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Is There Gold in Seabridge's Hills?

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The company has had tremendous success in defining one of the world's largest yellow-metal resources.

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Paul Forsyth, responding to the Barron's article There's (Possibly) Gold in Them Thar Hills, writes:

In the spirit of "full disclosure," herewith my curriculum vitae pertaining to Seabridge (SA):

1. I'm currently retired after having spent 40-plus years in the investment business both in Canada and the USA.

2. I advised Seabridge in 2008 for which I received a fee.

3. I'm currently a shareholder of Seabridge.

I want to clarify some errors, omissions, and/or misinterpretations.

First, I'll address the sentence in the article that states "Fronk and other Seabridge insiders have taken $36 million off the table through stock sales over a period of four years." This just isn't correct and it gives a totally misleading impression. I haven't been able to find in the public record any facts that support Alpert's number, but here's what I did find on the public record.

Although some insider sales did occur during that period, net-net during that period in question, insiders have increased their ownership to 3,072,104 shares from 2,214,659 -- an increase of 857,445 shares.

Regarding Mr. Friedberg, during that same period, in actuality increased his position from 7,223,052 shares to 8,629,632 shares -- an increase of 1,406,580 shares.

Also, the Barron's article implies the conclusion that NovaGold (NG) stock cratered because of the work (or lack thereof) performed by Mr. Mike Lechner (and his firm Resource Modeling) and Jim Gray (Moose Mountain Mining Services) on Nova Gold's (and Teck Cominco's) Galore Creek property. This also is erroneous.

Mike Lechner audited the resource estimates for Galore which were prepared internally at NovaGold. Jim Grey built the mine plans and estimated capital costs for the mining fleet and mining operating costs.

It's common knowledge in the industry that Galore Creek was challenged due to rising capital cost estimates at a time when capital costs were increasing at all developing and undeveloped mining projects around the world as a result of increasing steel, fuel, and other input costs. The fact is that the resource model, mine plans, mine operating costs, and mine capital were never questioned at Galore Creek. Both Mike Lechner and Jim Gray have fantastic industry reputations, that's why they're selected to do consulting by major mining companies like Barrick Gold (ABX) and Teck Cominco. It's due to their favorable industry reputations that Seabridge chose to hire them in the first place.

After reading Bill Alpert's column and also being aware of the sizable increase in Seabridge's short position (most recently a 12% increase to 1.38 million shares), it reminded me of the old days when I was a conduit or intermediary on behalf short positions taken down by the notorious Feshbach brothers. During that time, I passed on information to the Wall Street Journal and its "Heard on the Street" column on certain companies that I'd visited. I suppose it's not coincidence that the Wall Street Journal and Barron's are sister publications. It's also not hard to believe that the article on Seabridge was suggested to Barron's by the shorts in Seabridge, looking for a way to get out of a wrong-way bet on a company that's had tremendous success in defining one of the world's largest gold resources.


Mr. Forsyth saved me a lot of time in writing all that. I couldn't agree more.

I would add that Fronk never sold a share of Greenstone. He was robbed just like the rest of the Greenstone shareholders when the mine was expropriated by the Honduran government. An interesting side note to that story is that the Greenstone mine is now in production and producing exactly what the company said it would back when Fronk was the head of it. It's just that the mine is now producing for the Honduran government rather than Greenstone shareholders.

Expropriation is just one of the many risks in the mining business. Thankfully, Seabridge's KSM project is located in Canada, where the odds are near zero of an expropriation. Nobody said this business was easy, but to imply that Fronk is some sort of pump-and-dump artist or "Bre-X" promoter is just plain false.

The journalist that wrote this Barron's story was obviously fed a story by an interested party (i.e. -- somebody that's probably responsible for the recent sharp rise in the short interest) and then failed to do his own homework.

I can't wait to watch the panic when this large short in the stock inevitably gets squeezed. Just wait until the pre-feasibility on KSM comes out in March and much of the resource is likely moved over into proven & probable reserves. Shorting a relatively thin and closely held stock, in my opinion, is akin to suicide.

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Position in SA, gold, gold stocks

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