Seabridge Gold books a Q3 profit, but a spin-out gain drives the nine months

What happened

Seabridge Gold Inc. (NYSE: SA) reported third-quarter net income of C$6.7 million, reversing a C$32.3 million loss a year earlier. The nine-month profit of C$117.6 million depends on a one-time C$151.7 million gain from spinning out its Courageous Lake project.

Per share, the company earned C$0.06 in the quarter against a C$0.32 loss a year earlier. Over nine months it earned C$1.09 per share against a C$0.09 loss. OptimistFi calculates the quarterly improvement in net income at C$38.97 million.

The third quarter had no spin-out gain. Instead, a C$16.2 million gain from remeasuring secured notes replaced a C$20.0 million loss on that line a year earlier. Foreign exchange losses narrowed to C$0.8 million from C$12.6 million.

How the Courageous Lake spin-out produced the gain

Seabridge completed the spin-out of its 100%-owned Courageous Lake Gold Project on June 3. The project moved into Valor Gold Corp. Seabridge shareholders received 0.511 Valor shares for each Seabridge share they held.

The gain is an accounting result. Management valued Valor at C$211.8 million using comparable transactions, an estimate built on unobservable inputs. Net assets handed over were C$73.7 million. That difference, together with the gold stream described below, produced the gain.

Just before the spin-out, Seabridge bought a gold stream on Courageous Lake for C$4.9 million. Once commercial production starts, it must buy 10% of refined gold output in quarters when the average gold price is at or above US$4,000 per ounce. It pays US$4,000 per ounce delivered. The term is 40 years.

The stream's initial fair value was C$13.6 million, and the difference from the price paid went into the gain. At Sept. 30 the asset was carried at C$12.0 million. The valuation assumes production begins in 2033.

How KSM is being paid for

Seabridge is spending ahead of any mine revenue. Cash and equivalents fell to C$56.3 million at Sept. 30 from C$117.5 million at Dec. 31, 2025. Spending on mineral interests, property and equipment reached C$145.0 million in nine months, C$90.2 million of it in the third quarter. Operating activities used C$13.0 million.

In the third quarter BC Hydro substantially completed the Treaty Creek Terminal and related interconnection work. C$86.2 million of BC Hydro transmission extension costs moved into construction in progress at the KSM Project.

A strategic investor provided an unsecured facility of up to US$100 million at 7% interest. Seabridge drew C$69.9 million (US$50.0 million) by Sept. 30 and the other half on Nov. 2. Amounts are due on or before Dec. 31.

Seabridge can repay in cash, shares or both. Any share issue needs TSX approval. The price must be at least the greater of 92.5% of the 20-day volume weighted average price and the TSX minimum. The lender cannot end up owning more than 4.9% of the common shares.

Equity also funded the work. In the first quarter Seabridge sold 759,222 shares through its at-the-market program at an average C$48.15. It netted C$35.8 million and used up the program's remaining capacity. Shares outstanding stood at 108,079,853 at Sept. 30, up from 106,554,091 at Dec. 31, 2025.

Why it matters

OptimistFi has argued that Seabridge's value depends on turning a large asset base into partner-funded mine economics before dilution, liabilities or cost inflation absorb the upside. The filing is mixed on that test. Funding for KSM work is in place for now, but the profit says little about operating progress.

The earnings swing comes mostly from accounting items. Besides the spin-out gain, the nine months include a C$31.9 million gain from remeasuring secured notes and a C$7.3 million gain on loss of significant influence. A C$17.8 million foreign exchange loss and C$34.3 million of income tax expense partly offset them. Corporate and administrative expenses rose to C$21.9 million from C$14.0 million.

Secured notes are the largest liability. They are carried at C$536.9 million, against C$598.5 million at Dec. 31, 2025. In the second quarter Seabridge pushed both put exercise dates to March 24, 2028 and raised the put amounts by 6.5%. The 2022 note's Silver Financing Put is now US$247.1 million. The 2023 note's NSR Financing Put is US$164.8 million.

Seabridge assumes both become exercisable that day, based on its view of when project financing will be secured. Current liabilities rose to C$140.1 million from C$40.9 million at year-end. The loan and higher payables and accruals are both in that total.

What's next

The loan comes due on or before Dec. 31. Whether Seabridge repays it in cash or in shares is the next test of the dilution risk in OptimistFi's case. A share settlement needs TSX approval and adds to the share count.

The next quarterly report will show whether Seabridge can post a profit without a spin-out gain. The March 24, 2028 put date is the longer-dated pressure point on the secured notes.