true-up of prior year balances
27
Renouncement of flow-through
expenditures
Other
Income tax recovery
(b) Deferred income tax
1,357
(46)
(800)
following
The
components of deferred
liabilities:
table summarizes
the significant
income tax assets and
($000s)
Deferred income tax assets:
Property and equipment
Provision for reclamation liabilities
Financing costs
Non-capital loss carryforwards
December
31, 2020
December
31, 2019
258
822
2,480
28,664
68
70
622
25,347
Deferred income tax liabilities:
Mineral interests
Net deferred income tax liabilities
(51,258)
(19,034)
(48,533)
(22,426)
52
ANNUAL REPORT 2020SEABRIDGE GOLD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments and contingencies
($000s)
Mineral interests
Flow-through share expenditures
Payments due by years
Total
10,975
6,699
17,674
2021
1,098
6,699
7,797
2022-23
2024-25
2026-27
2,877
-
2,877
3,497
-
3,497
3,503
-
3,503
As reported in the Company’s prior year financial
statements, in 2019 the Company received a notice
from the CRA that it proposed to reduce the amount
of expenditures reported, as Canadian Exploration
Expenses (CEE) for the three-year period ended
December 31, 2016. The Company has
funded
certain of its exploration expenditures, from time-
to-time, with the proceeds from the issuance of
flow-through shares and renounced, to subscribers,
the expenditures which it determined to be CEE.
The notice disputes the eligibility of certain types of
expenditures previously audited and approved as
CEE by the CRA. The Company strongly disagrees
with the notice and responded to the CRA auditors
with additional information for their consideration. In
2020, the CRA auditors responded to the Company’s
submission and, although accepting additional
expenditures as CEE, reiterated that their position
subsequently
remains
largely unchanged and
issued reassessments to the Company reflecting
the additional CEE expenditures accepted and $2.3
million of Part Xll.6 tax owing. The Company has been
made aware that the CRA has reassessed certain
investors who subscribed for flow-through shares in
2013 and will reassess other investors with reduced
CEE deductions. The Company’s and
investors’
reassessments will be appealed to the courts.
The Company has indemnified the investors that
subscribed for the flow-through shares. The potential
tax indemnification to the investors is estimated to
be $11.0 million, plus $2.2 million potential interest.
No provision has been recorded related to the tax,
potential interest, nor the potential indemnity as
the Company and its advisors do not consider it
probable that there will ultimately be an amount
payable. Subsequent to the year end, $2.4 million
was deposited with the Receiver General, on behalf
of certain investors in return for their agreement to
object to their respective assessments and agreement
to repay the Company with any and all recoveries
upon the successful resolution of the Company’s
successful appeal.
53
ANNUAL REPORT 2020SEABRIDGE GOLD Corporate Information
DIRECTORS
Rudi P. Fronk
Chairman of the Board
A. Frederick Banfield
Eliseo Gonzalez-Urien
Richard C. Kraus
Jay S. Layman
Melanie R. Miller
Clement A. Pelletier
John W. Sabine
Gary A. Sugar
OFFICERS
Rudi P. Fronk
Chief Executive Officer
Jay S. Layman
President and Chief Operating Officer
William E. Threlkeld
Senior Vice President, Exploration
Peter D. Williams
Senior Vice President, Technical Services
Christopher J. Reynolds
Vice President, Finance and
Chief Financial Officer
R. Brent Murphy
Senior Vice President, Environmental Affairs
C. Bruce Scott
Vice President,
General Counsel and Corporate Secretary
Michael G. Skurski
Vice President, Technical Services
Elizabeth Miller
Vice President, Environment and
Social Responsibility
Neggar Shafai
Assistant Corporate Secretary
STOCK EXCHANGE LISTINGS
AUDITORS
KPMG LLP
333 Bay Street, Suite 4600
Toronto, Ontario M5H 2S5
Canada
LEGAL COUNSEL
Blake, Cassels & Graydon LLP
595 Burrard Street
Suite 2600
P.O. Box 49314
Vancouver, British Columbia
V7X 1L3 Canada
Carter Ledyard & Milburn LLP
2 Wall Street
New York, New York 10005
USA
DuMoulin Black LLP
10th Floor, 595 Howe Street
Vancouver, British Columbia
V6C 2T5 Canada
Toronto Stock Exchange, symbol “SEA”
New York Stock Exchange, symbol “SA”
CUSIP Number 811916105
HEAD OFFICE
Seabridge Gold Inc.
106 Front Street East, Suite 400
Toronto, Ontario M5A 1E1
Canada
Tel: 416 367 9292, Fax: 416 367 2711
info@seabridgegold.com
www.seabridgegold.com
www.ksmproject.com
INVESTOR RELATIONS
Rudi P. Fronk
Tel: 416 367 9292
info@seabridgegold.com
REGISTRAR AND TRANSFER AGENT
Computershare Investor Services Inc.
100 University Avenue
8th Floor, North Tower
Toronto, Ontario M5J 2Y1
Canada
Toll free (North America): 1 800 564 6253
International Direct Dial: 514 982 7555
Computershare Investor Services Inc.
250 Royall Street
Canton, Massachusetts 02021
USA
Toll free (North America): 1 800 564 6253
International Direct Dial: 514 982 7555
54
ANNUAL REPORT 2020SEABRIDGE GOLD
Seabridge Gold Inc.
106 Front Street East, Suite 400
Toronto, Ontario M5A 1E1
Canada
Phone: 416 367 9292
Fax: 416 367 2711
info@seabridgegold.com
www.seabridgegold.com
www.ksmproject.com