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Seabridge Gold to raise $225m from Sprott, Ontario Teachers’

Toronto-based mining company Seabridge Gold has agreed to sell a secured note, exchangeable for a KSM silver royalty, to Sprott Resource Streaming and Royalty Corp and Ontario Teachers' Pension Plan.

Toronto-based mining company Seabridge Gold has agreed to sell a secured note, exchangeable for a KSM silver royalty, to Sprott Resource Streaming and Royalty Corp and Ontario Teachers’ Pension Plan. The sale will generate $225 million (C$285 million) in proceeds. Seabridge’s assets include the KSM project in northern British Columbia.

PRESS RELEASE

Toronto, Ontario–(Newsfile Corp. – February 26, 2022) – Seabridge Gold (TSX: SEA) (NYSE: SA) announced today that its wholly-owned subsidiary, KSM Mining ULC (“KSMCo”) has agreed to sell a secured note (“Note”) that is to be exchanged at maturity for a silver royalty on its 100% owned KSM project located in northern British Columbia, Canada, to Sprott Resource Streaming and Royalty Corp. (“Sprott”) and Ontario Teachers’ Pension Plan (“Ontario Teachers'”) (jointly, the “Investors”) for US$225 million (approximately C$285 million at the current exchange rate). The proceeds of this sale will be used to continue ongoing physical works at KSM and advance the project towards a designation of ‘substantially started’.

Seabridge Chairman and CEO Rudi Fronk explained: “This fund-raising is intended to move KSM towards accomplishing three main objectives without the requirement for shareholder dilution:

Achieve the ‘substantially started’ designation which ensures the continuity of the KSM project’s approved Environmental Assessment Certificate (“EAC”) for the life of the project;
Complete key tasks which support construction readiness and will shorten the construction period once a construction decision has been made; and
Enhance the KSM proposition in our joint venture negotiations by securing the EAC, further de-risking the project, and accelerating the construction timetable.”

Key terms of the Note and silver royalty include:
When the Note matures, the Investors will use all of the principal amount repaid on maturity to purchase a 60% gross silver royalty (the “Silver Royalty”) upon the first to occur of:

a. commercial production being achieved at KSM; and
b. either the 10-year anniversary, or, if the EAC expires and the Investors do not exercise their right to put the Note to KSMCo (described below), the 13-year anniversary of the issue date of the Note.
Prior to its maturity, the Note bears interest at 6.5% per annum, payable quarterly in arrears. KSMCo can elect to satisfy interest payments in cash or by delivering Seabridge common shares.
KSMCo has the option to buyback 50% of the Silver Royalty, once exchanged on or before 3 years after commercial production has been achieved, for an amount that provides the Investors a minimum guaranteed annualized return.

If project financing to develop, construct and place KSM into commercial production is not in place by the fifth anniversary from closing, the Investors can put the Note back to KSMCo for US$232.5 million, with KSMCo able to pay such amount in cash or by delivering Seabridge common shares at its option. This right expires once such project financing is in place. If the Investors exercise this put right, the Investors’ right to purchase the Silver Royalty terminates.

If KSM’s EAC expires at anytime while the Note is outstanding, the Investors can put the Note back to KSMCo for US$247.5 million at any time over the following nine months, with KSMCo able to satisfy the put in cash or by delivering Seabridge common shares at its option. If the Investors exercises this put right, the Investors’ right to purchase the Silver Royalty terminates.

If commercial production is not achieved at KSM prior to the tenth anniversary from closing, the Silver Royalty payable to the Investors will increase to a 75% gross silver royalty (if the EAC expires during the term of the Note and the corresponding put right is not exercised, this uplift will occur at the thirteenth anniversary from closing).

No amount payable may be paid in common shares of Seabridge if, after the payment, any of the Investors would own more than 9.9% of Seabridge’s outstanding shares.
KSMCo’s obligations under the Note will be secured by a charge over all of the assets of KSMCo and a limited recourse guarantee from Seabridge secured by a pledge of the shares of KSMCo.