TURNING CASH INTO - Seabridge Gold · 2016-05-12 · 91 King Street East Toronto, Ontario M5C 1G3...

ANNUAL REPORT 2015

TURNING CASH INTO

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.

SEABRIDGE GOLD’S RESOURCE BASE OF GOLD, COPPER AND SILVER IS ONE OF THE WORLD’S LARGEST

CONTENTS

02 CEO’sReporttoShareholders

14 MineralReservesandResources

16 Management’sDiscussionandAnalysis

26 Management’sResponsibilityforFinancialStatements

27 IndependentAuditors’ReportofRegisteredPublic AccountingFirm

28 ReportofIndependentRegisteredPublicAccountingFirm onInternalControloverFinancialReporting

29 ConsolidatedStatementsofFinancialPosition

30 ConsolidatedStatementsofOperationsandComprehensive Loss

31 ConsolidatedStatementsofChangesinShareholders’Equity

32 ConsolidatedStatementsofCashFlows

33 NotestotheConsolidatedFinancialStatements

54 CorporateInformation

STOCK EXCHANGE TRADING SYMBOLS

“SEA”onTorontoStockExchange“SA”onNewYorkStockExchange

Annual General Meeting of Shareholders

Wednesday,June29,20164:30p.m.EDTTheAlbanyClub91KingStreetEastToronto,OntarioM5C1G3Canada

Forward-Looking Statements

Wearemakingstatementsandprovidinginformationaboutourexpectationsforthefuturewhichareconsideredtobeforward-lookinginformationorforward-lookingstatementsunderCanadianandUnitedStatessecuritieslaws.Theseincludestatementsregardingtheproposedproductionscenariosinrespectofourprincipalprojectsandourviewofthegoldmarket.Wearepresentingthisinformationtohelpyouunderstandmanagement’scurrentviewsofourfutureprospects,anditmaynotbeappropriateforotherpurposes.Wewillnotnecessarilyupdatethisinformationunlesswearerequiredtobysecuritieslaws.Thisinformationisbasedonanumberofmaterialassumptions,andissubjecttoanumberofmaterialrisks,whicharediscussedinourannualMD&Acontainedinthisdocumentundertheheadings“Forward-LookingStatements”and“RisksandUncertainties”.Wealsorefershareholderstothemorecomprehensivediscussionofforward-lookinginformationinourAnnualInformationFormfiledonSEDARatwww.sedar.comandour

AnnualReportonForm40-FfiledonEDGARatwww.sec.gov/edgar.shtml.

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Chief Executive Officer’s REport to Shareholders2015wasanotherdifficultyearforourindustry.Multi-yearsharepricelowsweresetfornearlyeverygoldandbasemetalcompanyincludingSeabridge.Nonetheless,inanticipationofaneventualturninmetalsmarkets,Seabridgecontinuedwithitsuniquestrategyofimprovingshareholderleveragetogoldbycontinuingtogrowitsgoldresourcebasefasterthansharesoutstanding.Asillustratedinthefollowinggraph,thiscorporatedisciplineoverthepast17yearshasallowedustodeveloponeoftheworld’slargestinventoriesofgoldreservesandresourceswithremarkablylittlesharedilution.

Gold Reserves and Resources Continue to Grow Faster than Shares Outstanding

ProvenandProbableGoldReserves

Measured+IndicatedGoldResources

InferredGoldResources

SharesOutstanding

Note:Intheabovegraph,theshareinformationfor2015doesnotincludethe1.8millioncommonsharefinancingcompletedinQ42015astheproceedsfromthisdilutionwillbespentduring2016onfurtherresourceandreserveexpansions.

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Inlastyear’sannualreport,wetookadifferentapproachfrompreviousyears.Ourexploration,engineeringandpermittingteamsspokedirectlyoftheirworkandtheircriticalaccomplishmentsduringtheyear.Weheardfrommanyshareholderswhoappreciatedgettingreportsfromthepeopleonthefrontlines.Inthisyear’sreport,wehaveonceagaintakenadifferentapproach,highlightingourunderstandingoftheuniquerolegoldplaysinourfinancialsystemandtheimpactthisunderstandinghashadonourcorporatestrategy,astrategythathasmadeusdifferentfromothergoldcompanies.Thethemeofthisyear’sreportisTurningCashintoGold.Ihopeyoufindmyinterviewthatfollowsthisbriefreporttobeuseful,aswellasthearticlesonthegoldmarket.

Report Card on 2015 Objectives: Asalways,westarttheyearwithasetofclear,publishedobjectivesdesignedtoenhanceshareholdervalue.Atyear-end,ourboardevaluateshowweperformedagainsttheseobjectives.Lastyear’sannualreportsetoutsixobjectives:

• Complete a joint venture agreement on the KSM project with a suitable partner on terms advantageous to Seabridge

Asofnow,thiskeycorporateobjectivehasnotbeenmet.2015provedtobeaproductiveyearassixmoremajorcompaniesexecutedconfidentialityagreementsonKSMandconductedduediligenceontheproject.Weweresuccessfulinsatisfyingeachofthesecompaniesonthetechnicalmeritsofourproject.TheimpressivenewdevelopmentsatDeepKerrwereespeciallyrelevantinthisprocess.However,astheyearprogresseditbecamecleartousthatincreasinglychallengingmarketconditionsforgoldandcopperwouldmakeitdifficulttoachievejointventuretermsacceptabletoSeabridge,sowedidnotcommenceformalnegotiations.Forus,termsaremoreimportantthantiming.Weonlygettodothisonce.

Withtechnicalevaluationsoutoftheway,webelievethestagehasbeensetforasuccessfultransactionwhenmarketconditionsimprove.Inthemeantime,wewillcontinuetoimprovethequalityofKSMthroughadditionalengineeringandexplorationfocusedonthehighergradematerialwehavefoundoverthepastseveralyears.

• Test for a potential high-grade core zone underneath Mitchell, KSM’s largest deposit

Thisobjectivewasmet.Duringthe2015KSMdrillprogram,threecoreholes(including1daughterhole)totaling3,972metersweredrilledtotestforapotentialhigh-gradecorezoneunderneathMitchell.ThesizeandorientationofthedrillinterceptssupportthepotentialforanexpansionoftheblockcaveoperationplannedforMitchell.SelectedMitchelldrillresultsfromthe2015programincludeholeM-15-130’s174metersof0.55g/tgoldand0.28%copperandM-15-131’s167metersof0.81g/tgoldand0.25%copper.Themineralogyandtexturesfromthisdrillcoresuggestthatweareapproachingazoneofhigher-temperatureandfluidflowthatmayofferevenbettergradesthanthoseencountered,butthereisevidenceoffaultingwhichneedstobeanalyzedbeforeweundertakefurtherdrillingonthistarget.

• Continue to expand resources at both Deep Kerr and the Iron Cap Lower Zone, focusing on grades that are significantly higher than KSM’s reserve grade

Thisobjectivewasmet.Atotalof6,344metersin5coreholes(including3daughterholes)successfullyexpandedtheknowndimensionsofDeepKerr.DuetothesuccessachievedatDeepKerr,Seabridgeelectedtofocusthereandnotundertakeadditionaldrillingin2015attheIronCapLowerZone.

ThefivedrillholescompletedintothewestpartoftheDeepKerrdepositweredesignedtoestablishdipcontinuityofthehigh-gradewestlimbofDeepKerr.SelectedDeepKerrdrillresultsfromthe2015programincludedholeM-15-49’s483metersof0.43g/tgoldand0.56%copperandM-15-49A’s340metersof0.53g/tgoldand0.60%copper.Resultsshowthatthemineralizedenvelopeofthewestlimbextendsmorethan450metersalongstrike.Downdip,thezoneshowscontinuityofanadditional

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400meterswithgradesandwidthsimprovingatdepth.Theshapeofthiszonecontinuestobehighlyfavorabletoundergroundbulkminingasitgrowsinsize.Thezoneremainsopenalongstrikeandatdepth.Afurtherdrillprogramisunderconsideration.

• Undertake additional engineering studies at Deep Kerr and the Iron Cap Lower zone to define the preliminary economics of bringing these higher grade deposits into KSM’s production profile

Thisobjectivehasbeenachieved.During2015,furtherengineeringstudieswereconductedontheDeepKerrandIronCapLowerZonetoascertainthepreliminaryeconomicsthatcouldbeachievedbybringingthesenewzonesintoKSM’sproductionplan.SubstitutinghighergradeundergroundblockcaveproductionfromtheDeepKerrandIronCapLowerZoneforotherlower-gradeorhigher-costorecouldsubstantiallyimproveKSM’s2012PreliminaryFeasibilityStudy(“PFS”)productionscenario.Potentialeconomicgainscouldberealizedfrommoreefficientandhighergradeproductionandenvironmentalbenefitscouldincludeareductioninsurfacedisturbance,wasterock,watermanagementandtreatmentrequirements.Theseadvantagesmaybepossiblewithoutsignificantlychanging,andpossiblyreducing,theprojectinfrastructurealreadyapprovedintheenvironmentalassessmentprocess.Preliminaryworksuggestsasignificantreductioninwasterockandimprovementsincapitalefficiency,IRRs,NPVsandcapitalpayback.

• Update the 2012 KSM Preliminary Feasibility Study by incorporating current metal prices and revised capital and operating costs

Thisobjectivewasnotmet.Withthesuccessofthe2015drillprogramatDeepKerr,coupledwiththerequirementsofNI-43-101,weelectedtodelaycompletionoftheupdatedPFStoallowustoincorporatePreliminaryEconomicAssessment(“PEA”)levelanalysisforDeepKerrandtheIronCapLowerZoneintotheupdatedPFS.Workisnowunderwayonthisupdateanditshouldbecompletedinmid-2016.

• Increase gold ownership per common share with expanded resource estimates for KSMThisobjectivewasrealized.InApril2015,weissued1.6millionflow-throughshares($16.4millioninproceedspricedata27%premiumtothethenmarketpriceofourshares)tofundthe2015explorationprogramatKSM.Asaresultofthe2015drillprogram,inferredresourcesatDeepKerrincreasedby3.2millionouncesofgoldand2.1billionpoundsofcopper,morethanoffsettingtheequitydilutionsufferedtofundthe2015program.ResourcesatDeepKerrnowstandat1.01billiontonnesgrading0.35g/tgold(11.3millionouncesofgold)and0.53%copper(11.8billionpoundsofcopper).

And for 2016…OurprimaryobjectivecontinuestobetocompleteajointventureagreementontheKSMprojectwithasuitablepartnerontermsadvantageoustoSeabridge.Thisobjectiveismostlynotunderourcontrol.DuetothesizeandcomplexityoftheKSMproject,wethinkthelandscapeofpotentialpartnersislimitedtonomorethan10majorgoldandbasemetalcompanies,manyofwhichhavesufferedseriousbalancesheetandsharepriceweakness.Marketconditionsandindustryconfidencearekeyfactorsaffectingtheachievementofthisobjective.

Industrycashflowsnowappeartobeontheriseandbalancesheetsarebeingrepaired,inpartbyassetsales.Capitalcostsfinallyappeartobetrendingdownward.Commitmentstomajornewprojectsarenotyetbeingmadebutseveralprospectivepartnershaverecentlyannouncedtheirintentiontoconsidernewopportunitiesastheirreserveandresourcebasesshrink.Webelieveprioritywillbegiventopermittedprojectsinsafejurisdictionswithlonglives.TherearefewifanyprojectsthatmeetthesekeycriteriabetterthanKSM.


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Wehaveestablishedsixadditionalvalue-enhancingobjectivesfor2016whicharenotdependentonmarketconditionsincluding:

1. ContinuetostrengthenoursociallicensebyenteringintofurtheragreementswithTreatyandFirst Nationsandlocalcommunitiesinresponsetotheirneedsandconcerns;

2. CompleteanupdatedPreliminaryFeasibilityStudyforKSMincorporatingcurrentmetalpricesand revisedcapitalandoperatingcosts;

3. WithintheupdatedKSMPreliminaryFeasibilityStudy,developaPreliminaryEconomicAssessmentfor DeepKerrandLowerIronCaptoshowthepotentialofbringingthesehighergradedepositsintoKSM’s productionprofile;

4. ObtainpermitstoconstructanexplorationaditintotheDeepKerrdepositfromthevalleyfloor.This wouldsignificantlydecreasethecostsassociatedwithtransformingDeepKerr’sinferredresourcesto provenandprobablereserves;

5. TakeadvantageofthecurrentdepressedmarketforjuniorexplorationcompaniestoacquirenewNorth AmericanprojectsthatwouldbeimmediatelyaccretivetoSeabridgeintermsofouncesofgoldresources persharewhilealsoprovidingsubstantialnewexplorationupside;and

6. Increasegoldownershippercommonsharebywayofaccretiveresourceadditionsfromacquisitions and/orcontinuedexplorationatKSM.

Weapproacheveryyearwithoptimism,knowingthereisworkaheadofusthatcanenhancethevalueofourassets.Thisyearisnoexception.Whatisdifferentthisyearisthatwethinkwehavethewindatourbacks.Webelievethebearmarketingoldisfinallyover.Ifweareright,thisshouldprovetobeaverygoodyearforourshareholders.

OnBehalfoftheBoardofDirectors,

RudiP.FronkChairmanandChiefExecutiveOfficerApril15,2016

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Q: Thethemeforthisyear’sannualreportis“TurningCashintoGold”.Isn’tthisessentiallySeabridge’scorporatestrategy?

Fronk: Itis.WhenwefoundedtheCompany17yearsago,itwastogiveourshareholdersmaximumexposuretothegoldprice.Thatmeanttakingadifferentapproachtothebusiness.Ifyoulookatwhatthegoldminingindustryisdoing,theyareturningwhatwebelievetobeasuperiorformofmoney—gold—intoaninferiorone—thedollar.

AtSeabridge,weliketothinkofourselvesasmodernalchemiststurningcashintogold.Overthelast17years,wehaveusedcashfromourshareholderstofundacquisitionsandexplorationofgoldprojectsinCanadawiththeaimofincreasinggoldownershippershareasmeasuredbyourouncesofgoldresourcesandreservesinthegroundrelativetooursharesoutstanding.Wethinkthereisaplaceforthisstrategyamongthoseshareholderswhovaluegoldownershipovercashflow.

Q: Younowhavemorethan59millionouncesofgoldresourcesinthemeasuredandindicatedcategoriesandnearly35millionouncesofgoldresourcesclassifiedasinferred.

Fronk: That’sright.And45millionofthoseouncesarereserves,withmuchmoretocome.Meanwhile,weonlyhave52millionsharesoutstanding.Goldownershippersharehasgrowneveryyearsinceourinception.Ithinkyouwillfindthateveryotherpublicgoldcompanyhasreduceditsgoldownershiponapersharebasisoverthesameperiod.

Q: Whydoestherestofthegoldindustrydoeverythinginreverse?

Fronk: Well,firstofall,becausetheyarefocusedontheirnextincomestatement.Thereisaninstantmarketforgoldatthequotedworldpriceandtheycanalwayssellit.That’sarealluxury.Notallmineralsandmetalshavethatmarketability.

Second,seniorgoldminingexecutivesarealmostalwaysengineersoraccountants.Theyunderstandthehardfactsofquantifyingproductionandmanagingcosts—estimatingoregrades,recoveryrates,reagentconsumptionandfuelprices—andallthatstuffisultimatelyexpressedindollars.Youreallycan’tshutinproductionwhenthegoldpricefallssoyouhavetobecomeveryadeptatmanagingcosts,whichisatremendousskill.Asaresult,theyarerequiredtoliveinadollarworld.

SeabridgeGold’sCEORudi Fronk:CorporateStrategyandtheRoleofGold

AN INTERVIEW WITH


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Iwastrainedasanengineerandthat’showIwastaught.Engineersareverygoodattakingbigissuesandreducingthemtodetailsthatcanbemeasuredandcontrolled.Big“soft”economicissuesthatarehardertoquantifyandcontrolcaneludethem.

AssoonasIcompletedmydegreeinminingengineering,Istartedstudyingeconomicsandfinancebecausethat’sthearenawherethingsarevalued.Torunagoldmine,youneedtheengineeringmindsetbuttounderstanditsvalue,youneedtounderstandmoney.Becauseinthegoldbusiness,ourproductisanalternativeformofmoney.Manypeopleinourbusinessgrewupinthebasemetalsindustrywhichismuchlargerandgenerallymoretechnicallyadvancedthangoldmining.Basemetalsarecommoditiesandthat’sthewaymostgoldminingexecutivesthinkofgold.Theydon’tthinkofgoldasmoney.

Q:Howdidyouarriveatyourstrategyofgrowinggoldownershippershare?

Fronk: Ourstrategycamefromtwofundamentalinsights.Thefirstinsightwasthatthevaluationoffinancialassetssuchasstocksandbondsrelativetogoldwasunreasonablyhighduetoinflationarymonetarypolicies.Thesethingsgoincycles.Inthe1970s,hardassetswereovervaluedagainstfinancialassets.Then,overthenext23yearswegotthereverse.

WeformedSeabridgeattheheightofenthusiasmforfinancialassets.Thedaywelaunched,inlate1999,ittook44ouncesofgoldtobuytheDow…thehighestever.Sincethentheratiohasgoneaslowas6.It’snowabout15butwewouldnotbesurprisedifitgetstoaratioof1to1yetagain,asithasdonetwiceinthelasthundredyears,thelasttimein1980whentheDowandgoldcrossedwithgoldat$850.Webelievewenowareinatimewhengoldisincreasinglyneededtoprotectwealth.

Second,itisextremelydifficulttofindgoldthatiseconomictodevelop.Goldisastoreofwealth,thebestthereis,becauseofthatscarcity.Cashyoucangetanywhere,youcanevenprintit,butnotgold.Wedecidedtomakethisscarcityvalueourcompetitiveadvantagebyfocusingongoldownership.

Asgoldpotentiallybecomesmoreimportantasaninvestment,ourindustryisstruggling.Reservesareonthedecline.Discoveryratesarefalling.Newprojectsaresmallerandlowergradethantheonesthatarebeingdepleted.Someproducershavebeenhigh-gradingtheirdepositstostayinbusinessandmeettheirdebtobligations,astrategythatdestroysreserves.Thesefactorssupportthefuturevalueofourstrategy.

We formed Seabridge at the height of enthusiasm for financial assets

Ifgoldownershippershareisyourchosenmetric,thenyouprobablycan’tbuildandoperatemines,whichwasadecisionwemadeattheverybeginning.Producershavetoselltheirgoldtopayforitsextraction.Then,theyhavetogooutandspendenormousdollarstoacquire,engineerandpermitnewprojectstostayinbusiness.Theresultisthattheequityanddebtdilutionoftheirshareholdershasbeenextraordinary.Studiesshowthatoverthepasttenyears,commonsharesoutstandingofthe10largestgoldminingcompanieshavemorethandoubled,whiletheirnetdebthasincreasedbyabout40fold.Ourlargestshareholderlikestosaythatthebiggestriskinowninggoldstocksisdilution.That’sthedifficultyofbeingaminer.Sowedecidedtomaximizegoldownershippershareratherthanbeaminer.

Q:Butyouarepreparingyourprojectstobecomeproducingmines.Won’tyouthenfacethesamedilutionissuesastherestoftheindustry?

Fronk: Wewillfacethesamechallengesbutwehavehad17yearstodevelopstrategiestoavoidexcessivedilutionofourgoldownership.

It’sclearthatgoldintheground,whichiswhatwehavenow,isworthmuchlessthangoldinthehand.Torealizethefullvalueofourreserves,theywillhavetobeminedandthecostsofbuildingandoperatingaminewillreduceourgoldownership.Weexpecttoenterintojointventureswithlarge,experiencedproducerswhowilltakeonmostofthecostsoffinancingtoproductioninreturnforashareoftheproject.Thisapproachisdesignedtolimitequityanddebtdilutionbutitwillcostusasignificantportionofourreserves.

Wethinkthelossofleveragetothegoldpricefromtakingonapartnerwillbemorethanoffsetbythesubstantiallyhighervaluegiventoouncesthathavebecomereservesofaproducingmineandthishigherperouncevalueshouldbereflectedinourshareprice.Productionshouldalsogenerateareturningold,whichcanbedistributedtoshareholdersasadividendinphysicalform.

Thetwokeystomaintainingourexceptionalgoldownershippershareovertimeareexplorationandacquisitions.Mostminersgiveverylittleprioritytoexplorationandtheygenerallyaren’tverygoodatit.Producersaretypicallynotentrepreneurialenterprises

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INTERVIEW WITH SEABRIDGE GOLD’S CEO RUDI FRONK: CORPORATE STRATEGY AND THE ROLE OF GOLD

wherecreativeexplorationisencouraged.Wehaveareallygoodengineeringandpermittingteamthathasaddedenormousvaluetoourassetbasebutourcorecompetencyremainsexploration.Whenweacquiredourcurrentprojects,explorationupsidewasalwaysthekeycriterion.

asourceofanxietyforcorporateearnings,commercialtradeandinvestment.Theproblemistheothertwo,becauseovertimethedollarcontinuallylosesvalueagainstrealthings.SincetheformingoftheFederalReserve,thecentralbankoffiat,thedollar’spurchasingpowerhasdroppedbyabout97%.

Furthermore,theU.S.authoritieshavepoliticizedthedollar—itisbeingusedtopropupborrowersattheexpenseofsavers,toaidthebanksandWallStreet.ItisbeingprintedtofundabloatedFederalGovernmentwhich,therefore,doesnotneedtolivewithinitsmeans.Below-marketratesofinterestelevatefinancialassetsbyencouragingspeculation,butattheexpenseofrealinvestmentandrealeconomicgrowth.

Asapoliticaltoolofgovernment,Ithinkthedollarcannotbetrustedtopreservewealth.Thatistheroleofgold.Youcankeepthedollarforitsusefulnessasamediumofexchangeandmeanwhileyoucangoonyourowngoldstandardtoprotectyourwealth.Seabridgerepresentsaleveragedwayofpursuingthatstrategy.

Now,Iknowthatmostpeoplethinkthathistorydoesn’tmeananythinganymore.Wearetoldthatweareinanewerawheretheoldrulesnolongerapply.ButweshouldallnotethatattheendofWorldWarII,nearlyhalfoftheworld’scurrencieswenttozero.Golddidnot.

I’mnotpredictinganewworldwar.ButInotethattheglobaldebtmarketnowhasabout$225trillionoutstandingwhileequitiestotalabout$75trillion.So,wehaveabout$300trillioninfinancialclaimsagainstaglobalGDPofabout$75trillion.Howisthatgoingtoworkout?Lotsofpeoplearegoingtolosevalue.Meanwhile,thereisabout$7trillioninabovegroundgoldtobacktheseclaims,whicharereallyliabilities,notassets.Astheonlyassetthatbacksitself,Ithinkgoldisgoingmuchhigher.

Q: Thisisnotthecommonview.

Fronk: No,mostofusareabsorbedintheminutiaeofdailylife.Youneedtolookupandseehowtheworldworks.Youneedtolookbehindthegovernmentdataandtheeasyanswers.Peopledon’twanttofaceunpleasanttruths.Mostinvestorshavebeenmakingmoney,measuredindollars,andifyouhavebeenholdingfinancialliabilitiesasiftheyareassets,youhavebeenrewardedindollars.Whowantstoknowthattheseprofitsmayprovetobelessthanreal?Thereisatonofpropagandathatyouhavetofightyourwaythroughandmostpeoplearejusttoobusydoingtheirday-to-daystuff.

We have demonstrated the discipline to buy assets at the right time, when most of our industry is being forced to reduce debt by selling the projects they have overpaid for at the top of the market

Webelievewecanreplacetheouncesminedatourprojectsfromlow-costexploration.Wehaveproventhatoverthelast17years.Andwehavecarefullyfocusedoureffortsonacquiringandexploringdistrictscaleprojectswherethereisanoutstandingopportunitytogrow.AtKSM,webelievethatthereisenormousremainingexplorationpotentialtobesharedwithourpartner.YoucanalsoseethisupsideatourCourageousLakeprojectwhichconsistsofanentire53kilometerlonggreenstonebelt.

Whilevaluationsremainathistoricallylowlevels,youcanalsoexpectustoacquiremoreprojectsbasedonourconfidencethatwecanfindeconomicouncesatalowcost.Wehavedemonstratedthedisciplinetobuyassetsattherighttime,whenmostofourindustryisbeingforcedtoreducedebtbysellingtheprojectstheyhaveacquirednearthetopofthemarket.Weboughtourexistingprojectsnearthebottomofthelastgoldcycleandweexpecttodothesameinthecurrentdepressedmarket.

Q: Whatisyoursenseofthecurrentmonetarysystemandwhereitisheaded?

Fronk: Asyouknow,moneyhasthreefunctions—amediumofexchange,aunitofaccountandastoreofvalue.Thedollardoesagreatjobofactingasamediumofexchangeworldwide,althoughitsvolatilityiscertainly


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2016 ASSET CLASS PERFORMANCE

AsofFeb29,2016

Gold

Silver

TotalBondsMarket

Commodity(CRB)

USDollar

S&PInded

MSCIEmergingMarket

Oil

7.60%

16.70%

2.00%

0.10%

-1%

-5.40%

-5.80%

-14%

GOLD OUTPERFORMED EVERY OTHER ASSET CLASShighin2011.Goldoutperformedeveryotherassetclass.Goldstockswentup1,575%frombottomtotop,whichisprettyniceleveragetothegoldprice.Seabridgebeatthegoldstockaveragesbyrising3,500%.

Industryvaluationsrightnowarebasedonthecashflowfromproducingreserves.Theoptionvalueimputedtogoldinthegroundisnexttonothing.That’swhathappensatthebottomofthecycle.Ibelievegoldisnowonthewayup.Inouropinion,thenextbullmarketingoldhasbegun,andifthat’sthecase,IbelieveyouwillbewellrewardedbyowningsharesofSeabridge.

ThebearargumentongolddependsonastrongU.S.economicrecovery,acredibleFedandrisingshort-terminterestrates.Themarketislosingconfidenceinallthree.WhereistherecoverytheFedhaspromised?AndwhathashappenedtothenormalizationininterestratesthattheFedkeepstellingusisjustaroundthecorner?JimGrantmakesthepointthatthegoldpriceistheinverseofconfidenceincentralbankers.Fromthatperspective,theFedisgold’sbestfriendbecausetheyaredoingafinejobofdemonstratingthattheyhavenoideawhattheyaredoing.

Q: Inthemeantime,yoursharepriceiswellbelowitshighsof2011despitesuccessgrowingresourcesandreserves.

Fronk: It’sallaboutinvestorsentiment.Goldisnotyetinfavor.Financialassetsstillare.Thegoldpriceisateeter-totterwiththestockmarketontheotherendfromgold.Aslongasperceivedrisksarelow,stockswillgoupattheexpenseofgold.Whenitgoestheotherway,Ibelievegoldinthegroundwillrapidlyincreaseinvalue.Asagoldinvestor,youhavetobepatientandwaitfortheshiftinsentiment.Whenitcomes,Ithinkyouwillberewarded.WeareverypatienthereatSeabridge.

Seabridgeisaleveragedplayongoldsowetendtoexceedtheindustryaveragesbothtotheupsideandtothedownside,justasyouwouldexpect.Asyouknow,goldwentupnearly650%fromthelowin1999tothe

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No Way to run a Country

Itisgenerallyacceptedbypoliticiansandeconomiststhatyoucan’tcomparegovernmentfinanceswithhouseholdbudgeting.Weask,whynot?Botharefinancialunitsthathaverevenues,billstopayandconvenientplacestoborrowmoney.Themaindifferenceiseightzeros.Theconsequenceofthatdifferenceinzerosisthattheordinarypersoncannolongerassimilatethenumbers,theyaretoobigtomakesenseof,whichisjustwhatthepoliticiansandeconomistswant.Ifyoureyesglazeover,theyhavewon.

Here are the current numbers for the U.S. Federal Government:

AnnualFederalTaxRevenue: $3,309,149,000,000

AnnualFederalExpenditures: $3,798,706,000,000

CurrentYearDeficit: $489,566,000,000

NationalDebt: $19,155,214,000,000

Now let’s remove those eight zeros and pretend it’s a household budget:AnnualFamilyIncome: $33,091

AnnualFamilySpending: $37,798

NewDebtontheCreditCard: $4,896

OutstandingBankDebt: $191,552

Giventhesenumbers,whydoyouhaveconfidenceinthevalueoftheUSdollar?Because,youmightsay,it’sbackedbytheUSGovernment,themostpowerfulinstitutiononearth,withthebiggestmilitaryandthemostpowerfuleconomy.

Asahousehold,youhavetobeabletobackyourcurrentliabilitieswithcurrentassets.Showmethecurrentassetsbackingthedollar.Showmethemoney,astheysay.Let’slookattheU.S.FederalGovernment’sfinancialassets,ascalculatedbyDougShortofAdvisor Perspectives,seepiechartentitled,“Federal Government Total Financial Assets.”

YourdollarisnotprimarilybackedbyU.S.OfficialReserveAssets(goldofficiallyvaluedonthebalancesheetat$11billionbutreallyworthabout$320billionatmarket)ortaxesreceivablefromtheworld’sbesteconomy.Thatdollarinyourwalletisforthemostpartbacked,incurrentassetterms,bystudentloansowedinlargepartbyunemployedkidslivingintheirparents’basements.

Now,youmaywanttoarguethispoint.Afterall,taxrevenuescomeineveryday,yearafteryear.Considerthevalueofthisincomestream,youmightsay.Butthenyoumustalsoconsiderthenetpresentvalueofunfundedfutureliabilities,whichisatleast$80Trillion(withaT)ormoredependingonthediscountrateandotherassumptionsyouuse.BostonUniversity’sLaurenceKotlikoff,thereigningexpertonU.S.liabilities,recentlyestimatedthenetpresentvalueoftheseliabilitiesatabout$200Trillion.

Ofcourse,onebigdifferencebetweenahouseholdandtheU.S.TreasuryisthattheTreasuryessentiallyhasacaptivebank(theFederalReserve)withmonopolypowertocreatethecurrencyoftheland,whichmeansthatregularcreditcriteriadon’tapply.TheunfortunateendresultisthattheU.S.Treasurycangetintofarmoretroublethanahousehold.

TheU.S.dollariswhatwecallafaith-basedcurrency.Oddlyenough,youcanstilltradedollarsforgold,sowhywouldyounottaketheopportunitytodosomeofthat?

U.S.OfficialReserveAssets:4.1%CheckableDepositsandCurrency:16.1%OtherLoansandAdvances:9.4%TotalMortgages:5.5%Student Loans: 45.0%CorporateEquities:1.6%TradeReceivables:2.2%TaxesReceivable:7.6%TotalMiscellaneousAssets:8.5%

FEDERAL GOVERNMENT TOTAL FINANCIAL ASSETS

Student Loans: 45.0%

5.5%

9.4%

16.1%7.6%

1.6%

2.2%

4.1%8.5%

Sou

rce:

Fin

anci

al A

ccou

nts

of

the

Un

ited

Sta

tes

for

Q4

2015


11

Peak Gold?Bad Idea

Recently,anumberofanalystsandseniorgoldcompanyexecutiveshaveadoptedtheideaofpeakgold.Bythistheyappeartomeanthatgoldproductioncapacitywillsoonpeakandthendecline,justasthemarketseemedtothinkwouldhappentooilacoupleofyearsago.

Theconceptofpeakgoldisanotherexampleoftheconventionalthinkingthatgoldisacommodity.Itisnot.Foracommoditysuchascopperoroil,peakproductionmayhavemeaning.Commoditieshavelimitedabove-groundsupplybecausetheyareconstantlybeingconsumed.Ifproductioncapacityfallswhiledemandremainsstrong,thereisnotmuchslackandthemarketwillsoonbegintoanticipateapossibleshortage,leadingtoahigherpricetoclearthemarket.

Goldhasanabovegroundsupplythatisvergingonsixbillionounces—almostallthegoldevermined.Itishighlyimprobablethattherewilleverbelessgoldavailableforsalethanthereistoday.Ifthegoldminingindustrysuddenlyweretostopproductionentirely,theimpactonthegoldpricewould,inourview,beminimalexceptperhapsforashort-termpsychologicalreaction,nevermindifannualproductionweretofallbyafewpercentagepointsfromsometheoreticalpeak.

Mineproductionincreasestheexistingabovegroundgoldsupplybyabout1.4%peryear.Bycomparison,theLondonmarkettradestheworld’stotalannualgoldproductionabouteveryfourdays.Therateofproductionisessentiallyirrelevant.

The best and highest use of gold is in a vault as real wealth

Norwillthereeverbeashortageofgold.Anyconceivabledemandforgoldcanandwillbemet,withpricebeingthemechanismbringingsupplyanddemandtogether.

Whileweareatthebusinessofdebunkingcommodityanalysis,itshouldbenotedthatgoldappearstobeaso-calledGiffenGood,namedaftertheeconomistRobertGiffen.Contrarytoeconomiclaw,demandforgoldriseswiththeprice,unlikeothergoods,onceagainbecausegoldisnotconsumed.Goldhasamarginalutilityofone.Thesecondgoldcoinbringsjustasmuchimmediatesatisfactionasthefirst,unlikeicecreamconesorsteakdinners.

Finally,thebestandhighestuseofgoldisinavaultasrealwealth.Ifgoldweretodevelopimportantalternativeuses,therewouldbelessofitand,inouropinion,thatwouldalsoresultinamuchlowerprice.Industrialuseswouldcommoditizegoldandsubjectittothelawsofeconomicsubstitutionsimilartosilver.Themarket’sgold-to-silverpriceratiohasbeendecliningforhundredsofyearspreciselybecausesilverhasindustrialuseswhichhavegrownovertime,partiallyeclipsingitsmonetaryvalue.

Afinalwordonpeakproduction:IthasbeenpredictedforanynumberofcommoditiessinceatleastthetimeofMalthusandithasn’tbeentrueyet.Thelongtermpricetrendforcommoditiesinrealtermshasbeendownforcenturiesbecausehumanskeepgettingmoreefficientatproducingthem.

S E A B R I D G E G O L D 2 0 1 5

12

WEIGHTS, MEASURES

WE ALL KNOW WHAT A METER OR A

YARD IS. A KILO (OR A POUND) IS ALSO

STANDARDIZED AND KNOWN. A MINUTE IS

THE SAME ANYWHERE ON EARTH.

Whydowenothaveastandardmeasureforvalue?Untilrecently,wedid—anounceofgold.Itwasthemeasureofwealthallovertheglobeforthousandsofyears.Remarkably,itisstillacceptedeverywhereanditstillhasthesamevalueworld-wide.Butgoldisnolongerusedasameasureofwealth,astandardofvalue,havingbeenpushedtothesideinfavourofpapermoneyissuedbythestateandmandatedasthecurrencyforalltransactions.

Should you store your wealth in a currency whose supply grows exponentially, like this?

& otherConstantsWehavenoproblemwiththestateissuingcurrency,suchasthedollar,forthesettlementoftransactions.Butsocietyhasunwiselydecidedtousethistransactionalcurrencytomeasureandstorewealth.WHY UNWISE? Becausedollarsareapoliticalcreationandthereisnoreliableconstraintoncreatingmoreofthem.Dollarsareusedbythestateandcentralbankstoachievetheirobjectives,suchasstimulatingtheeconomy,bailingoutfoolishdebtors,runningdeficits,influencingexchangeratesandencouragingcertainbehavioursoverothers,whichareincompatiblewiththepreservationofsavingsandwealth.

Source: Board of Governors of the Federal System (U.S.)research.stlouisfed.org

(Bill

ions

ofD

olla

rs)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1985 1990 1995 2000 2005 2010 2015

M2MoneyStock


13

Source: U.S. Bureau of Labor Statisticsresearch.stlouisfed.org

(Inde

x19

82-1

984=

100)

Theproofthatdollarsarenotagoodstoragemediumforwealthistobefoundinthissimplethoughtexperiment.Oneofthemostimportantusesforwealthistoliveinretirement.Howmuchmoneydidyouneedtoretireonin1970?PerhapsU.S.$300,000?Ata7%risk-freeinterestrate,youwouldhavehadthethenprincelyannualincomeof$21,000.Today,youmayneedanincomeofU.S.$60,000toenjoythesamelifestyle.Howmuchwealthdoyouneedtogeneratethatincomeata2%risk-freeinterestrate?ThatwouldbeU.S.$3million.So,46yearslater,youneed10timesmorecapitaltoretireinthesamemanner.Oryoucantakealotmoreriskbyinvestinginhigher-yielddebt,whichmanyarenowforcedtodo.

Thislittleexerciseshowsyouhowpoordollarsareasapreserverofrealwealth.Adollarisnotadollarovertime.WebelievethattheamountofmoneyneededforretirementisabettermeasureofmonetarydebasementthanM2ortheCPI.Incidentally,ifyouhadboughtU.S.$300,000ofgoldin1970,youwouldhaveacquired8,571ounceswhichareworthtodaymorethanU.S.$10million.Hasgoldgoneuporhasthedollargonedown?Wethinkthelatter.

AtSeabridge,wemeasureourcorporateworthinouncesofgold,notdollars.Wemeasureourprogressonbehalfofshareholdersinouncesofgoldresourcesandreservespershare.Wesuggestgoldmayalsobetherightwaytomeasureyourownwealth.Inourview,werequireaconstantformeasuringwealthjustasweneedconstantweightsandmeasuresforthethingswebuy.Itkeepsushonest.

Do you think it is a good idea to store your savings in a currency that suffers ongoing loss of purchasing power like this (below)?

A DOLLAR IS NOT A DOLLAR OVER TIME

60

80

100

120

140

160

180

200

220

240

1985 1990 1995 2000 2005 2010 2015

ConsumerPriceIndexforAllUrbanConsumers:AllItems

S E A B R I D G E G O L D 2 0 1 5

14

* AsofDecember31,2015eachoftheRedMountain,QuartzMountainandCastle/BlackRockprojectsweresubjecttooptionsagreementsunderwhicha100%interestineachsuchprojectmaybeacquiredfromSeabridgebytheoptionee.

Note:UnitedStatesinvestorsarecautionedthattherequirementsandterminologyofNI43-101differsignificantlyfromtherequirementsoftheSEC,includingIndustryGuide7undertheU.S.SecuritiesActof1933.Accordingly,theIssuer’sdisclosuresregardingmineralizationmaynotbecomparabletosimilar informationdisclosedbycompaniessubjecttotheSEC’sIndustryGuide7. MineralResourceswhicharenotMineralReservesdonothavedemonstratedeconomicviability.Inferredresourcesarebasedonlimitedgeologicevidenceandsampling.Itisreasonablyexpectedthatthemajorityofinferredresourcescouldbeupgradedtoindicatedresourceswithcontinuedexploration.

Cut-Off Grade

(g/t)

MEASURED Resources

Gold Copper Silver Molybdenum

Tonnes (000)

Grade (g/t)

Ounces (000)

Grade (%)

Pounds (millions)

Grade (g/t)

Ounces (000)

Grade (ppm)

Pounds (millions)Project

KSM: 0.5Gold

Mitchell Equiv. 724,000 0.65 15,130 0.18 2,872 3.2 74,487 56 89.4CourageousLake 0.83 13,401 2.53 1,090 n/a n/a n/a n/a n/a n/aQuartzMountain* 0.34 3,480 0.98 110 n/a n/a n/a n/a n/a n/aRedMountain* 1.00 1,260 8.01 324 n/a n/a n/a n/a n/a n/aCastle/BlackRock* 0.25 4,120 0.57 75 n/a n/a n/a n/a n/a n/aTotal Measured Resources 16,729 2,872 74,487 89.4

MINERAL RESERVES AND RESOURCESThefollowingtablesprovideabreakdownofSeabridge’smostrecentNationalInstrument43-101compliantestimatesofmineralreservesandresourcesbyproject.Seabridgenotesthatmineralresourcesthatarenotmineralreservesdonothavedemonstratedeconomicviability.

Proven and Probable Mineral Reserves

Mineral Resources(IncludesMineralReservesasStatedAbove)

Project ZoneReserve

CategoryTonnes

(millions)

AVERAGE GRADES Contained Metal

Gold (g/t)

Copper (%)

Silver (g/t )

Moly (ppm)

Gold (million ounces)

Copper (million pounds)

Silver(million ounces)

Moly (million pounds)

KSM

Mitchell Proven 476 0.67 0.17 3.05 60.9 10.3 1,798 47 64Probable 935 0.57 0.16 3.11 50.7 17.2 3,296 93 104

IronCap Probable 193 0.45 0.20 5.32 21.5 2.8 834 33 9Sulphurets Probable 318 0.59 0.22 0.79 50.6 6.0 1,535 8 35Kerr Probable 242 0.24 0.45 1.2 0.0 1.9 2,425 9 0

KSM TotalsProven 476 0.67 0.17 3.05 60.9 10.3 1,798 47 64

Probable 1,688 0.51 0.22 2.65 40.1 27.9 8,090 144 149Total 2,164 0.55 0.21 2.74 44.7 38.2 9,888 191

Courageous LakeProven 12 2.41

n/a n/a n/a1.0

n/a n/a n/aProbable 79 2.17 5.5Total 91 2.20 6.5

Seabridge Totals 44.7 9,888 191 213

213


15

Cut-Off Grade

(g/t)

INDICATED RESOURCES


Tonnes (000)

Grade (g/t)

Ounces (000)

Grade (%)

Pounds (millions)

Grade (g/t)

Ounces (000)

Grade (ppm)


KSM: Mitchell 1,052,900 0.58 19,634 0.16 3,713 3.1 104,940 59 136.9Sulphurets 0.5 370,900 0.59 7,036 0.21 1,717 0.8 9,540 49 40.1Kerr Gold 270,400 0.24 2,086 0.46 2,741 1.1 9,563 n/a n/aIronCap Equiv 361,700 0.44 5,117 0.21 1,674 5.4 62,796 47 37.5KSMTotal 2,055,900 0.51 33,873 0.22 9,845 2.8 186,838 54 214.5CourageousLake 0.83 93,914 2.28 6,884 n/a n/a n/a n/a n/a n/aQuartzMountain* 0.34 54,330 0.91 1,591 n/a n/a n/a n/a n/a n/aRedMountain* 1.00 340 7.04 76 n/a n/a n/a n/a n/a n/aCastle/BlackRock* 0.25 8,260 0.53 140 n/a n/a n/a n/a n/a n/aTotal Indicated Resources 42,564 9,845 186,838 214.5

Cut-Off Grade

(g/t)

MEASURED PLUS INDICATED RESOURCES


Tonnes (000)

Grade (g/t)

Ounces (000)

Grade (%)

Pounds (millions)

Grade (g/t)

Ounces (000)

Grade (ppm)


KSM: Mitchell 1,776,900 0.61 34,764 0.17 6,585 3.1 179,426 58 226.3Sulphurets 0.5 370,900 0.59 7,036 0.21 1,717 0.8 9,540 49 40.1Kerr Gold 270,400 0.24 2,086 0.46 2,741 1.1 9,563 n/a n/aIronCap Equiv 361,700 0.44 5,117 0.21 1,674 5.4 62,796 47 37.5KSMTotal 2,779,900 0.55 49,003 0.21 12,717 2.9 261,325 55 303.8CourageousLake 0.83 107,315 2.31 7,974 n/a n/a n/a n/a n/a n/aQuartzMountain* 0.34 57,810 0.92 1,701 n/a n/a n/a n/a n/a n/aRedMountain* 1.00 1,600 7.78 400 n/a n/a n/a n/a n/a n/aCastle/BlackRock* 0.25 12,380 0.54 215 n/a n/a n/a n/a n/a n/aTotal Measured Plus Indicated Resources 59,293 12,717 261,325 303.8

Cut-Off Grade

(g/t)

INFERRED RESOURCES


Tonnes (000)

Grade (g/t)

Ounces (000)

Grade (%)

Pounds (millions)

Grade (g/t)

Ounces (000)

Grade (ppm)


KSM: Mitchell 567,800 0.44 8,032 0.14 1,752 3.4 62,068 51 63.8Sulphurets 0.5 177,100 0.50 2,847 0.15 585 1.2 6,833 30 11.7Kerr Gold 85,000 0.24 656 0.28 525 0.9 2,460 n/a n/aIronCap Equiv 297,300 0.36 3,441 0.20 1,310 3.9 37,278 60 39.3KSMTotal 1,127,200 0.41 14,976 0.17 4,172 3.0 108,638 50 114.8DeepKerr $24NSR 1,008,200 0.35 11,345 0.53 11,777 2.0 64,829 27 60.0IronCapLowerZone $20NSR 163,800 0.59 3,124 0.27 961 4.2 22,120 15 5.3CourageousLake:FATDepositWalshLake

0.830.60

48,9634,624

2.183.24

3,432482

n/an/a

n/an/a

n/an/a

n/an/a

n/an/a

n/an/a

QuartzMountain* 0.34 44,800 0.72 1,043 n/a n/a n/a n/a n/a n/aRedMountain* 1.00 2,079 3.71 248 n/a n/a n/a n/a n/a n/aCastle/BlackRock* 0.25 7,950 0.37 93 n/a n/a n/a n/a n/a n/aTotal Inferred Resources 31,577 14,457 177,624 167.2

U.S.C

S E A B R I D G E G O L D 2 0 1 5

16

MANAGEMENT’S DISCUSSION AND ANALYSISThefollowingisadiscussionoftheresultsofoperationsandfinancialconditionofSeabridgeGoldInc.anditssubsidiarycompaniesfortheyearsendedDecember31,2015and2014.ThisreportisdatedMarch24,2016andshouldbereadinconjunctionwiththeauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2015and2014,theCompany’sAnnualInformationFormfiledonSEDARatwww.sedar.com,andtheAnnualReportonForm40-FfiledonEDGARatwww.sec.gov/edgar.shtml.OthercorporatedocumentsarealsoavailableonSEDARandEDGARaswellastheCompany’swebsitewww.seabridgegold.net.AstheCompanyhasnooperatingprojectatthistime,itsabilitytocarryoutitsbusinessplanrestswithitsabilitytosellprojectsortosecureequityandotherfinancings.AllamountscontainedinthisdocumentarestatedinCanadiandollarsunlessotherwisedisclosed.

TheaccompanyingconsolidatedfinancialstatementsfortheyearendedDecember31,2015andthecomparativeyearendedDecember31,2014havebeenpreparedbytheCompanyinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard.

Company Overview

SeabridgeGoldInc.isadevelopmentstagecompanyengagedintheacquisitionandexplorationofgoldpropertieslocatedinNorthAmerica.TheCompany’sobjectiveistoprovideitsshareholderswithexceptionalleveragetoarisinggoldprice.TheCompany’sbusinessplanistoincreaseitsgoldouncesinthegroundbutnottogointoproductiononitsown.TheCompanywilleithersellprojectsorparticipateinjointventurestowardsproductionwithmajorminingcompanies.Duringtheperiod1999through2002,whenthepriceofgoldwaslowerthanitistoday,Seabridgeacquired100%interestsineightadvanced-stagegoldprojectssituatedinNorthAmerica.Seabridge’sprincipalprojectsincludetheKerr-Sulphurets-Mitchell(“KSM”)propertylocatedinBritishColumbiaandtheCourageousLakepropertylocatedintheNorthwestTerritories.Seabridge’scommonsharestradeinCanadaontheTorontoStockExchangeunderthesymbol“SEA”andintheUnitedStatesontheNewYorkStockExchangeunderthesymbol“SA”.

selected annual information

SUMMARY OPERATING RESULTS($000’s except per share amounts) 2015 2014 2013

Corporateandadministrativecosts (9,410) (14,091) (11,831)Otherincome-flow-throughshares 2,907 7,489 6,256Gainondispositionofmineralproperties 1,000 2,489 2,006Impairmentofmineralproperties (350) (2,437) –Impairmentofinvestments (891) (1,236) (4,579)Incometaxes (2,700) (5,899) (5,960)Other 378 662 459

Netloss (9,066) (13,023) (13,649)

Basiclosspershare (0.18) (0.27) (0.30)Dilutedlosspershare (0.18) (0.27) (0.30)

SUMMARY BALANCE SHEETS($000’s) 2015 2014 2013

Currentassets 20,134 16,282 33,390Non-currentassets 280,393 262,074 236,987

Totalassets 300,527 278,356 270,377

Currentliabilities 2,373 4,743 8,481Non-currentliabilities 16,170 13,779 8,141Equity 281,984 259,834 253,755

Totalliabilitiesandequity 300,527 278,356 270,377


17

Results of Operations

ThenetlossfortheyearendedDecember31,2015was$9.1millionor$0.18persharecomparedtoanetlossof$13millionor$0.27persharefor2014.

Inboth2015and2014,themostsignificantexpensescontributingtonetlosswerecorporateandadministrativecosts,andinparticular,stock-basedcompensation.Impairmentofinvestmentsandmineralpropertiesandincometaxesalsocontributedtothelossbuttoalesserdegreein2015thaninthecomparativeyear.Offsettingsomeoftheseexpensesweretherecognitionofgainsonthedispositionofmineralpropertiesandotherincomerelatingtotheamortizationofflow-throughsharepremiums,obtainedinfinancingscompletedin2014andthecurrentyear.Theseitemsarediscussedfurther,below.

In2015,corporateandadministrativeexpensesdecreasedsignificantlyfrom$14.1millionin2014to$9.4millioninthecurrentyearrepresentinga33%decline.Themajorityofthedeclineresultedfroma$6.0million(62%)decreaseinnon-cash,stock-basedcompensation.Thefairvalueofstockoptions,grantedin2014,andrestrictedshareunits(RSU),grantedattheendof2013andin2014,wereamortizedoverashorterserviceperiodandthemajorityofthosecostswererecognizedin2014,priortothestartofthecurrentfiscalyear,resultinginahigherexpenseinthecomparativeyear.Cashcompensation,however,increasedfrom$2.5millionin2014,to$3.5millionor40%inthecurrentyear,reflectingtheawardofbonusestomanagementandtheimpactofastrengthenedU.S.versustheCanadiandollaronU.S.denominatedsalaries.OthercorporateandadministrativecostsincreasedmarginallyoverthecomparativeyearastheCompanycontinuedtosourceajointventurepartnerforKSM.Stock-basedcompensationisnotexpectedtoincreasein2016asthefairvalueofunamortizedstock-basedcompensationasatDecember31,2015is$2.5million.

ThefollowingtablesillustratetheCompany’sstockoptionandRSUgrantspositions:

OPTIONS GRANTED ($000’sexceptnumberofoptionsandexerciseprices)

Grant Expensed Remaining Number of Exercise date fair prior Expensed Expensed balance to be options price value to 2014 in 2014 in 2015 expensed

December20,2010 950,000 29.75 12,363 12,082 281 – –June29,2011 50,000 27.39 583 459 124 – –June27,2012 100,000 14.70 839 703 136 – –September11,2012 180,000 17.32 1,749 1,345 404 – –December12,2012 165,000 17.52 1,487 1,019 468 – –March3,2013 705,000 12.60 2,577 1,226 1,335 16 –June5,2013 100,000 12.91 724 257 361 106 –December19,2013 50,000 8.00 239 9 230 – –March24,2014 700,000 10.36 2,959 – 2,959 – –June24,2014 50,000 9.72 223 – 223 – –April27,2015 475,000 9.00 1,414 – – 895 519December21,2015 365,000 11.13 1,959 – – 803 1,156

6,521 1,820 1,675

S E A B R I D G E G O L D 2 0 1 5

18

RSUs GRANTED

(000’sexceptnumberofRSUs) Remaining Number of Grant date Expensed Expensed Cancelled Expensed balance to RSUs fair value in 2013 in 2014 in 2015 in 2015 be expensed

December19,2013 235,000 2,267 84 2,059 (24) 100 –December9,2014 272,500 2,624 – 1,099 – 1,184 341December31,2015 94,000 1,046 – – – 542 504

5,937 84 3,158 (24) 1,826 845

TheCompanyimplementedtheRSUPlaninlate2013andhasgrantedatotalof601,500RSUstocertainnon-director,keymanagementpersonnel.PursuanttothatRSUPlan,theBoardofDirectorshastheauthoritytograntRSUs,andtoestablishtermsoftheRSUsincluding,thevestingcriteriaandthelifeoftheRSU,whichisnottoexceedtwoyears.TheRSUsareexchangedforsharesoftheCompanyuponthevestingcriteriabeingmet.Thefairvalueofthegrants,of$5.9million,wasestimatedaseachgrantdate.Theexpectedserviceperiodsvaryfromonetoeighteenmonthsdependingonthecorporateobjectivesthathaveoraretobemet.

TheCompanyenteredintoanagreementwithIDMMining(“IDM”)in2014tooptiontheCompany’sRedMountainProject.Aspartofthatagreement,IDMhaspaidtheCompany$2millionincashand4,955,500commonsharesofIDM,thefairvalueofwhichwas$2.5million.$1millionandtheshareswerereceivedin2014and$1millionwasreceivedin2015.Thereceiptofcashandshareshasbeenrecordedasagainonthedispositionofmineralpropertiesintheyearofreceipt,asallhistoricalacquisitionandexplorationcostsfortheprojecthadbeenfullyrecoveredthroughpreviousoptionpaymentsandotherrecoveries.Inadditiontotheinitialpaymentsofcashandshares,IDMisobligatedtospend$7.5millionontheRedMountainProjectbetween2014and2017.

In2015,theCompanyrecorded$2.9millionofotherincome(2014-$7.5million),relatedtotwoprivateplacementsofflow-throughsharesitcompletedin2014and2015.In2014theCompanyissued1,150,000flow-throughcommonshares,at$12.00pershare,raisinggrossproceedsof$13.8million.Thepurchasepricerepresenteda29%premiumoverthemarketpriceoftheCompany’ssharesonthatdate.Thepremiumcalculatedatthetimeofthefinancing,of$3.1million,wasrecognizedasaliabilityonthestatementoffinancialpositionandthebalancewasrecordedassharecapital.In2015,theCompanyissued1,610,000flow-throughcommonshares,at$10.17pershare,raisinggrossproceedsof$16.4millionata22%premiumoverthemarketprice.Thepremiumcalculatedatthetimeofthisfinancing,of$3million,wasrecognizedasaliabilityonthestatementoffinancialpositionandthebalancewasrecordedassharecapital.TheCompanycommittedtorenounceitsabilitytodeductqualifyingexplorationexpendituresfortheequivalentvalueofthegrossproceedsofthetwofinancingsandtransferthedeductibilityoftheexpensestothepurchasersoftheflow-throughshares.Theeffectivedateoftherenouncementforthe2014financingwasDecember31,2014andDecember31,2015forthefinancingcompletedin2015.Basedonqualifyingexpendituresmadein2015,$2.9millionofotherincomehasbeenrecognizedinthecurrentyear.Ofthe$2.9million,$0.9millionrelatedtotheremainingpremiumfromthe2014financingand$2millionrelatedtotheamortizationofthe2015premium.


19

Thebalanceofthepremiumrelatedtothefinancingcompletedin2015,of$1million,recordedasaliabilityonthestatementoffinancialpositionasatDecember31,2015,willbeamortizedastheCompanyincursqualifyingexpendituresin2016.

In2015theCompanywasnotifiedthattheremainingoptionononeofitsprojectsinNevada,CastleBlackRock,wouldbeforegone.TheCompanydeterminedthattherecoverabilityofthecarryingcostswasimpairedandchargedthestatementofoperationswiththeremainingcarryingcostof$0.4million.TheCompanychargedthestatementofoperationswithanimpairmentof$2.4millionin2014,relatedtoitsNevadaProjects.AtDecember31,2015,theCompanynolongerhasanycapitalizedmineralpropertyvaluerelatedtotheseprojects.

TheCompanyholdsinvestmentsincommonsharesofseveralminingcompaniesthatwerereceivedasconsiderationforoptionedmineralproperties,andothershort-terminvestments,includingonegoldexchangetradedreceipt.Theseavailableforsalefinancialassetsarerecordedatfairvalueonthestatementsoffinancialposition.In2015,theCompanydeterminedthattherecoverabilityofsomeofitsavailableforsaleinvestmentswereimpairedandrecordeda$0.9million(2014-$1.2million)chargetothestatementofoperations.

DuetothesignificantinfluencetheCompanycanexert,throughrepresentationontheboardofdirectorsandshareownershipofoneinvestmenttheCompanyholds,itisclassifiedasanassociateandaccountedforusingtheequitymethod.In2015theCompanyrecognizeda$0.2milliongain(2014-$0.6millionloss)onthestatementofoperationsforitsproportionateshareofgainsoftheassociate.

In2015,theCompanyrecognizedincometaxexpenseof$2.7million(2014-$5.9million)primarilyrelatedtoadeferredtaxexpensearisingduetotherenouncementofexpendituresrelatedto2014and2015flow-throughshareswhicharecapitalizedforaccountingpurposes,offsetpartiallybyadeferredtaxrecoveryarisingfromthelossinthecurrentyear.

Quarterly Information

SelectedfinancialinformationforthelasteightquartersendingDecember31,2015isasfollows(unaudited):

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter ended ended ended endedQuarterly operating December 31, September 30, June 30, March 31,results ($000’s) 2015 2015 2015 2015Revenue – – – –Lossforperiod (2,373) (2,629) (1,590) (2,474)Basiclosspershare (0.05) (0.05) (0.03) (0.05)Dilutedlosspershare (0.05) (0.05) (0.03) (0.05)

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter ended ended ended endedQuarterly operating December 31, September 30, June 30, March 31,results ($000’s) 2014 2014 2014 2014Revenue – – – –Lossforperiod (3,972) (2,834) (3,775) (2,442)Basiclosspershare (0.08) (0.06) (0.08) (0.05)Dilutedlosspershare (0.08) (0.06) (0.08) (0.05)

Significantactivitiesin2015included:evaluatingtheresultsofthe2014explorationanddrillprogramatKSM;establishingandsupportinganindependentgeotechnicalreviewboard(“IGRB”)toreviewandconsidertheproject’stailingsmanagementfacilityandwaterstoragedam;completingapilotplantevaluationofanewprocessfortheremovalofseleniumfromwatersfromKSM;andcompletingthe2015explorationanddrillingprogramatKSM.

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Mineral Interest Activities

DuringtheyearendedDecember31,2015,theCompanyincurredanaggregateof$18.6millionofexpendituresrelatedtoitsmineralinterestscomparedto$31.7millionin2014.

Inboththecurrentandcomparativeyear,themajorityoftheexpenditureswereincurredontheKSMprojectwheretheCompanyincurred$18millionofcosts(2014-$30.9million).Currentyearspendingincludeddrilling,conductingwatertreatmentpilotplantstudiesandcoordinatingtheworkoftheIGRB.

Resultsfromthe2014KSMdrillprogram,analyzedinearly2015,andthe2015explorationprogramadvancedtheprojectsignificantly.The2015explorationprogramfocusedondrillingtoconfirmthecontinuityofthemineralizedzonebelowtheinferredresourcesatDeepKerrDepositandtodrilltesttheplungeprojectionofthehighergradecentralzoneoftheMitchellDeposit.Eightdrillholeswerecompletedtotalling10,741meters.

The2015drillresultsconfirmedamajorexpansionoftheDeepKerrDepositandculminatedinanupdatedindependentmineralresourceestimate,reportedsubsequenttoDecember31,2015.Theresourceestimatepointstoaninferredresourceof1.01billiontonnesgrading0.53%copperand0.35g/tgold(11.3millionouncesofgoldand11.8billionpoundsofcopper).Thelarge,continuouszoneappearstobeamenabletoblockcavemining.

Drillresultsfrom2015alsopointedtowardasizeableexpansionoftheMitchellDepositatdepth.Thesizeandorientationofthedrillinterceptssupportthepotentialforanexpansionofthecost-effectiveblockcaveoperationplannedforthereservesabovetheintercepts.Theresultsyieldedinterceptsof174maveraging0.55g/tgoldand0.28%coppermorethan200mtothesouthwestofanotherinterceptof167maveraging0.81g/tgoldand0.25%copper,whichappearstobeevidenceofanextensionoftheMitchellcentralzone.Themineralogyandtexturesfromdrillcoresuggestsazoneofhigher-temperatureandfluidflowwhichmightindicatethatbettergradesmaybeinthevicinitybutresultsalsoshowedevidenceoffaultingwhichrequiresfurtheranalysisbeforefurtherdrillingisundertaken.

AtCourageousLake,theCompanyincurred$0.6million(2014-$0.9million)ofcostscompletinganalysisofdrilltargetidentification,fromearliergroundmagneticandverylowfrequencyelectromagneticsurveys,aswellascoststomaintaintheprojectingoodstanding.Limitedworkisplannedfor2016atCourageousLakeastheCompanycontinuestofocusesonadvancingtheKSMProject.

Liquidity and Capital Resources

TheCompany’sworkingcapitalposition,atDecember31,2015,was$17.8million,upfrom$11.5millionatDecember31,2014.Excludingtheflow-throughsharepremium,workingcapitalamountedto$18.7millionatDecember31,2015and$12.5millionatDecember31,2014.Cashandshort-termdepositsatDecember31,2015totaled$15.5millionversus$6.3millionatDecember31,2014.In2015,theCompanyclosedtwofinancings.Aflow-throughprivateplacementfinancingwascompletedinthesecondquarterraisinggrossproceedsof$16.4millionandanon-brokeredprivateplacementfinancingraisinggrossproceedsof$14.6millionwascompletedinthefourthquarter.Bothfinancingssignificantlyincreasedcashandshort-termdepositsandtheCompany’soverallworkingcapital.

OnApril7,2015theCompanyissued1,610,000flow-throughcommonshares,at$10.17pershare,raisinggrossproceedsof$16.4million.Thepurchasepricerepresenteda22%premiumoverthemarketpriceoftheCompany’ssharesonthatdate.Shareissuancecostsof$1.0millionwereincurredinrelationtotheoffering.TheCompanyhascommittedtorenounceitsabilitytodeductqualifyingexplorationexpendituresfortheequivalentvalueofthegrossproceedsofthefinancingsandtransferthedeductibilitytothepurchasersoftheflow-throughshares.AsatDecember31,2015,theCompanyhasaremainingcommitmenttospend$5.5million,in2016,onqualifyingexpenditures.


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OnOctober30,2015,theCompanyissued1,800,000commonsharesoftheCompany,throughanon-brokeredprivateplacement,atapriceof$8.10pershareraisinggrossproceedsof$14.6million.

In2015,theCompanycollected$4.1millionofrefundableprovincialtaxcreditsrelatedtoexplorationexpendituresincurredin2011atKSM.

OnJuly22,2014theCompanyissued1,150,000flow-throughcommonshares,at$12.00pershare,raisinggrossproceedsof$13.8million.Thepurchasepricerepresenteda29%premiumoverthemarketpriceoftheCompany’ssharesonthatdate.TheCompanyhascommittedtorenounceitsabilitytodeductqualifyingexplorationexpendituresfortheequivalentvalueofthegrossproceedsofthefinancingsandtransferthedeductibilitytothepurchasersoftheflow-throughshares.During2014and2015theCompanyincurredthefull$13.8millionofqualifyingexpendituresagainstthecommitment.

DuringtheyearendedDecember31,2015,operatingactivities,includingworkingcapitaladjustments,used$7.4millioncomparedto$4.3millionusedbyoperatingactivitiesin2014.Operatingactivitiesinthenear-termarenotexpectedtodeviatesignificantlyfromcurrentlevels.Expendituresonmineralinterestsof$18.6millionexcludingrecoveriesaredownfromthe$31millionspentin2014whentheCompanycarriedoutanextensiveexplorationanddrillingprogram.Inboth2015and2014,$1.0millionwasreceivedincashaspartialconsiderationforoptionedmineralproperties.Alsoshowingayear-over-yearvariance,theCompanyraised$0.3milliononthedispositionofcertaininvestmentsversus$2.1millioninthecomparativeyear.

TheCompanywillcontinuetoadvanceitstwomajorgoldprojects,KSMandCourageousLake,inordertoeithersellthemorjointventurethemtowardsproductionwithmajorminingcompanies.

Contractual Obligations ($000’s) Payments due by years

Total 2016 2017-18 2019-20 After 2020

Mineralinterests 7,987 793 2,186 2,404 2,604Flow-throughexpenditures 5,451 5,451 – – –Businesspremisesoperatinglease 187 132 55 – –

13,625 6,376 2,241 2,404 2,604

AmountsshownformineralinterestsincludeoptionpaymentsandmineralleasepaymentsthatarerequiredtomaintaintheCompany’sinterestinthemineralprojects.

OutlookFor2016theCompanywillconductafurtherexplorationprogramatKSMthatwillentailanalysisofpreviousdrillingincludingre-loggingtoenhancethecurrentresourcemodelsandtosupporton-goingengineeringandenvironmentalstudies.Pendingfurtherstudyofexplorationresults,theCompanywillestablishwhethera2016drillprogramiswarrantedatKSM.TheCompanyalsoplanstoupdatethe2012pre-feasibilitystudyinmid-2016andtocontinuepermittingactivities.RecentdrillingresultsfromDeepKerrDepositandMitchellDepositandinparticularitscoppermineralizationhasenhancedthepotentialtoattracttheinterestofmajorminingcompaniestoenterintoajointventurearrangementthatwouldallowtheCompanytomovetheprojectclosertowardproduction.WhiletheCompanycontinuestofocusonKSMin2016,limitedexplorationisplannedfortheCourageousLakeproject.

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Internal Controls Over Financial Reporting

TheCompany’smanagementunderthesupervisionoftheChiefExecutiveOfficerandChiefFinancialOfficerareresponsiblefordesigninginternalcontrolsoverfinancialreportingorcausingthemtobedesignedundertheirsupervisioninordertoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithIFRS.Managementisresponsibleforestablishingandmaintainingadequateinternalcontrolsoverfinancialreporting.ManagementevaluatedtheeffectivenessoftheCompany’sinternalcontrolsoverfinancialreportingasofDecember31,2015usingtheCOSOInternalControlIntegratedFramework(2013).BasedonthatevaluationoftheinternalcontrolsatDecember31,2015,managementhasconcludedthattheCompany’sinternalcontrolsandproceduresareappropriatelydesignedandoperatingeffectively.TheregisteredpublicaccountingfirmthatauditedtheCompany’sconsolidatedfinancialstatementshaveissuedtheirattestationreportonmanagement’sassessmentoftheeffectivenessofinternalcontroloverfinancialreportingasofDecember31,2015.

Changes to Internal Controls Over Financial Reporting

TherewasnochangeintheCompany’sinternalcontrolsoverfinancialreportingthatoccurredbetweenOctober1toDecember31,2015thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theCompany’sinternalcontrolsoverfinancialreporting.

Disclosure Controls and Procedures

DisclosurecontrolsandprocedureshavebeendesignedtoprovidereasonableassurancethatallrelevantinformationrequiredtobedisclosedbytheCompanyisaccumulatedandcommunicatedtoseniormanagementasappropriatetoallowtimelydecisionsregardingrequireddisclosure.TheCompany’sChiefExecutiveOfficerandChiefFinancialOfficerhaveconcluded,basedontheirevaluationofthedesignandoperatingeffectivenessofthedisclosurecontrolsandproceduresasofDecember31,2015,areappropriatelydesignedandoperatingeffectively.ThesedisclosurecontrolsandproceduresprovidereasonableassurancethatmaterialinformationismadeknowntothembyotherswithintheCompany.

Limitations of controls and procedures

TheCompany’smanagement,includingthePresidentandChiefExecutiveOfficerandChiefFinancialOfficer,believethatanyinternalcontrolsoverfinancialreportinganddisclosurecontrolsandprocedures,nomatterhowwelldesigned,canhaveinherentlimitations.Therefore,eventhosesystemsdeterminedtobeeffectivecanprovideonlyreasonableassurancethattheobjectivesofthecontrolsystemaremet.

Shares Issued and Outstanding

AtMarch24,2016,theissuedandoutstandingcommonsharesoftheCompanytotaled52,139,626.Inaddition,therewere3,585,000stockoptionsgrantedand183,250RSUsoutstanding.AssumingtheexerciseofalloutstandingoptionsandRSUs,therewouldbe55,907,876commonsharesissuedandoutstanding.


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Related Party TransactionsThefollowingisalistingofcompensationtokeymanagementpersonneloftheCompany:

($000’s) 2015 2014

Compensationofdirectors: Directors’fees 363 316 Services 113 86 Stock-basedcompensation 283 2,375

759 2,777

Compensationofkeymanagementpersonnel:Salariesandconsultingfees 3,107 2,170Stock-basedcompensation 2,138 4,816

5,245 6,986

Totalremunerationofdirectorsandkeymanagementpersonnel 6,004 9,763

Changes in Accounting Standards Not Yet Adopted

NewstandardsandamendmentstostandardsandinterpretationsthatarerelevanttotheCompanyandeffectiveforannualperiodsbeginningonorafterJanuary1,2016,thathavenotbeenappliedinpreparingthesefinancialstatementsare:

IAS 1, Presentation of Financial Statements (“IAS 1”) introducesamendmentstoimprovepresentationanddisclosureinfinancialstatements.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2016.TheCompanyintendstoadopttheseamendmentsinitsfinancialstatementsfortheannualperiodbeginningonJanuary1,2016.TheCompanydoesnotexpecttheamendmentstohaveamaterialimpactonthefinancialstatements.

IFRS 9, Financial Instruments (“IFRS 9”) introducesnewrequirementsforclassificationandmeasurementoffinancialassets,additionalchangestofinancialliabilitiesandanewgeneralhedgeaccountingstandard.ThemandatoryeffectivedateisforannualperiodsbeginningonorafterJanuary1,2018.Earlyadoptionispermittedandthenewstandardmustbeappliedretrospectively,withsomeexceptions.TheCompanydoesnotexpectthestandardwillhaveamaterialimpactonthefinancialstatementsuponadoption.

Amendments to IFRS 11, Joint Operations (“IFRS 11”) requiresbusinesscombinationaccountingtobeappliedtoacquisitionsofinterestsinajointoperationthatconstituteabusinessandapplyprospectivelyforannualperiodsbeginningonorafterJanuary1,2016.TheCompanywilladopttheamendmentstoIFRS11initsfinancialstatementsfortheannualperiodbeginningonJanuary1,2016.TheCompanydoesnotexpecttheamendmentstohaveamaterialimpactonthefinancialstatements.

IFRS 15, Revenue From Contracts with Customers (“IFRS 15”) willreplaceIAS18Revenue,IAS11Constructioncontracts,andsomerevenue-relatedinterpretations.ThenewstandardiseffectiveforannualperiodsbeginningonorafterJanuary1,2018.Earlierapplicationispermitted.Thestandardcontainsasinglemodelthatappliestocontractswithcustomersandtwoapproachestorecognizingrevenueateitherapointintimeorovertime.Themodelfeaturesafive-stepanalysisoftransactionstodeterminewhenandhowmuchrevenueshouldberecognized.Newestimatesandjudgmentalthresholdswereintroduced,which

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mayaffecttheamountand/ortimingofrevenuerecognized.TheCompanyintendstoadoptIFRS15initsfinancialstatementsfortheannualperiodbeginningonJanuary1,2018.TheCompanydoesnotexpectthestandardwillhaveamaterialimpactonthefinancialstatementsuponadoption.

Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assetsstatethatrevenue-basedmethodsofdepreciationcannotbeusedforproperty,plantandequipmentandtheamendmentsinIAS38introducethesuppositionthattheuseofrevenue-basedamortizationmethodsforintangibleassetsisinappropriate.TheCompanywilladopttheamendmentstoIAS16andIAS38initsfinancialstatementsfortheannualperiodbeginningonJanuary1,2016.TheCompanydoesnotexpecttheamendmentswillhaveamaterialimpactonthefinancialstatementsuponadoption.

Critical Accounting Estimates

CriticalaccountingestimatesusedinthepreparationoftheconsolidatedfinancialstatementsincludetheCompany’sestimateofrecoverablevalueofitsmineralpropertiesandrelateddeferredexplorationexpenditures,thevalueofstock-basedcompensation,assetretirementobligationsanddeferredincometax.Alloftheseestimatesinvolveconsiderablejudgmentandare,orcouldbe,affectedbysignificantfactorsthatareoutoftheCompany’scontrol.

Thefactorsaffectingstock-basedcompensationincludeestimatesofwhenstockoptionsandcompensationwarrantsmightbeexercisedandthestockpricevolatility.ThetimingforexerciseofoptionsisoutoftheCompany’scontrolandwilldependuponavarietyoffactors,includingthemarketvalueoftheCompany’ssharesandfinancialobjectivesofthestock-basedinstrumentholders.TheCompanyusedhistoricaldatatodeterminevolatility.However,thefuturevolatilityisuncertain.

Therecoverabilityofthecarryingvalueofmineralpropertiesandassociateddeferredexplorationexpensesisbasedonmarketconditionsforminerals,underlyingmineralresourcesassociatedwiththepropertiesandfuturecoststhatmayberequiredforultimaterealizationthroughminingoperationsorbysale.TheCompanyisinanindustrythatisdependentonanumberoffactorsincludingenvironmental,legalandpoliticalrisks,theexistenceofeconomicallyrecoverablereserves,theabilityoftheCompanyanditssubsidiariestoobtainnecessaryfinancingtocompletethedevelopment,andfutureprofitableproductionortheproceedsofdispositionthereof.

Theprovisionforassetretirementobligationsisthebestestimateofthepresentvalueofthefuturecostsofreclaimingtheenvironmentthathasbeensubjecttodisturbancethroughexplorationactivitiesorhistoricalminingactivities.TheCompanyusesassumptionsandevaluatestechnicalconditionsforeachprojectthathaveinherentuncertainties,includingchangestolawsandpracticesandtochangesinthestatusofthesitefromtime-to-time.Thetimingandcostoftherehabilitationisalsosubjecttouncertainty.Thesechanges,ifany,arerecordedonthestatementoffinancialpositionasincurred.

TheCompanyhasnetassetsinCanadaandtheUnitedStatesandfilescorporatetaxreturnsineach.Deferredtaxliabilitiesareestimatedfortaxthatmaybecomepayableinthefuture.Futurepaymentscouldbemateriallydifferentfromourestimateddeferredtaxliabilities.Wehavedeferredtaxassetsrelatedtonon-capitallossesandotherdeductibletemporarydifferences.Deferredtaxassetsareonlyrecognizedtothedegreethattheysheltertaxliabilitiesorwhenitisprobablethatwewillhaveenoughtaxableincomeinthefuturetorecoverthem.


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Risks and Uncertainties

TherisksanduncertaintiesarediscussedwithintheCompany’smostrecentAnnualInformationFormfiledonSEDARatwww.sedar.com,andtheAnnualReportonForm40-FfiledonEDGARatwww.sec.gov/edgar.shtml.

Forward Looking Statements

Theconsolidatedfinancialstatementsandmanagement’sdiscussionandanalysiscontaincertainforward-lookingstatementsrelatingbutnotlimitedtotheCompany’sexpectations,intentions,plansandbeliefs.Forward-lookinginformationcanoftenbeidentifiedbyforward-lookingwordssuchas“anticipate”,“believe”,“expect”,“goal”,“plan”,“intend”,“estimate”,“may”and“will”orsimilarwordssuggestingfutureoutcomes,orotherexpectations,beliefs,plans,objectives,assumptions,intentionsorstatementsaboutfutureeventsorperformance.Forward-lookinginformationmayincludereserveandresourceestimates,estimatesoffutureproduction,unitcosts,costsofcapitalprojectsandtimingofcommencementofoperations,andisbasedoncurrentexpectationsthatinvolveanumberofbusinessrisksanduncertainties.Factorsthatcouldcauseactualresultstodiffermateriallyfromanyforward-lookingstatementinclude,butarenotlimitedto,failuretoestablishestimatedresourcesandreserves,thegradeandrecoveryoforewhichisminedvaryingfromestimates,capitalandoperatingcostsvaryingsignificantlyfromestimates,delaysinobtainingorfailurestoobtainrequiredgovernmental,environmentalorotherprojectapprovals,inflation,changesinexchangerates,fluctuationsincommodityprices,delaysinthedevelopmentofprojectsandotherfactors.Forward-lookingstatementsaresubjecttorisks,uncertaintiesandotherfactorsthatcouldcauseactualresultstodiffermateriallyfromexpectedresults.

Potentialshareholdersandprospectiveinvestorsshouldbeawarethatthesestatementsaresubjecttoknownandunknownrisks,uncertaintiesandotherfactorsthatcouldcauseactualresultstodiffermateriallyfromthosesuggestedbytheforward-lookingstatements.Shareholdersarecautionednottoplaceunduerelianceonforward-lookinginformation.Byitsnature,forward-lookinginformationinvolvesnumerousassumptions,inherentrisksanduncertainties,bothgeneralandspecific,thatcontributetothepossibilitythatthepredictions,forecasts,projectionsandvariousfutureeventswillnotoccur.TheCompanyundertakesnoobligationtoupdatepubliclyorotherwisereviseanyforward-lookinginformationwhetherasaresultofnewinformation,futureeventsorothersuchfactorswhichaffectthisinformation,exceptasrequiredbylaw.

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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTSTheaccompanyingconsolidatedfinancialstatementshavebeenpreparedbymanagementinaccordancewithInternationalFinancialReportingStandards(IFRS)asissuedbytheInternationalAccountingStandardsBoard.Financialstatementsincludecertainamountsbasedonestimatesandjudgments.WhenanalternativemethodexistsunderIFRS,managementhaschosenapolicyitdeemsmostappropriateinthecircumstancesinordertoensurethattheconsolidatedfinancialstatementsarepresentedfairly,inallmaterialrespects,inaccordancewithIFRS.

TheCompanymaintainsadequatesystemsofinternalcontrols.Suchsystemsaredesignedtoprovidereasonableassurancethattransactionsareproperlyauthorizedandrecorded,theCompany’sassetsareappropriatelyaccountedforandadequatelysafeguardedandthatthefinancialinformationisrelevantandreliable.

TheBoardofDirectorsoftheCompanyisresponsibleforensuringthatmanagementfulfillsitsresponsibilitiesforfinancialreporting,andisultimatelyresponsibleforreviewingandapprovingtheconsolidatedfinancialstatementsandtheaccompanyingmanagement’sdiscussionandanalysis.TheBoardofDirectorscarriesoutthisresponsibilityprincipallythroughitsAuditCommittee.

TheAuditCommitteeisappointedbytheBoardofDirectorsandallofitsmembersarenon-managementdirectors.TheAuditCommitteemeetsperiodicallywithmanagementandtheexternalauditorstodiscussinternalcontrols,auditingmattersandfinancialreportingissues,andtosatisfyitselfthateachpartyisproperlydischargingitsresponsibilities.TheAuditCommitteealsoreviewstheconsolidatedfinancialstatements,management’sdiscussionandanalysis,theexternalauditors’report,examinesthefeesandexpensesforauditservices,andconsiderstheengagementorreappointmentoftheexternalauditors.TheAuditCommitteereportsitsfindingstotheBoardofDirectorsforitsconsiderationwhenapprovingtheconsolidatedfinancialstatementsforissuancetotheshareholders.KPMGLLP,theexternalauditors,havefullandfreeaccesstotheAuditCommittee.

RudiP.Fronk ChristopherJ.ReynoldsChairmanandChiefExecutiveOfficer VicePresident,FinanceandChiefFinancialOfficerMarch24,2016 March24,2016


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INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRMTotheShareholdersandBoardofDirectorsofSeabridgeGoldInc.

WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofSeabridgeGoldInc.,whichcomprisetheconsolidatedstatementsoffinancialpositionasatDecember31,2015andDecember31,2014,theconsolidatedstatementsofoperationsandcomprehensiveloss,changesinshareholders’equityandcashflowsfortheyearsendedDecember31,2015andDecember31,2014,andnotes,comprisingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

Management’s Responsibility for the Consolidated Financial StatementsManagementisresponsibleforthepreparationandfairpresentationoftheseconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard,andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationofconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditors’ ResponsibilityOurresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithCanadiangenerallyacceptedauditingstandardsandthestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheconsolidatedfinancialstatements.Theproceduresselecteddependonourjudgment,includingtheassessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheentity’spreparationandfairpresentationoftheconsolidatedfinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.

Webelievethattheauditevidencewehaveobtainedinourauditsissufficientandappropriatetoprovideabasisforourauditopinion.

OpinionInouropinion,theconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,theconsolidatedfinancialpositionofSeabridgeGoldInc.asatDecember31,2015andDecember31,2014,anditsconsolidatedfinancialperformanceanditsconsolidatedcashflowsfortheyearsthenendedinaccordancewithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard.

Other MatterWealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),SeabridgeGoldInc.’sinternalcontroloverfinancialreportingasofDecember31,2015,basedonthecriteriaestablishedinInternalControl–IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO),andourreportdatedMarch24,2016expressedanunmodified(unqualified)opinionontheeffectivenessofSeabridgeGoldInc.’sinternalcontroloverfinancialreporting.

CharteredProfessionalAccountants,LicensedPublicAccountantsMarch24,2016Toronto,Canada

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTINGTotheShareholdersandBoardofDirectorsofSeabridgeGoldInc.

WehaveauditedSeabridgeGoldInc.’sinternalcontroloverfinancialreportingasofDecember31,2015,basedoncriteriaestablishedinInternalControl–IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).SeabridgeGoldInc.’smanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancialreportingandforitsassessmentoftheeffectivenessofinternalcontroloverfinancialreportingincludedundertheheadingInternalControlsoverFinancialReportinginManagement’sDiscussionandAnalysisfortheyearendedDecember31,2015.OurresponsibilityistoexpressanopinionontheCompany’sinternalcontroloverfinancialreportingbasedonouraudit.

WeconductedourauditinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwasmaintainedinallmaterialrespects.Ourauditincludedobtaininganunderstandingofinternalcontroloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,andtestingandevaluatingthedesignandoperatingeffectivenessofinternalcontrolbasedontheassessedrisk.Ourauditalsoincludedperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.

Acompany’sinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Acompany’sinternalcontroloverfinancialreportingincludesthosepoliciesandproceduresthat(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofthecompany;(2)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsandexpendituresofthecompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsofthecompany;and(3)providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,ordispositionofthecompany’sassetsthatcouldhaveamaterialeffectonthefinancialstatements.

Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.

Inouropinion,SeabridgeGoldInc.maintained,inallmaterialrespects,effectiveinternalcontroloverfinancialreportingasofDecember31,2015,basedoncriteriaestablishedinInternalControl–IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).

Wealsohaveaudited,inaccordancewithCanadiangenerallyacceptedauditingstandardsandthestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),theconsolidatedstatementsoffinancialpositionofSeabridgeGoldInc.asofDecember31,2015andDecember31,2014,andtherelatedconsolidatedstatementsofoperationsandcomprehensiveloss,changesinshareholders’equityandcashflowsfortheyearsendedDecember31,2015andDecember31,2014,andourreportdatedMarch24,2016expressedanunmodified(unqualified)opiniononthoseconsolidatedfinancialstatements.

CharteredProfessionalAccountants,LicensedPublicAccountantsMarch24,2016Toronto,Canada


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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (ExpressedinthousandsofCanadiandollars)

December 31, 2015 December 31, 2014

AssetsCurrent assetsCashandcashequivalents(Note4) 990 256Short-termdeposits(Note4) 14,540 6,037Amountsreceivableandprepaidexpenses(Note5) 565 5,092Investments(Note6) 4,039 4,897

20,134 16,282Non-current assetsMineralinterests(Note7) 278,798 260,521Reclamationdeposits(Note9) 1,595 1,553

Totalnon-currentassets 280,393 262,074

Total assets 300,527 278,356

Liabilities and shareholders’ equityCurrent liabilitiesAccountspayableandaccruedliabilities(Note8) 1,392 3,737Taxespayable - 65Flow-throughsharepremium(Note10) 981 941

2,373 4,743Non-current liabilitiesDeferredincometaxliabilities(Note14) 14,841 12,430Provisionforreclamationliabilities(Note9) 1,329 1,349

Totalnon-currentliabilities 16,170 13,779

Total liabilities 18,543 18,522

Shareholders’ equity (Note 10) 281,984 259,834

Total liabilities and shareholders’ equity 300,527 278,356

Commitments (Note 15)

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:

RudiP.Fronk JayS.LaymanDirector Director

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (ExpressedinthousandsofCanadiandollarsexceptcommonshareandpercommonshareamounts)

2015 2014

Corporateandadministrativeexpenses(Note12) (9,410) (14,091)Gainondispositionofmineralproperties(Note7) 1,000 2,489Otherincome-flow-throughshares(Note10) 2,907 7,489Impairmentofmineralinterests(Note7) (350) (2,437)Impairmentofinvestments(Note6) (891) (1,236)Othergainsoninvestments(Note6) 266 517Interestincome 101 190Financeexpenseandother (20) (20)Foreignexchangegain(loss) 31 (25)

Loss before income taxes (6,366) (7,124)Incometaxexpense(Note14) (2,700) (5,899)

Loss for the year (9,066) (13,023)

Other comprehensive loss, net of income taxes:Reclassificationofpreviouslydeferredgainsonavailableforsaleinvestments - (1,272)Items that may subsequently be reclassified to profit or loss: Unrealizedgainonavailableforsaleinvestments(Note6) 97 166

Totalothercomprehensivegain(loss) 97 (1,106)

Comprehensive loss for the year (8,969) (14,129)

Basic and diluted net loss per Common Share (0.18) (0.27)Basic weighted average number of common shares outstanding 49,825,270 47,655,513



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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(ExpressedinthousandsofCanadiandollarsexceptnumberofshares)

Accumulated other Share Stock-based Contributed comprehensive Total Shares capital compensation surplus Deficit income equity

AsatJanuary1,2015 48,438,876 295,545 29,197 15,061 (80,009) 40 259,834Shareissuance 3,437,500 28,284 – – – – 28,284Shareissuancecosts – (1,101) – – – – (1,101)Stock-basedcompensation – – 3,647 – – – 3,647Shares-RSUs 263,250 2,607 (2,607) – – – –Expiredoptions – – (7,646) 7,646 – – –Deferredtax – 289 – – – – 289Othercomprehensivegain – – – – – 97 97Netlossfortheyear – – – – (9,066) – (9,066)

As at December 31, 2015 52,139,626 325,624 22,591 22,707 (89,075) 137 281,984

AsatJanuary1,2014 47,081,376 283,544 26,818 9,233 (66,986) 1,146 253,755Shareissuance 1,205,000 11,205 – – – – 11,205Shareissuancecosts – (919) – – – – (919)Stock-basedcompensation – – 9,679 – – – 9,679Shares-RSUs 152,500 1,472 (1,472) – – – –Expiredoptions – – (455) 455 – – –Cancelledoptions – – (5,373) 5,373 – – –Deferredtax – 243 – – – – 243Othercomprehensiveloss – – – – – (1,106) (1,106)Netlossfortheyear – – – – (13,023) – (13,023)

AsatDecember31,2014 48,438,876 295,545 29,197 15,061 (80,009) 40 259,834


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CONSOLIDATED STATEMENTS OF CASH FLOWS(ExpressedinthousandsofCanadiandollars) 2015 2014

Operating activitiesNetloss (9,066) (13,023)Itemsnotaffectingcash: Impairmentofmineralinterest 350 2,437 Gainondispositionofmineralproperties (1,000) (2,489) Stock-basedcompensation 3,647 9,679 Otherincome–flow-throughshares (2,907) (7,489) Impairmentofinvestments 891 1,236 Othergainoninvestments (300) (517) Incometaxexpense 2,700 5,899 Financeexpenseandother 20 20 Taxespaid (58) (1,219)Changesinnon-cashworkingcapitalitems: Amountsreceivableandprepaidexpenses 408 (253) Accountspayableandaccruedliabilities (2,111) 1,465

Net cash used in operating activities (7,426) (4,254)

Investing activitiesMineralinterests (18,602) (30,988)Mineralexplorationtaxcredits 4,119 4,435Purchaseofshort-termdeposits (30,000) (12,000)Redemptionofshort-termdeposits 21,497 26,054Dispositionofmineralinterests 1,000 1,000Cashproceedsfromsaleofinvestments 294 2,065

Net cash used in investing activities (21,692) (9,434)

Financing activitiesIssueofsharecapital(netoftransactioncosts) 29,852 12,881

Net increase (decrease) in cash and cash equivalents during the year 734 (807)Cash and cash equivalents, beginning of the year 256 1,063

Cash and cash equivalents, end of the year 990 256



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFortheyearsendedDecember31,2015and2014

1. Reporting entity

SeabridgeGoldInc.iscomprisedofSeabridgeGoldInc.(“Seabridge”orthe“Company”)anditssubsidiaries(SeabridgeGold(NWT)Inc.andSeabridgeGoldCorp.)andisacompanyengagedintheacquisitionandexplorationofgoldpropertieslocatedinNorthAmerica.TheCompanywasincorporatedunderthelawsofBritishColumbia,Canada,onSeptember4,1979,andcontinuedunderthelawsofCanadaonOctober31,2002.ItscommonsharesarelistedontheTorontoStockExchangetradingunderthesymbol“SEA”andontheNewYorkStockExchangeunderthesymbol“SA”.TheCompanyisdomiciledinCanada,theaddressofitsregisteredofficeis10thFloor,595HoweStreet,Vancouver,BritishColumbia,CanadaV6C2T5,andtheaddressofitscorporateofficeis106FrontStreetEast,4thFloor,Toronto,Ontario,CanadaM5A1E1.

2. Statement of compliance and basis of presentation

TheseconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”).ThesefinancialstatementswereauthorizedforissuancebytheBoardofDirectorsoftheCompanyonMarch24,2016.

3. SIGNIFICANT ACCOUNTING POLICIES

Thesignificantaccountingpoliciesusedinthepreparationoftheseconsolidatedfinancialstatementsaredescribedbelow.

(a) Basis of measurementTheconsolidatedfinancialstatementshavebeenpreparedonthehistoricalcostbasis,exceptforavailableforsalefinancialassets,otherassetsatfairvaluethroughprofitandlossandstockbasedcompensation,whicharemeasuredatfairvalue.

(b) Basis of consolidation - Subsidiaries SubsidiariesareentitiesoverwhichtheCompanyhascontrol.ControloveranentityexistswhentheCompanyisexposedorhasrightstoreturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.SubsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheCompany.Theyaredeconsolidatedfromthedateonwhichcontrolceases.

Businessacquisitionsareaccountedforusingtheacquisitionmethodwherebyacquiredassetsandliabilitiesarerecordedatfairvalueasofthedateofacquisitionwiththeexcessofthepurchaseconsiderationoversuchfairvaluebeingrecordedasgoodwillandallocatedtocashgeneratingunits.Non-controllinginterestinanacquisitionmaybemeasuredateitherfairvalueoratthenon-controllinginterest’sproportionateshareofthefairvalueoftheacquiree’snetidentifiableassets.

Ifthefairvalueofthenetassetsacquiredexceedsthepurchaseconsideration,thedifferenceisrecognizedimmediatelyasagainintheconsolidatedstatementofoperationsandcomprehensiveloss.

Whereabusinesscombinationisachievedinstages,previouslyheldequityinterestsintheacquireearere-measuredatacquisition-datefairvalueandanyresultinggainorlossisrecognizedintheconsolidatedstatementofoperationsandcomprehensiveloss.Acquisitionrelatedcostsareexpensedduringtheperiodinwhichtheyareincurred,exceptforthecostofdebtorequityinstrumentsissuedinrelationtotheacquisitionwhichisincludedinthecarryingamountoftherelatedinstrument.Certainfairvaluesmaybeestimatedattheacquisitiondatependingconfirmationorcompletionofthevaluationprocess.Whereprovisionalvaluesareusedinaccountingforabusinesscombination,theymaybeadjustedretrospectivelyinsubsequentperiods.However,themeasurementperiodwillnotexceedoneyearfromtheacquisitiondate.

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(c) Associates AnassociateisanentityoverwhichtheCompanyhassignificantinfluencebutnotcontrolandonethatisneitherasubsidiarynoraninterestinajointarrangement.SignificantinfluenceispresumedtoexistwheretheCompanyhasbetween20%and50%ofthevotingrights,butcanalsoarisewheretheCompanyhaslessthan20%ifinfluenceisexertedoverpolicydecisionsthataffecttheentity.TheCompany’sshareofthenetassetsandnetincomeorlossofassociatesisaccountedforintheconsolidatedfinancialstatementsusingtheequitymethodofaccounting.

(d) Translation of foreign currencies TheseconsolidatedfinancialstatementsarepresentedinCanadiandollars,whichistheCompany’s,andeachofitssubsidiary’s,functionalcurrency.

ForeigncurrencytransactionsaretranslatedintoCanadiandollarsusingtheexchangeratesprevailingatthedatesofthetransactionsorvaluationwhereitemsarere-measured.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsarerecognizedintheconsolidatedstatementofoperationsandcomprehensiveloss.

MonetaryassetsandliabilitiesoftheCompanydenominatedinaforeigncurrencyaretranslatedintoCanadiandollarsattherateofexchangeatthestatementoffinancialpositiondate.Non-monetaryassetsandliabilitiesaretranslatedathistoricalrates.Revenuesandexpensesaretranslatedataverageexchangeratesprevailingduringtheperiod.Exchangegainsandlossesareincludedinthedeterminationofprofitorlossfortheyear.

(e) Critical accounting judgments and estimation uncertainty InapplyingtheCompany’saccountingpoliciesinconformitywithIFRS,managementisrequiredtomakejudgments,estimatesandassumptionsaboutthecarryingamountsofcertainassetsandliabilities.Theseestimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Actualresultsmaydifferfromtheseestimates.

(i) CRITICAL ACCOUNTING JUDGMENTS

Thefollowingarethecriticaljudgments,thattheCompanyhasmadeintheprocessofapplyingtheCompany’saccountingpoliciesandthathavethemostsignificanteffectontheamountsrecognizedintheconsolidatedfinancialstatements(refertoappropriateaccountingpoliciesfordetails).

(a)Mineralreservesandresources

Tocalculatereservesandresources,theCompanyusesassumptionsandevaluatestechnical,economicandgeologicalconditionsforeachorebody.Measuredgradeoftheoreanditsmetallurgycanhaveasignificanteffectonthecarryingvalueofmineralpropertiesandthereforetherecoverabilityofcosts.Futuremarketpricesforgoldandcopperandothercommoditiesarealsofactoredintovaluationmodels.Changestothesefactorscanaffecttherecoverabilityofmineralpropertiesandimpairmentthereto.

(b)Impairmentofassets

WhentherehasbeenadeclineinthefairvalueofaninvestmentinmarketablesecuritiesthattheCompanyhasjudgedtobesignificantorprolonged,theinvestmentiswrittendowntofairvalueandthelossisrecognizedinthestatementofoperationsandcomprehensiveloss.Formineralproperties,shouldtheCompanydecidetoproceedwithdevelopmentinrespectofaparticularareaofinterest,therelevantexplorationandevaluationassetistestedforimpairmentatthattime.


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(ii) KEY SOURCES OF ESTIMATION UNCERTAINTY

(a)Mineralproperties

Therecoverabilityofthecarryingvalueofmineralpropertiesandassociateddeferredexplorationexpensesisbasedonmarketconditionsforminerals,underlyingmineralresourcesassociatedwiththepropertiesandfuturecoststhatmayberequiredforultimaterealizationthroughminingoperationsorbysale.TheCompanyisinanindustrythatisdependentonanumberoffactorsincludingenvironmental,legalandpoliticalrisks,theexistenceofeconomicallyrecoverablereserves,theabilityoftheCompanyanditssubsidiariestoobtainnecessaryfinancingtocompletethedevelopment,andfutureprofitableproductionortheproceedsofdispositionthereof.

(b)Assetretirementobligations

Theprovisionforassetretirementobligationsisthebestestimateofthepresentvalueofthefuturecostsofreclaimingtheenvironmentthathasbeensubjecttodisturbancethroughexplorationactivitiesorhistoricalminingactivities.TheCompanyusesassumptionsandevaluatestechnicalconditionsforeachprojectthathaveinherentuncertainties,includingchangestolawsandpracticesandtochangesinthestatusofthesitefromtime-to-time.Thetimingandcostoftherehabilitationisalsosubjecttouncertainty.Thesechanges,ifany,arerecordedonthestatementoffinancialpositionasincurred.

(c)Share-basedpayments

Thefactorsaffectingstock-basedcompensationincludeestimatesofwhenstockoptionsandrestrictedshareunitsmightbeexercisedandsharepricevolatility.ThetimingforexerciseofoptionsisoutoftheCompany’scontrolandwilldependuponavarietyoffactors,includingthemarketvalueoftheCompany’ssharesandfinancialobjectivesoftheshare-basedinstrumentholders.TheCompanyusedhistoricaldatatodeterminevolatilityinaccordancewiththeBlack-Scholesmodel.However,thefuturevolatilityisuncertainandthemodelhasitslimitations.

(d)Deferredincometaxes

TheCompanyhasnetassetsinCanadaandtheUnitedStatesandfilescorporatetaxreturnsineach.Deferredtaxliabilitiesareestimatedfortaxthatmaybecomepayableinthefuture.Futurepaymentscouldbemateriallydifferentfromourestimateddeferredtaxliabilities.Wehavedeferredtaxassetsrelatedtonon-capitallossesandotherdeductibletemporarydifferences.Deferredtaxassetsareonlyrecognizedtothedegreethatitshelterstaxliabilitiesorwhenitisprobablethattherewillbesufficienttaxableincomeinthefuturetorecoverthem.

(f) Cash and cash equivalents and short-term deposits Cashandcashequivalentsandshort-termdepositsconsistofbalanceswithbanksandinvestmentsinmoneymarketinstruments.Theseinstrumentsarecarriedatfairvaluethroughprofitorloss.Cashandcashequivalentsconsistofinvestmentswithmaturitiesofupto90daysatthedateofpurchase.Short-termdepositsconsistofinvestmentswithmaturitiesfrom91daystooneyearatthedateofpurchase.

(g) InvestmentsInvestmentsinmarketablesecuritiesaccountedforasavailable-for-salesecuritiesarerecordedatfairvalue.Thefairvaluesoftheinvestmentsaredeterminedbasedontheclosingpricesreportedonrecognizedsecuritiesexchangesandover-the-countermarkets.Suchindividualmarketvaluesdonotnecessarilyrepresenttherealizablevalueofthetotalholdingofanysecurity,whichmaybemoreorlessthanthatindicatedbymarketquotations.Increasesordecreasesinthemarketvalueofinvestmentsarerecordedinothercomprehensiveincomenetofrelatedincometaxes.Whentherehasbeenalossinthevalueofaninvestmentinmarketablesecuritiesthatisdeterminedtobesignificantorprolonged,theinvestmentiswrittendownandthelossisrecordedinthestatementofoperationsandcomprehensiveloss.

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(h) Mineral interests Mineralresourcepropertiesarecarriedatcost.TheCompanyconsidersexplorationanddevelopmentcostsandexpenditurestohavethecharacteristicsofproperty,plantandequipmentand,assuch,theCompanycapitalizesallexplorationcosts,whichincludelicenseacquisitioncosts,advanceroyalties,holdingcosts,fieldexplorationandfieldsupervisorycostsandallcostsassociatedwithexplorationandevaluationactivitiesrelatingtospecificpropertiesasincurred,untilthosepropertiesaredeterminedtobeeconomicallyviableformineralproduction.Generalandadministrativecostsareonlyincludedinthemeasurementofexplorationandevaluationcostswheretheyarerelateddirectlytoactivitiesinaparticularareaofinterest.Thefairvalueofanyrecoveriesfromthedispositionoroptioningofamineralpropertyiscreditedtothecarryingvalueofmineralproperties.

Onceaprojecthasbeenestablishedascommerciallyviableandtechnicallyfeasible,relateddevelopmentexpendituresarecapitalized.Thisincludescostsincurredinpreparingthesiteforminingoperations.Capitalizationceaseswhenthemineiscapableofcommercialoperations.

TheactualrecoveryvalueofcapitalizedexpendituresformineralpropertiesanddeferredexplorationcostswillbecontingentuponthediscoveryofeconomicallyviablereservesandtheCompany’sfinancialabilityatthattimetofullyexploitthesepropertiesordetermineasuitableplanofdisposition.

Whenadecisionismadetoproceedwithdevelopmentinrespectofaparticularareaofinterest,therelevantexplorationandevaluationassetistestedforimpairment,reclassifiedtodevelopmentproperties,andthenamortizedoverthelifeofthereservesassociatedwiththeareaofinterestonceminingoperationshavecommenced.

(i) Property and equipmentPropertyandequipmentarestatedatcost,lessaccumulateddepreciationandaccumulatedimpairmentlosses.Thecostofpropertyandequipmentcomprisesitspurchaseprice,anycostsdirectlyattributabletobringingtheassettothelocationandconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagementandtheestimatedclosureandrestorationcostsassociatedwiththeasset.Depreciationisprovidedusingthestraight-linemethodatanannualrateof20%fromthedateofacquisition.Residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachstatementoffinancialpositiondate.Changestotheestimatedresidualvaluesorusefullivesareaccountedforprospectively.

(j) Impairment of non-financial assetsThecarryingvalueoftheCompany’smineralinterestsisassessedforimpairmentwhenindicatorsofsuchimpairmentexist.Ifanyindicationofimpairmentexists,anestimateoftheasset’srecoverableamountiscalculatedtodeterminetheextentoftheimpairmentloss,ifany.Therecoverableamountisdeterminedasthehigherofthefairvaluelesscoststosellfortheassetandtheasset’svalueinuse.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetforwhichtheestimatesoffuturecashflowshavenotbeenadjusted.

Impairmentisdeterminedonanassetbyassetbasis,wheneverpossible.Ifitisnotpossibletodetermineimpairmentonanindividualassetbasis,thenimpairmentisconsideredonthebasisofacashgeneratingunit(“CGU”).CGUsrepresentthelowestlevelforwhichthereareseparatelyidentifiablecashinflowsthatarelargelyindependentofthecashflowsfromotherassetsorothergroupofassets.

Ifthecarryingamountoftheassetexceedsitsrecoverableamount,theassetisimpairedandanimpairmentlossischargedimmediatelytocomprehensivelosswithinthestatementofoperationsandcomprehensivelosssoastoreducethecarryingamounttoitsrecoverableamount.


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Anassessmentismadeateachreportingdateastowhetherthereisanyindicationthatpreviouslyrecognizedimpairmentlossesmaynolongerexistormayhavedecreased.Ifsuchindicationexists,theCompanymakesanestimateoftherecoverableamount.

Apreviouslyrecognizedimpairmentlossisreversedonlyiftherehasbeenachangeintheestimatesusedtodeterminetheasset’srecoverableamountsincethelastimpairmentlosswasrecognized.Ifthisisthecase,thecarryingamountoftheassetisincreasedtoitsrecoverableamount.Theincreasedamountcannotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedfortheassetinprioryears.Suchreversalisrecognizedinthestatementofoperationsandcomprehensiveloss.

(k) Reclamation liabilitiesProvisionsforenvironmentalrestorationarerecognizedwhen:(i)theCompanyhasapresentlegalorconstructiveobligationasaresultofpastexploration,developmentorproductionevents;(ii)itisprobablethatanoutflowofresourceswillberequiredtosettletheobligation;(iii)andtheamountcanbereliablyestimated.Provisionsdonotincludeanyadditionalobligationswhichareexpectedtoarisefromfuturedisturbance.

Costsareestimatedonthebasisofaformalreportandaresubjecttoregularreview.

Provisionsaremeasuredatthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligationincorporatingrisksspecifictotheobligationusingapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoney.Whenestimatesofobligationsarerevised,thepresentvalueofthechangesinobligationsisrecordedintheperiodbyachangeintheobligationamountandacorrespondingadjustmenttothemineralinterestasset.

Theamortizationor‘unwinding’ofthediscountappliedinestablishingthenetpresentvalueofprovisionsduetothepassageoftimeischargedtothestatementofoperationsandcomprehensivelossineachaccountingperiod.

Theultimatecostofenvironmentalremediationisuncertainandcostestimatescanvaryinresponsetomanyfactorsincludingchangestotherelevantlegalrequirements,theemergenceofnewrestorationtechniquesorexperienceatotherminesites.Theexpectedtimingofexpenditurecanalsochange,forexampleinresponsetochangesinorereservesorproductionrates.Asaresulttherecouldbesignificantadjustmentstotheprovisionsforrestorationandenvironmentalcleanup,whichwouldaffectfuturefinancialresults.

Fundsondepositwiththirdpartiesprovidedassecurityforfuturereclamationcostsareincludedinreclamationdepositsonthestatementoffinancialposition.

(l) Income taxesIncometaxexpensecomprisescurrentanddeferredtax.Currentanddeferredtaxarerecognizedinprofitorlossexcepttotheextentthatitrelatestoabusinesscombinationoritemsrecognizeddirectlyinequity.

Currenttaxistheexpectedtaxpayableonthetaxableincomefortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.

Deferredtaxisrecognizedusingtheassetandliabilitymethod,providingfortemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.

Deferredtaxismeasuredattheratesthatareexpectedtobeappliedtotemporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantiallyenactedbythereportingdate.Deferredtaxisnotrecognizedforthefollowingtemporarydifferences;theinitialrecognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombinationandthataffectsneitheraccountingnortaxableprofitorloss,anddifferencesrelatingtoinvestmentsinsubsidiariesandjointlycontrolledentitiestotheextentthatitisprobablethattheywillnotreverseintheforeseeablefuture.Inaddition,deferredtaxisnotrecognizedfortaxabletemporarydifferencesarisingontheinitialrecognitionofgoodwillwhichisnotdeductiblefortaxpurposes.

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Adeferredtaxassetisrecognizedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheassetcanbeutilized.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealized.

TheCompanyhascertainnon-monetaryassetsandliabilitiesforwhichthetaxreportingcurrencyisdifferentfromitsfunctionalcurrency.Anytranslationgainsorlossesontheremeasurementoftheseitemsatcurrentexchangeratesversushistoricexchangeratesthatgiverisetoatemporarydifferenceisrecordedasadeferredtaxassetorliability.

(m) Stock-based compensation (options and restricted share units)TheCompanyappliesthefairvaluemethodforstock-basedcompensationandotherstock-basedpayments.ThefairvalueofoptionsisvaluedusingtheBlackScholesoption-pricingmodelandothermodelsforthetwo-tieredoptionsandrestrictedshareunitsasmaybeappropriate.Thegrantdatefairvalueofstock-basedpaymentawardsgrantedtoemployeesisrecognizedasanemployeeexpense,withacorrespondingincreaseinequity,overtheperiodthattheemployeesunconditionallybecomeentitledtotheawards.Theamountrecognizedasanexpenseisadjustedtoreflectthenumberofawardsforwhichtherelatedserviceandnon-marketvestingconditionsareexpectedtobemet,suchthattheamountultimatelyrecognizedasanexpenseisbasedonthenumberofawardsthatdomeettherelatedserviceandnon-marketperformanceconditionsatthevestingdate(Note10).TheCompanyreviewsestimatedforfeituresofoptionsonanongoingbasis.

(n) Flow-through sharesTheCompanyfinancesaportionofitsexplorationactivitiesthroughtheissuanceofflow-throughcommonshares.Thetaxdeductibilityofqualifyingexpendituresistransferredtotheinvestorpurchasingtheshares.ConsiderationforthetransferreddeductibilityofthequalifyingexpendituresisoftenpaidthroughapremiumpriceoverthemarketpriceoftheCompany’sshares.TheCompanyreportsthispremiumasaliabilityonthestatementoffinancialpositionandthebalanceisreportedassharecapital.Ateachreportingperiod,andasqualifyingexpenditureshavebeenincurred,theliabilityisreducedonaproportionatebasisandincomeisrecognizedinthestatementofoperationsandcomprehensiveloss.

(o) Net profit (loss) per common shareBasicprofit(loss)percommonshareiscomputedbasedontheweightedaveragenumberofcommonsharesoutstandingduringtheyear.TheCompanyusesthetreasurystockmethodforcalculatingdilutedearningspersharewhichassumesthatstockoptionsandRSUswithanexercisepricelowerthantheaveragequotedmarketpricewereexercisedatthelaterofthebeginningoftheyear,ortimeofissue.StockoptionswithanexercisepricegreaterthantheaveragequotedmarketpriceofthecommonsharesandRSUsarenotincludedinthecalculationofdilutedprofitpershareastheeffectisanti-dilutive.

(p) Financial assets and liabilitiesFinancialassetswithinthescopeofIAS39areclassifiedaseitherfinancialassetsatfairvaluethroughprofitorloss,loansandreceivables,held-to-maturityinvestmentsoravailable-for-salefinancialassets,asappropriate.Whenfinancialassetsarerecognizedinitially,theyaremeasuredatfairvalue,plus,inthecaseoffinancialassetsnotatfairvaluethroughprofitorloss,directlyattributabletransactioncosts.TheCompanydeterminestheclassificationofitsfinancialassetsatinitialrecognitionand,whereallowedandappropriate,re-evaluatesthisdesignationateachfinancialyear-end.

TheCompany’sfinancialinstrumentsarecomprisedofthefollowing:

Financial assets: Classification:

Cashandcashequivalents FairvaluethroughprofitorlossShort-termdeposits FairvaluethroughprofitorlossAmountsreceivable LoansandreceivablesInvestments Availableforsale

Financial liabilities: Classification:

Accountspayableandotherliabilities Otherfinancialliabilities


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(i) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financialassetsatfairvaluethroughprofitorlossincludefinancialassetsheldfortradingandfinancialassetsdesignateduponinitialrecognitionasfairvaluethroughprofitorloss.

(ii) LOANS AND RECEIVABLES

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket,donotqualifyastradingassetsandhavenotbeendesignatedaseitherfairvaluethroughprofitorlossoravailableforsale.Afterinitialmeasurement,loansandreceivablesaresubsequentlymeasuredatamortizedcostusingtheeffectiveinterestmethodlessanyallowanceforimpairment.Amortizedcostiscalculatedtakingintoaccountanydiscountorpremiumonacquisitionandincludesfeesthatareanintegralpartoftheeffectiveinterestrateandtransactioncosts.Gainsandlossesarerecognizedintheconsolidatedstatementofoperationswhentheloansandreceivablesarederecognizedorimpaired,aswellasthroughtheamortizationprocess.

(iii) AVAILABLE FOR SALE INVESTMENTS

Financialassetsclassifiedasavailable-for-salearemeasuredatfairvalue,withchangesinfairvaluesrecognizedinothercomprehensiveincome,exceptwhenthereisobjectiveevidencethattheassetisimpaired,atwhichpointthecumulativelossthathadbeenpreviouslyrecognizedinothercomprehensiveincomeisrecognizedwithintheconsolidatedstatementofoperationsandcomprehensiveloss.

(iv) FAIR VALUE

Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Thefairvaluehierarchyestablishesthreelevelstoclassifytheinputstovaluationtechniquesusedtomeasurefairvalue.

(v) IMPAIRMENT OF FINANCIAL ASSETS

Financialassetsareassessedforindicatorsofimpairmentateachfinancialreportingdate.Financialassetsareimpairedwherethereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionofthefinancialasset,theestimatedfuturecashflowsoftheinstrumenthavebeenimpacted.Evidenceofimpairmentcouldinclude:

• significantfinancialdifficultyoftheissuerorcounterparty;or • defaultordelinquencyininterestorprincipalpayments;or • itbecomingprobablethattheborrowerwillenterbankruptcyorfinancialre-organization.

Thecarryingamountofthefinancialassetisreducedbytheimpairmentlossdirectlyforallfinancialassetswiththeexceptionofamountsreceivable,wherethecarryingamountisreducedthroughtheuseofanallowanceaccount.Whenanamountreceivableisconsidereduncollectible,itiswrittenoffagainsttheallowanceaccount.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainsttheallowanceaccount.Changesinthecarryingamountoftheallowanceaccountarerecognizedinprofitorloss.If,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognized,thepreviouslyrecognizedimpairmentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountoftheinvestmentatthedatetheimpairmentreverseddoesnotexceedwhattheamortizedcostwouldhavebeenhadtheimpairmentnotbeenrecognized.Inthecaseofanimpairmentlossreversalbeingrecordedforavailable-for-salemarketablesecurities,thereversalisrecordedinothercomprehensiveincome.

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(q) New accounting standards not yet adoptedNewstandardsandamendmentstostandardsthatarerelevanttotheCompanyandeffectiveforannualperiodsbeginningonorafterJanuary1,2016,thathavenotbeenappliedinpreparingtheseconsolidatedfinancialstatementsare:

IAS1,Presentation of Financial Statements (“IAS 1”)introducesamendmentstoimprovepresentationanddisclosureinfinancialstatements.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2016.TheCompanyintendstoadopttheseamendmentsinitsfinancialstatementsfortheannualperiodbeginningonJanuary1,2016.TheCompanydoesnotexpecttheamendmentstohaveamaterialimpactonthefinancialstatements.

IFRS9,Financial Instruments (“IFRS 9”) introducesnewrequirementsforclassificationandmeasurementoffinancialassets,additionalchangestofinancialliabilitiesandanewgeneralhedgeaccountingstandard.ThemandatoryeffectivedateisforannualperiodsbeginningonorafterJanuary1,2018.Earlyadoptionispermittedandthenewstandardmustbeappliedretrospectively,withsomeexceptions.TheCompanydoesnotexpectthestandardwillhaveamaterialimpactonthefinancialstatementsuponadoption.

AmendmentstoIFRS11, Joint Operations (“IFRS 11”)requiresbusinesscombinationaccountingtobeappliedtoacquisitionsofinterestsinajointoperationthatconstituteabusinessandapplyprospectivelyforannualperiodsbeginningonorafterJanuary1,2016.TheCompanywilladopttheamendmentstoIFRS11initsfinancialstatementsfortheannualperiodbeginningonJanuary1,2016.TheCompanydoesnotexpecttheamendmentstohaveamaterialimpactonthefinancialstatements.

IFRS15,Revenue From Contracts with Customers (“IFRS 15”) willreplaceIAS18Revenue,IAS11Constructioncontracts,andsomerevenue-relatedinterpretations.ThenewstandardiseffectiveforannualperiodsbeginningonorafterJanuary1,2018.Earlierapplicationispermitted.Thestandardcontainsasinglemodelthatappliestocontractswithcustomersandtwoapproachestorecognizingrevenueateitherapointintimeorovertime.Themodelfeaturesafive-stepanalysisoftransactionstodeterminewhenandhowmuchrevenueshouldberecognized.Newestimatesandjudgmentalthresholdswereintroduced,whichmayaffecttheamountand/ortimingofrevenuerecognized.TheCompanyintendstoadoptIFRS15initsfinancialstatementsfortheannualperiodbeginningonJanuary1,2018.TheCompanydoesnotexpectthestandardwillhaveamaterialimpactonthefinancialstatementsuponadoption.

AmendmentstoIAS16Property, Plant and Equipment and IAS 38IntangibleAssetsstatethatrevenue-basedmethodsofdepreciationcannotbeusedforproperty,plantandequipmentandtheamendmentsinIAS38introducethesuppositionthattheuseofrevenue-basedamortizationmethodsforintangibleassetsisinappropriate.TheCompanywilladopttheamendmentstoIAS16andIAS38initsfinancialstatementsfortheannualperiodbeginningonJanuary1,2016.TheCompanydoesnotexpecttheamendmentswillhaveamaterialimpactonthefinancialstatementsuponadoption.

4. Cash and cash equivalents and short-term deposits

($000’s) December 31, 2015 December 31, 2014

Cashandcashequivalents 990 256Short-termdeposits 14,540 6,037

15,530 6,293

Short-termdepositsconsistofCanadianScheduleIbankguaranteednoteswithtermsfrom91daysuptooneyearbutarecashableinwholeorinpartwithinterestatanytimetomaturity.AllofthecashandcashequivalentsareheldinaCanadianScheduleIbank.


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5. Amounts receivable and prepaid expenses


Provincialtaxcredits - 4,246HST 249 389Prepaidexpenses 316 229Otherreceivables - 228

565 5,092

6. investments

Compre- January 1, Acqui- Dispo- Gain on Gain (loss) of Impair- hensive Dec 31, ($000’s) 2015 sitions sitions Disposition associates ment gain 2015

Available-for-saleinvestments 3,246 - (294) 28 - (346) 97 2,731Investmentsinassociates 1,651 - - - 202 (545) - 1,308

4,897 - (294) 28 202 (891) 97 4,039

Gain on Compre- January 1, Acqui- Dispo- Reclas- Gain (loss) of Impair- hensive Dec 31, ($000’s) 2014 sitions sitions sification associates ment loss 2014

Available-for-saleinvestments 5,179 1,581 (2,082) 1,144 (403) (1,067) (1,106) 3,246Investmentsinassociates 1,924 103 - - (207) (169) - 1,651

7,103 1,684 (2,082) 1,144 (610) (1,236) (1,106) 4,897

TheCompanyholdscommonsharesofseveralminingcompaniesthatwerereceivedasconsiderationforoptionedmineralpropertiesandothershort-terminvestments,includingonegoldexchangetradedreceipt.Theseavailable-for-salefinancialassetsarerecordedatfairvalueof$2.7million(2014-$3.2million)onthestatementsoffinancialposition.TheCompanydisposedof$0.3millionoftheseinvestmentsduring2015andrecognizedamarginalgain.Alsoin2015,theCompanydeterminedthattherecoverabilityofsomeofitsremainingavailable-for-saleinvestmentswasimpairedandrecordeda$0.3million(2014-$1.1million)chargetothestatementofoperationsandcomprehensiveloss.

TheCompanyholdsoneinvestmentinanassociatethatisaccountedforontheequitybasis.DuringtheyearendedDecember31,2015,theCompanyrecordeditsproportionateshareofthenetincomeoftheassociateof$0.2million(2014–$0.2millionloss)withinothergainsoninvestmentsonthestatementofoperationsandcomprehensiveincomeand,atDecember31,2015,afterrecognizinganimpairmenttotherecoverabilityoftheinvestmentof$0.5million(2014-$0.2million),carriedtheinvestmentat$1.3milliononthestatementoffinancialposition.

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TheCompanyhadpreviouslyaccountedfortheinvestmentatfairvalueasitwasclassifiedasanavailable-for-saleasset.During2014,theCompanyobtainedsignificantinfluenceoverthisinvestmentandonreclassificationfromavailable-for-saletoassociatetheCompanyrecognizedagainof$0.6milliononthestatementofoperationsandcomprehensiveloss.Thegainwascomprisedof$1.3millionofdeferredgains,previouslyrecognizedinaccumulatedothercomprehensiveincomeand$0.7millionlossinthefirstfiscalquarterof2014,representingthechangeinfairvalueoftheinvestmentduringtheperiod,priortoobtainingsignificantinfluence.7. mineral interests

Mineralinterestexpendituresonprojectsareconsideredasexplorationandevaluationandtheirrelatedcostsconsistofthefollowing:

Balance, Expenditures Recoveries Impairment Balance, ($000’s) January 1, 2015 2015 2015 2015 December 31, 2015

KSM 191,929 18,000 – – 209,929CourageousLake 67,471 627 – – 68,098NevadaProjects 350 – – (350) -GrassyMountain 771 – – – 771 260,521 18,627 – (350) 278,798

Balance, Expenditures Recoveries Impairment Balance,($000’s) January1,2014 2014 2014 2014 December31,2014

KSM 165,196 30,852 (4,119) – 191,929CourageousLake 66,585 886 – – 67,471NevadaProjects 2,882 – (95) (2,437) 350GrassyMountain 771 – – – 771 235,434 31,738 (4,214) (2,437) 260,521

ContinuedexplorationoftheCompany’smineralpropertiesissubjecttocertainleasepayments,projectholdingcosts,rentalfeesandfilingfees.

a) KSM (Kerr-Sulphurets-Mitchell)

In2001,theCompanypurchaseda100%interestincontiguousclaimblocksintheSkeenaMiningDivision,BritishColumbia.Thevendormaintainsa1%netsmelterroyaltyinterestontheproject,subjecttomaximumaggregateroyaltypaymentsof$4.5million.TheCompanyisobligatedtopurchasethenetsmelterroyaltyinterestforthepriceof$4.5millionintheeventthatapositivefeasibilitystudydemonstratesa10%orhigherinternalrateofreturnaftertaxandfinancingcosts.

In2002,theCompanyoptionedtheKSMpropertytoNorandaInc.(whichsubsequentlybecameFalconbridgeLimitedandthenXstrataplc.-nowGlencoreplc)whichcouldearnuptoa65%interestbyincurringexplorationexpendituresandfundingthecostofafeasibilitystudy.InApril2006,theCompanyreacquiredtheexplorationrightstotheKSMpropertyfromFalconbridge.OnclosingoftheformalagreementinAugust2006,theCompanyissuedFalconbridge200,000commonsharesoftheCompanywithadeemedvalueof$3,140,000excludingshareissuecosts.TheCompanyalsoissued2millionwarrantstopurchasecommonsharesoftheCompanywithanexercisepriceof$13.50each.The2,000,000warrantswereexercisedin2007andproceedsof$27,000,000werereceivedbytheCompany.

InJuly2009,theCompanyagreedtoacquirevariousmineralclaimsimmediatelyadjacenttotheKSMpropertyforfurtherexplorationandpossiblemineinfrastructureuse.ThetermsoftheagreementrequiredtheCompanytopay$1millionincash,issue75,000sharesandpayadvanceroyaltiesof$100,000peryearfor10yearscommencingonclosingoftheagreement.Thepropertyissubjecttoa4.5%netsmelterroyalty


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fromwhichtheadvanceroyaltiesaredeductible.ThepurchaseagreementclosedinSeptember2009,withthepaymentof$1millionincash,theissuanceof75,000sharesvaluedat$2,442,750andthepaymentofthefirstyear’s$100,000advanceroyalty.

InFebruary2011,theCompanyacquireda100%interestinadjacentmineralclaimsmainlyformineinfrastructurepurposesforacashpaymentof$675,000,subjecttoa2%netsmelterreturnsroyaltyontheseadjacentclaims.

In2011and2012,theCompanycompletedagreementsgrantingathirdpartyanoptiontoacquirea2%netsmelterroyaltyonallgoldandsilverproductionsalesfromKSMforapaymentequaltothelesserof$160millionorU.S.$200million.Theoptionisexercisableforaperiodof60daysfollowingtheannouncementofreceiptofallmaterialapprovalsandpermits,fullprojectfinancingandcertainotherconditionsfortheKSMproject.

In2014,approvalofanenvironmentalassessmentapplication,submittedtoprovincialandfederalregulatorsin2013wasobtained.Alsoin2014,theCompanyappliedfor$4.1millionofrefundableprovincialtaxcreditsrelatedtoexplorationexpendituresincurredin2011atKSMandtherecoverywascreditedtomineralpropertiesandacorrespondingreceivablewasrecognizedontheDecember31,2014statementoffinancialposition.In2015theCompanycollectedthefunds.

In2015,$18millionofexpenditureswereincurredontheKSMprojectastheCompanyfinalizedtheanalysisoftheresourceupdateonDeepKerrandIronCapLowerZonefromthe2014explorationdrillingandexecutedthe2015explorationanddrillingprogram.

b) Courageous Lake

In2002,theCompanypurchaseda100%interestintheCourageousLakegoldprojectfromNewmontCanadaLimitedandTotalResources(Canada)Limited(“theVendors”)forU.S.$2.5million.TheCourageousLakegoldprojectconsistsofminingleaseslocatedinNorthwestTerritoriesofCanada.

In2004,anadditionalpropertywasoptionedinthearea.Underthetermsoftheagreement,theCompanypaid$50,000onclosingandwasrequiredtomakeoptionpaymentsof$50,000oneachofthefirsttwoanniversarydatesandsubsequently$100,000peryearuptoatotalof$1,250,000.TheCompanyhasmade$950,000inpaymentsandiscommittedtomakethreeadditionalannualpaymentsuntil2017.Thepropertymaybepurchasedoutrightatanytimewiththeacceleratedpaymentoftheremainingbalance.

In2015,theCompanyincurred$0.6millionofexplorationandothercostscompletingalimitedexplorationprogramwhiletheCompanycontinuesitsprimaryfocusonexplorationprogramsatKSM.

c) Grassy Mountain

In2000,theCompanyacquiredanoptionona100%interestinmineralclaimslocatedinMalheurCounty,Oregon,U.S.A.During2002,theCompanypaidU.S.$50,000inoptionpayments.OnDecember23,2002,theagreementwasamendedandtheCompanymadeafurtheroptionpaymentofU.S.$300,000andinMarch2003acquiredthepropertyforapaymentofU.S.$600,000.

InApril2011,theCompanyannouncedthatanagreementhadbeenreachedtooptiontheGrassyMountainprojecttoCalicoResourcesCorp.(“Calico”)whichwassubsequentlyamendedin2013.Intheoriginalagreement,inordertoexercisetheoption,CalicowastoissuetotheCompany(i)twomillionofitscommonsharesfollowingTSXVentureExchangeapproval;(ii)fourmillionofitscommonsharesatthefirstanniversary,and(iii)eightmillionofitsshareswhentheprojecthasreceivedtheprincipalminingandenvironmentalpermitsnecessaryfortheconstructionandoperationofamine.TheCompanyreceivedthefirsttwomillioncommonsharesofCalicoin2011andavalueof$740,000wasrecordedasareductiontothecarryingvalueofthemineralproperties.InFebruary2013,theagreementwasamendedtoallowforanacceleratedexerciseoftheoptionandCalicoissued6,433,000commonsharesand4,567,000specialwarrantstoacquirea100%interestintheGrassyMountainproject.Eachspecialwarrantwasexercisableto

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acquireonecommonshareofCalicofornoadditionalconsideration.Thefairvalueofthesharesandspecialwarrantsreducedthecarryingvalueofthemineralpropertiesatthetimeofreceiptofthesecurities.During2013and2014,theCompanyelectedtoconvertallofthespecialwarrantsintocommonshares.

Inadditiontothesharesandspecialwarrantsreceivedasconsideration,afterthedeliveryofaNationalInstrument43-101compliantfeasibilitystudyontheproject,CalicomusteithergranttheCompanya10%netprofitsinterestorpaytheCompany$10millionincash,atthesoleelectionoftheCompany.Followingthede-recognitionoftheGrassyMountainnetassets,in2013,avalueof$771,000hasbeenretainedwithinmineralproperties.

d) Nevada Projects

InJune2011,theCompanyenteredintoanagreementletterofintentwithGoldenPredatorCorp.pursuanttowhichtheCompanyandGoldenPredatorCorp.,wouldcontributeaportfolioofmineralpropertiesintoanewprivatecompanycalledWolfpackGoldCorp.(“Wolfpack”).ThetransactionwasclosedonJune26,2012andcertainpropertiesweretransferredtoWolfpack,fromtheCompany,whileotherswereoptioned.Intotal,5,506,500sharesofWolfpackwerereceivedasconsiderationfortheoptionedandtransferredproperties.

In2014,theCompanywasnotifiedthattheoptiontopurchaseFourMileBasinandLibertySpringswouldbediscontinued.TheCompanydecidednottocontinuetocarrythemaintenancecostsoftheseclaimsanddeterminedthattherecoverabilityofthecarryingcostswasimpairedandchargedthestatementofoperations$2.4millioninthatyear.Similarly,inthecurrentyear,theCompanywasnotifiedthattheremainingoptiononCastleBlackRockwouldbediscontinuedandtheCompanyfullyimpairedtheremainingcarryingcostoftheNevadaprojects.

e) Other mineral properties

(i)RedMountain

In2001,theCompanypurchaseda100%interestinanarrayofassetsassociatedwithmineralclaimsintheSkeenaMiningDivision,BritishColumbia,togetherwithrelatedprojectdataanddrillcore,anownedofficebuildingandaleasedwarehouse,variousminingequipmentontheprojectsite,andamineralexplorationpermitwhichisassociatedwithacashreclamationdepositof$1million.

TheCompanyassumedallliabilitiesassociatedwiththeassetsacquired,includingallenvironmentalliabilities,allongoinglicensingobligationsandongoingleaseholdobligationsincludingnetsmelterroyaltyobligationsoncertainmineralclaimsrangingfrom2.0%to6.5%aswellasanannualminimumroyaltypaymentof$50,000.

In2014,theCompanyenteredintoanagreementwithIDMMining(“IDM”)tooptiontheRedMountainProject.Inordertoexerciseitsoption,IDMpaidtheCompany$1millionin2014andanother$1millionin2015.IDMalsoissuedtotheCompany4,955,500commonshares,thefairvalueofwhichwas$1.5million,andwasrecordedininvestmentsonthestatementoffinancialposition.IDMisalsoobligatedtospend$7.5millionontheRedMountainProjectoverathree-yearperiod.Atthetimeofthereceiptofthecashandsharesmentionedabove,therewasnocarryingvaluerecordedforRedMountain,asallhistoricalacquisitionandexplorationcostshadbeenfullyrecoveredthroughoptionpaymentsandotherrecoveriesandassuch,the$1millionreceivedin2015andthecombinedvalueofthecashandsharesof$2.5millionreceivedin2014hasbeenrecordedonthestatementofoperationsandcomprehensivelossasagainonthedispositionofmineralpropertiesintherespectiveyears.

(ii)QuartzMountain

In2001,theCompanypurchaseda100%interestinmineralclaimsinLakeCounty,Oregon.Thevendorretaineda1%netsmelterroyaltyinterestonunpatentedclaimsacquiredanda0.5%netsmelterroyaltyinterestwasgrantedtoanunrelatedpartyasafinder’sfee.

In2011,subjecttoanagreementbetweentheCompanyandOrsaVenturesCorp.(“Orsa”)theCompanygrantedOrsatheexclusiveoptiontoearna100%interestintheQuartzMountaingoldpropertyandallofSeabridge’sundivided50%beneficialjointventureinterestinanadjacentperipheralproperty.Theagreement


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stipulatedthatOrsawouldpaytheCompany$0.5milliononorbeforethefifthdayfollowingregulatoryapprovaloftheoptionagreementandmakestagedpaymentsof$5millionincashorcommonsharesofOrsa,atthediscretionoftheCompany.In2013,AlamosGoldInc.(“Alamos”)acquiredOrsaanditsoptiontoacquireQuartzMountainandtheCompanyreceivedthenextstagedpaymentof$2millionfromAlamos.ThereisnocarryingvaluerecordedforQuartzMountainasallhistoricalacquisitionandexplorationcostshavebeenfullyrecoveredthroughoptionpaymentsandotherrecoveries.

Uponthecompletionofafeasibilitystudy,AlamosmustpaytheCompany$3millionandeitheranadditional$15millionorprovidea2%netsmelterreturnroyaltyonproductionatQuartzMountain,attheoptionoftheCompany.

8. Accounts payable and accrued liabilities


Tradepayables 1,104 3,545Tradeandotherpayablesduetorelatedparties 88 56Non-tradepayablesandaccruedexpenses 200 136

1,392 3,737

9. Provision for reclamation liabilities


Beginningoftheyear 1,349 1,349Accretion 18 17Currentyearadjustment (38) (17)

Endoftheyear 1,329 1,349

TheCompany’spolicyonprovidingforreclamationobligationsisdescribedinNote3.Althoughtheultimatecoststobeincurredareuncertain,theCompany’sestimatesarebasedonindependentstudiesoragreementswiththerelatedgovernmentbodyforeachprojectusingcurrentrestorationstandardsandtechniques.Theestimateoftheassetretirementobligations,asatDecember31,2015,wascalculatedusingthetotalestimatedundiscountedcashflows,of$1.5million(December31,2014-$1.5million)requiredtosettleestimatedobligationsandexpectedtimingofcashflowpaymentsrequiredtosettletheobligationsin2024.Thediscountrateusedtocalculatethepresentvalueofthereclamationobligationswas1.4%atDecember31,2015(1.25%-December31,2014).TheCompanyhasplacedatotalof$1.6million(December31,2014-$1.6million)ondepositwithfinancialinstitutionsthatarepledgedassecurityagainstthereclamationprovision.

10. shareholders’ equity


Sharecapital 325,624 295,545Stockbasedcompensation 22,591 29,197Contributedsurplus 22,707 15,061Deficit (89,075) (80,009)Accumulatedothercomprehensiveincome 137 40

281,984 259,834

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TheCompanyisauthorizedtoissueanunlimitednumberofpreferredsharesandcommonshareswithnoparvalue.NopreferredshareshavebeenissuedorwereoutstandingatDecember31,2015andDecember31,2014.

TheCompanymanagesitscapitalstructureandmakesadjustmentstoit,basedonthefundsavailabletotheCompany,inordertosupporttheacquisition,explorationanddevelopmentofmineralproperties.TheBoardofDirectorsdoesnotestablishquantitativereturnoncapitalcriteriaformanagement,butratherreliesontheexpertiseoftheCompany’smanagementtosustainfuturedevelopmentofthebusiness.

ThepropertiesinwhichtheCompanycurrentlyhasaninterestareintheexplorationstage;assuchtheCompanyisdependentonexternalfinancingtofunditsactivities.Inordertocarryouttheplannedexplorationandpayforadministrativecosts,theCompanywillspenditsexistingworkingcapitalandraiseadditionalamountsasneeded.TheCompanywillcontinuetoassessnewpropertiesandseektoacquireaninterestinadditionalpropertiesthatwouldbeaccretiveandmeaningfultotheCompany.TheCompanyisnotsubjecttoexternallyimposedcapitalrequirements.

Managementreviewsitscapitalmanagementapproachonanongoingbasisandbelievesthatthisapproach,giventherelativesizeoftheCompany,isreasonable.TherewerenochangesintheCompany’sapproachtocapitalmanagementduringtheyearendedDecember31,2015.TheCompanyconsidersitscapitaltobesharecapital,stockbasedcompensation,contributedsurplusanddeficit.

OnOctober30,2015,theCompanyissued1,800,000commonsharesoftheCompany,throughanon-brokeredprivateplacement,atapriceof$8.10pershareraisinggrossproceedsof$14.6million.

OnApril7,2015theCompanyissued1,610,000flow-throughcommonshares,at$10.17pershare,raisinggrossproceedsof$16.4million.Thepurchasepricerepresenteda22%premiumoverthemarketpriceoftheCompany’ssharesonthatdate.Shareissuancecostsof$1.0millionwereincurredinrelationtotheofferingandhavebeenincludedinequity.TheCompanyhascommittedtorenounceitsabilitytodeductqualifyingexplorationexpendituresfortheequivalentvalueofthegrossproceedsofthefinancingsandtransferthedeductibilitytothepurchasersoftheflow-throughshares.TheeffectivedateoftherenouncementisDecember31,2015.The$2.9millionpremiumhasbeenrecognizedasaliabilityonthestatementoffinancialpositionandthebalancewasrecordedassharecapital.Ateachreportingperiod,andasqualifyingexpendituresareincurred,theliabilityisreducedonaproportionatebasisandincomeisrecognizedonthestatementofoperationsandcomprehensiveincome.IntheperiodApril8,2015toDecember31,2015,$2.0millionofthepremiumwasrecognizedthroughotherincomeonthestatementofoperationsandcomprehensiveincomefortheproportionateamountofqualifyingexpendituresmaderelativetothe$16.4millioncommitment.

OnJuly22,2014theCompanyissued1,150,000flow-throughcommonshares,at$12.00pershare,raisinggrossproceedsof$13.8million.Thepurchasepricerepresenteda29%premiumoverthemarketpriceoftheCompany’ssharesonthatdate.TheCompanycommittedtorenounceitsabilitytodeductqualifyingexplorationexpendituresfortheequivalentvalueofthegrossproceedsofthefinancingsandtransferthedeductibilitytothepurchasersoftheflow-throughshares.TheeffectivedateoftherenouncementoftheseexpenditureswasDecember31,2014.Thefullpremiumof$3.1millionwasinitiallyrecognizedasaliabilityonthestatementoffinancialpositionandthebalancewasrecordedassharecapital.Ateachreportingperiod,andasqualifyingexpenditureswereincurred,theliabilitywasbeingreducedonaproportionatebasisandincomewasrecognizedonthestatementofoperationsandcomprehensiveloss.IntheperiodJuly22,2014toDecember31,2014$2.2millionofthepremiumwasrecognizedthroughotherincomeonthestatementofoperationsfortheproportionateamountofqualifyingexpendituresmaderelativetothe$13.8millioncommitment.Theremaining$0.9millionliabilitywasamortizedandrecordedasincomeonthestatementofoperationsandcomprehensivelossin2015basedonqualifyingexpendituresinthecurrentyear.Shareissuancecostsof$0.9millionwereincurredin2014inrelationtotheofferingandhavebeenincludedinequity.


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OnDecember10,2013theCompanyissued1,500,000flow-throughcommonshares,at$11.17pershare,raisinggrossproceedsof$16.8million.Thepurchasepricerepresenteda46.6%premiumoverthemarketpriceoftheCompany’ssharesonthatdate.TheCompanyhasrenounceditsabilitytodeductqualifyingexplorationexpendituresfortheequivalentvalueofthegrossproceedsofthefinancingandhastransferredthedeductibilitytothepurchasersoftheflow-throughshares.Thepremiumof$5.3millionwasinitiallyrecognizedasaliabilityonthestatementoffinancialpositionandthebalancewasrecordedassharecapital.Ateachreportingperiod,andasqualifyingexpenditureswereincurred,theliabilitywasreducedonaproportionatebasisandincomeisrecognizedonthestatementofoperationsandcomprehensiveloss.Shareissuancecostsof$1.1millionwereincurredin2013inrelationtotheofferingandhavebeenincludedinequity.TheCompanyincurredthefull$16.8millionofqualifyingexpendituresin2014andthepremiumhasbeenfullyamortizedthroughthestatementofoperationsandcomprehensiveloss.

TheCompanyprovidescompensationtodirectorsandemployeesintheformofstockoptionsandaRestrictedShareUnits(“RSU”),planimplementedin2013.

PursuanttotheShareOptionPlan,theBoardofDirectorshastheauthoritytograntoptions,andtoestablishtheexercisepriceandlifeoftheoptionatthetimeeachoptionisgranted,atapricenotlessthantheclosingpriceoftheCommonSharesontheTorontoStockExchangeonthedateofthegrantofsuchoptionandforaperiodnotexceedingfiveyears.Allexercisedoptionsaresettledinequity.

PursuanttotheCompany’sRSUPlan,theBoardofDirectorshastheauthoritytograntRSUs,andtoestablishtermsoftheRSUsincludingthevestingcriteriaandthelifeoftheRSU.ThelifeoftheRSUisnottoexceedtwoyears.

StockoptionandRSUtransactionswereasfollows:

Weighted Amortized Amortized average value value Stock-based exercise of options of RSUs compensation Options price ($) ($000’s) RSUs ($000’s) ($000’s)

OutstandingJanuary1,2015 3,240,000 17.62 27,427 355,000 1,770 29,197

Granted 840,000 9.93 1,698 94,000 1,826 3,524ExercisedoptionorvestedRSU – 9.90 – (263,250) (2,583) (2,583)Cancelled – 9.63 – (2,500) (24) (24)Expired (495,000) 29.75 (7,646) – – (7,646)Amortizedvalueofstockbased compensationgrantedinprioryears – – 123 – – 123

Outstanding December 31, 2015 3,585,000 14.15 21,602 183,250 989 22,591

Exercisable at December 31, 2015 2,888,333

Weighted Amortized Amortized average value value Stock-based exercise of options of RSUs compensation Options price ($) ($000’s) RSUs ($000’s) ($000’s)

OutstandingJanuary1,2014 2,925,000 21.11 26,734 235,000 84 26,818

Granted 750,000 10.32 3,181 272,500 1,099 4,280ExercisedoptionorvestedRSU – – – (152,500) (1,472) (1,472)Cancelled (400,000) 28.98 (5,373) (5,373)Expired (35,000) 23.02 (455) – – (455)Amortizedvalueofstockbased – – – – – – compensationgrantedinprioryears – – 3,340 – 2,059 5,399

Outstanding December 31, 2014 3,240,000 17.62 27,427 355,000 1,770 29,197

Exercisable at December 31, 2014 3,046,666 –

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TheoutstandingshareoptionsatDecember31,2015expireatvariousdatesbetweenMarch2016andDecember2020.Asummaryofoptionsoutstanding,theirremaininglifeandexercisepricesasatDecember31,2015isasfollows:

Exercise Number Remaining Numberprice outstanding contractual life Exercisable

$30.42 150,000 3months 150,000$21.98 545,000 11months 545,000$21.54 10,000 1year2months 10,000$14.70 100,000 1year6months 100,000$17.32 180,000 1year8months 180,000$17.52 155,000 1year11months 155,000$12.60 705,000 2years2months 705,000$12.91 100,000 2years5months 100,000$8.00 50,000 3years 50,000$10.36 700,000 3years3months 700,000$9.72 50,000 3years6months 50,000$9.00 475,000 4years4months -$11.13 365,000 5years 143,333

3,585,000 2,888,333

InApril2015,475,000five-yearoptionstopurchasecommonsharesoftheCompany,withafairvalueof$1.4million,weregrantedtomembersoftheBoardofDirectors.Theseoptionshaveanexercisepriceof$9.00andweresubjecttoshareholderapprovalwhichwasobtainedinJune2015.VestingoftheseoptionsissubjecttotheCompanyenteringintoamajortransactionononeoftheCompany’stwocoreassets.Thefairvalueoftheseoptionsisbeingamortizedovertheservicelifeoftheoptions.

InDecember2015,365,000five-yearoptions,withanexercisepriceof$11.13,topurchasecommonsharesoftheCompanyweregrantedtomembersofmanagement.Theseoptionshadafairvalueof$2million.Ofthetotalgranted,235,000optionsvestoveratwo-yearperiod.Oftheremaining130,000options,onehalfofthemvestedonDecember31,2015andthesecondhalfwillvestupontheCompanyenteringintoamajortransactionononeoftheCompany’stwocoreassets.

InthequarterendedMarch31,2014,700,000five-yearoptionsweregrantedtosevendirectorsoftheCompanyatanexercisepriceof$10.36andafairvalueof$3.52peroption.Theexercisepricerepresenteda20%premiumtomarketatthetimeofthegrant.ThisgrantwasapprovedbyshareholdersinJune2014andthevestingwassubjecttotheearlierofamajortransactionononeoftheCompany’stwocoreassetsorreceiptofenvironmentalassessmentandenvironmentalimpactstatementcertificatesfortheKSMproject.Inthesecondquarterof2014,50,000optionsweregrantedtoadirectoroftheCompanywithanexercisepriceof$9.72andafairvalueof$4.45peroption.Thefairvalueoftheseoptionswasamortizedovertheservicelifeoftheoptions.

In2014,400,000optionsthatweregrantedin2010and2011werecancelled.Allofthefairvalueattributedtotheseoptionshadbeenexpensedpriortothetimeofcancellation.


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ThefairvalueoftheoptionsgrantedthatvestovertimeisestimatedonthedatesofgrantusingaBlackScholesoption-pricingmodelwiththefollowingassumptions:

2015 2014

Dividendyield Nil NilExpectedvolatility 51 - 57% 52%Risk-freerateofreturn 0.7 - 1% 1.6-1.7%Expectedlifeofoptions 5 years 4.75-5years

TheBoardgranted235,000RSUsin2013tonon-directormembersofseniormanagement.TheRSUPlanalongwiththe2013grantsweresubjecttoregulatoryandshareholderapproval.Shareholderandregulatoryapprovalswereobtainedin2014.Thefairvalueofthegrants,of$2.3million,wasestimatedatthedateallregulatoryapprovalswereobtainedandwereamortizedovertheserviceperiodsthatvariedfromsixtoeighteenmonthsfromthedateofthegrant,dependingoncertaincorporateobjectivesbeingmet.

In2014,theBoardgranted272,500RSUstonon-directormembersofseniormanagement.Thefairvalueofthegrants,of$2.6million,wasestimatedasatthegrantdateandisbeingamortizedovertheexpectedserviceperiodofthegrants.Theexpectedserviceperiodsvaryfromonetofourteenmonthsfromthedateofthegrantdependingoncertaincorporateobjectivesbeingmet.During2014,152,500RSUsfullyvestedandwereexchangedforsharesoftheCompany.

In2015,theBoardgranted94,000RSUstomembersofmanagement.Thefairvalueofthegrants,of$1.0million,wasestimatedasatthegrantdateandisbeingamortizedovertheexpectedserviceperiodofthegrants.Theexpectedserviceperiodsvaryfromonetoninemonthsfromthedateofthegrantdependingoncertaincorporateobjectivesbeingmet.In2015,263,250RSUsvestedandwereexchangedforcommonsharesoftheCompany.

11. Fair value of financial assets and liabilities

Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Thefairvaluehierarchyestablishesthreelevelstoclassifytheinputstovaluationtechniquesusedtomeasurefairvalue.

LEVEL 1: Inputsarequotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.

LEVEL 2: Inputsarequotedpricesinmarketsthatarenotactive,quotedpricesforsimilarassetsorliabilitiesinactivemarkets,inputsotherthanquotedpricesthatareobservablefortheassetorliability(forexample,interestrateandyieldcurvesobservableatcommonlyquotedintervals,forwardpricingcurvesusedtovaluecurrencyandcommoditycontracts,volatilitymeasurementsusedtovalueoptioncontractsandobservablecreditdefaultswapspreadstoadjustforcreditriskwhereappropriate),orinputsthatarederivedprincipallyfromorcorroboratedbyobservablemarketdataorothermeans.

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LEVEL 3:Inputsareunobservable(supportedbylittleornomarketactivity).

ThefairvaluehierarchygivesthehighestprioritytoLevel1inputsandthelowestprioritytoLevel3inputs.

TheCompany’sfinancialassetsandliabilitiesasatDecember31,2015andDecember31,2014arecashandcashequivalents,short-termdeposits,amountsreceivable,available-for-saleinvestments,andaccountspayableandaccruedliabilities.Otherthaninvestments,thecarryingvaluesapproximatetheirfairvaluesduetotheimmediateorshort-termmaturityofthesefinancialinstrumentsandareclassifiedasaLevel1measurement.TheCompany’savailable-for-saleinvestmentsaremeasuredatfairvaluebasedonquotedmarketpricesandareclassifiedasalevel1measurement.

TheCompany’sfinancialriskexposuresandtheimpactontheCompany’sfinancialinstrumentsaresummarizedbelow:

Credit RiskTheCompany’screditriskisprimarilyattributabletoshort-termdeposits,andreceivablesincludedinamountsreceivableandprepaidexpenses.TheCompanyhasnosignificantconcentrationofcreditriskarisingfromoperations.Short-termdepositsconsistofCanadianScheduleIbankguaranteednotes,withtermsuptooneyearbutarecashableinwholeorinpartwithinterestatanytimetomaturity,forwhichmanagementbelievestheriskoflosstoberemote.Managementbelievesthattheriskoflosswithrespecttofinancialinstrumentsincludedinamountsreceivableandprepaidexpensestoberemote.

Liquidity RiskTheCompany’sapproachtomanagingliquidityriskistoensurethatitwillhavesufficientliquiditytomeetliabilitieswhendue.AsatDecember31,2015,theCompanyhadacashandcashequivalentsandshort-termdepositsbalanceof$15.5million(2014-$6.3million)forsettlementofcurrentliabilitiesof$1.4million,excludingtheflow-throughsharepremium.TheCompanyiscommittedtospend$5.5milliononqualifyingexplorationexpendituresinfulfillmentoftheApril15,2015flow-throughfinancingandwillincur$0.8milliontomaintainitsmineralpropertyclaimsingoodstanding.Theshort-termdepositsarevariousguaranteedaccountsandareredeemable,inwholeorinpart,withinterestatanytime.AlloftheCompany’scurrentfinancialliabilitieshavecontractualmaturitiesof30daysandaresubjecttonormaltradeterms.TheCompany’sabilitytofunditsoperationsandcapitalexpendituresandotherobligationsastheybecomedueisdependentuponmarketconditions.

Market Risk(a)InterestRateRiskTheCompanyhasnointerest-bearingdebt.TheCompany’scurrentpolicyistoinvestexcesscashinCanadianbankguaranteednotes(short-termdeposits).TheCompanyperiodicallymonitorstheinvestmentsitmakesandissatisfiedwiththecreditratingsofitsbanks.Theshort-termdepositscanbecashedinatanytimeandcanbereinvestedifinterestratesrise.

(b)ForeignCurrencyRiskTheCompany’sfunctionalcurrencyistheCanadiandollarandmajorpurchasesaretransactedinCanadianandU.S.dollars.TheCompanyfundscertainoperations,explorationandadministrativeexpensesintheUnitedStatesonacashcallbasisusingU.S.dollarcurrencyconvertedfromitsCanadiandollarbankaccountsheldinCanada.Managementbelievestheforeignexchangeriskderivedfromcurrencyconversionsisnotsignificanttoitsoperationsandthereforedoesnothedgeitsforeignexchangerisk.AsatDecember31,2015theCompanyhadnoforeigncurrencydenominatedfinancialinstruments.


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(c)InvestmentRiskTheCompanyhasinvestmentsinotherpubliclylistedexplorationcompanieswhichareincludedininvestments.TheseshareswerereceivedasoptionpaymentsoncertainexplorationpropertiestheCompanyowns.Inaddition,theCompanyholds$2.2millioninagoldexchangetradedreceiptthatisrecordedonthestatementoffinancialpositionininvestments.TheriskontheseinvestmentsissignificantduetothenatureoftheinvestmentbuttheamountsarenotsignificanttotheCompany.

12. Corporate and administrative expenses

($000’s) 2015 2014

Employeecompensation 3,459 2,509Stock-basedcompensation 3,647 9,679Professionalfees 897 734Generalandadministrative 1,407 1,169

9,410 14,091

13. Related party disclosuresCompensationtokeymanagementpersonneloftheCompany:

($000’s) 2015 2014

Compensationofdirectors:Directors’fees 363 316Services 113 86Stock-basedcompensation 283 2,375

759 2,777

Compensationofkeymanagementpersonnel:Salariesandconsultingfees 3,107 2,170Stock-basedcompensation 2,138 4,816

5,245 6,986

Totalremunerationofdirectorsandkeymanagementpersonnel 6,004 9,763

14. Income taxes

($000’s) 2015 2014

Currenttaxexpense 11 18

Deferredtaxexpense 2,689 5,881

2,700 5,899

Tax recovery recognized directly in equity

($000’s) 2015 2014

Financingcosts 289 243

S E A B R I D G E G O L D 2 0 1 5

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In2015,theCompanyrecognizedincometaxexpenseof$2.7million(2014-$5.9million)primarilyrelatedtoadeferredtaxexpensearisingduetotherenouncementofexpendituresrelatedto2014and2015flow-throughshareswhicharecapitalizedforaccountingpurposes,offsetpartiallybyadeferredtaxrecoveryarisingfromthelossesinthecurrentyearand2014.

Rate reconciliationTheprovisionforincometaxdiffersfromtheamountthatwouldhaveresultedbyapplyingthecombinedFederalandOntarioandNorthwestTerritoriesstatutoryincometaxratesof26.29%(2014-26.44%)

($000’s) 2015 2014

Lossbeforeincometaxes (6,366) (7,124)

26.29% 26.44%Taxrecoverycalculatedusingstatutoryrates (1,674) (1,884)Non-deductibleitems 198 570Differenceinforeigntaxrates (37) (303)Changeindeferredtaxrates (65) (33)Movementintaxbenefitsnotrecognized (191) 527Branchtax 11 16Renouncementofflow-throughexpenditures 4,027 6,972Priorperiodadjustment 427 37Other 3 (3)

Incometaxexpense 2,700 5,899

Deferred income taxThefollowingtablesummarizesthecomponentsofdeferredincometax:


Deferredtaxassets Propertyandequipment 63 63Provisionforreclamationliabilities 349 362Financingcosts 583 664Non-capitallosscarryforwards 13,200 10,728

Deferredtaxliabilities Mineralinterests (29,036) (24,247)

(14,841) (12,430)

Unrecognized deferred tax assetsDeferredincometaxassetshavenotbeenrecognizedinrespectofthefollowingdeductibletemporarydifferences:


Investmentinsubsidiaries 4,422 4,847Marketablesecurities 1,360 1,598Losscarryforwards 735 451Investmenttaxcredits 1,481 1,898Foreigntaxcredits 16 16Mineralproperties 454 357


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Thetaxlossesnotrecognizedexpireaspertheamountandyearsnotedbelow.Thedeductibletemporarydifferencesdonotexpireunderthecurrenttaxlegislation.DeferredtaxassetshavenotbeenrecognizedinrespectoftheseitemsbecauseitisnotprobablethatfuturetaxableprofitwouldbeavailableagainstwhichtheCompanycanutilizethebenefitstherefrom.

Income tax attributesAsatDecember31,2015,theCompanyhadthefollowingCanadianincometaxattributestocarryforward:

Amount (000’s) Expiry date

Canadiannon-capitallosses 51,339 2035Canadiancapitallosses 885 IndefiniteCanadiantaxbasisofmineralinterest 168,054 Indefinite

U.S.non-capitallosses 160 2035U.S.captiallosses 758 2020U.S.taxbasisofmineralinterest 1,725 Indefinite

15. Commitments

Paymentsduebyperiod

($000’s) Total 2016 2017-18 2019-20 After 2020

Mineralinterests 7,987 793 2,186 2,404 2,604Flow-throughexpenditures 5,451 5,451 – – –Businesspremisesoperatinglease 187 132 55 – –

13,625 6,376 2,241 2,404 2,604

TheCompanyiscommittedtospend$5.5millionin2016onqualifyingexplorationexpendituresinfulfillmentofagreementswithsubscribersof1,610,000flow-throughsharesissuedinApril2015(seenote10).

S E A B R I D G E G O L D 2 0 1 5

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CORPORATE INFORMATION

DirectorsRudiP.FronkChairmanoftheBoard

A.FrederickBanfield

D.ScottBarr

EliseoGonzalez-Urien

RichardC.Kraus

JayS.Layman

JohnW.Sabine

OfficersRudiP.FronkChiefExecutiveOfficer

JayS.LaymanPresidentandChiefOperatingOfficer

WilliamE.ThrelkeldSeniorVicePresident,Exploration

PeterD.WilliamsSeniorVicePresident,TechnicalServices

ChristopherJ.ReynoldsVicePresident,FinanceandChiefFinancialOfficer

R.BrentMurphyVicePresident,EnvironmentalAffairs

C.BruceScottVicePresident,CorporateAffairsandCorporateSecretary

GloriaM.TrujilloAssistantCorporateSecretary

Stock Exchange ListingsTorontoStockExchange,symbol:“SEA”NewYorkStockExchange,symbol:“SA”CUSIPNumber811916105

Head OfficeSeabridgeGoldInc.106FrontStreetEast,Suite400Toronto,OntarioM5A1E1CanadaTel:4163679292,Fax:[email protected]

Investor RelationsRudiP.FronkTel:[email protected]

Registrar and Transfer AgentComputershareInvestorServicesInc.100UniversityAvenue8thFloor,NorthTowerToronto,OntarioM5J2Y1CanadaTollfree(NorthAmerica):18005646253InternationalDirectDial:5149827555

ComputershareInvestorServicesInc.250RoyallStreetCanton,Massachusetts02021USATollfree(NorthAmerica):18005646253InternationalDirectDial:5149827555

AuditorsKPMGLLPSuite4600,333BayStreetBayAdelaideCentreToronto,OntarioM5H2S5Canada

Legal CounselBlake,Cassels&GraydonLLP595BurrardStreetP.O.Box49314Suite2600,ThreeBentallCentreVancouver,BritishColumbiaV7X1L3Canada

CarterLedyard&MilburnLLP2WallStreetNewYork,NewYork10005USA

CBCSLawCorporation6063BlinkBonnieRd.WestVancouver,BritishColumbiaV7W1V9Canada

DuMoulinBlackLLP10thFloor,595HoweStreetVancouver,BritishColumbiaV6C2T5Canada


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TURNING CASH INTO

106 Front St. East, Suite 400

Toronto, Ontario M5A 1E1

Canada

T 416 367 9292

F 416 367 2711

[email protected]

www.seabridgegold.net

www.ksmproject.com

TURNING CASH INTO - Seabridge Gold · 2016-05-12 · 91 King Street East Toronto, Ontario M5C 1G3...

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Transcript of TURNING CASH INTO - Seabridge Gold · 2016-05-12 · 91 King Street East Toronto, Ontario M5C 1G3...