Largest Gold Mine in the Lower 48...
Midas Gold (TSX: MAX)(MDRPF) Is the Best in Class Independent Emerging Gold Producer
Size, Grade, Scale…
Midas Gold is worth 5X its current valuation and
is setting an environmental standard for the industry
Editor's Note: On February 15, 2021, Midas Gold changed its name to Perpetua Resources Corp.
(TSX: PPTA)(NASDAQ: PPTA). Click here to learn more about the name change.
Midas Gold (TSX: MAX)(OTC: MDRPF) is a C$565 million Canadian mining company. It owns the Stibnite Gold project in Central Idaho.
This is an emerging gold producer that will not only make you money, it will improve its part of the world at the same time.
When operating, it will be the largest independent gold mine in the contiguous United States, producing 388,000 ounces of gold per year at some of the lowest costs in the industry.
Alongside building the gold mine, Midas will restore damage done in the area from previous operators, reconnecting fish to spawning grounds and improving water quality.
And it will do all this while creating hundreds of well-paying jobs.
It’s hard to find a gold miner with the kind of economic and environmental upside that Midas Gold has.
Midas’ Stibnite Gold Project is a model for the future of mining in North America.
It’s a success story that we can feel good about. Not only will it make shareholders a lot of money, it goes a long way towards building trust among all stakeholders.
This is a story of how a mine can benefit all interested parties. It shows the power of working within the fabric of an established community rather than trying to bulldoze through it.
Ultimately, Midas Gold must obtain more than fifty permits, licenses and regulatory approvals to build and operate its mine. In order to proceed, the community must buy into the process and support it. Here’s how the company stated its plan:
Midas Gold designed the Stibnite Gold Project to integrate responsible, modern mining with the restoration of legacy and new disturbances at this brownfields site.
[The company plans to] …invest $1 billion to create an economically feasible, environmentally sound mining operation that provides funding for the reclamation and restoration of numerous legacy impacts from prior operations left by previous owners and operators;
Restore passage for various species of fish, and especially Chinook Salmon, to the headwaters of the East Fork of the Salmon River for the first time in 80 years;
Create approximately 500 well paid jobs in rural Idaho and a similar number of indirect jobs in the services, support and supplies sector of the local economy;
And provide local communities direct input into the Project through its Community Agreement signed with eight local cities, villages and counties, and provide a share of profits to local communities through the Stibnite Foundation.
And that is why Midas Gold succeeded and many other high-profile mining companies in more mining friendly states failed.
The Stibnite region in Idaho has a long mining history, starting in 1899. It became an important source of tungsten for the World War II effort, and mining continued through the late 1990’s.
Those decades badly damaged the ecosystem. One of the large problems is that waste rock blocked migratory salmon in part of the South Fork of the Salmon River.
As part of Midas Gold’s new development, they have plans to reclaim and rehabilitate the area damaged by earlier miners. This is important for the communities in the region, because they must live with the impact of both old and new mines.
Cleaning up past damage and making the right choices in the future is the only path for miners in developed areas. Midas recognizes that truth.
Stibnite is a giant project. Once built, it would be one of the largest gold mines in the U.S. Here are some other bullets about the project:
- It holds the 8th largest gold reserve in the U.S. at 4.6 million ounces of gold.
- It holds 137 million pounds of antimony.
- The average grade is over 1.6 grams per tonne.
- That’s the fourth highest grade open pit gold mine in the U.S.
- At a gold price of $1,650 per ounce, Stibnite’s net present value(NPV) is $1.4 billion.
- For the first four years, Stibnite produces 388,000 ounces of gold annually, at a cost of $506 per ounce.
- For the rest of its life, it produces 337,000 ounces per year at a cost of $616 per ounce.
- In addition to gold, it produces silver and antimony.
Midas Gold Trades for a Fraction of Stibnite’s Current Value
To put this project in perspective, its net present value at $1,650 per ounce gold is US$1.4 billion. That alone is over 5X Midas Gold’s current market cap.
With gold prices today closer to $1,900 per ounce, the NPV is over US$2 billion. Yet Midas Gold trades with a market cap around US$450 million.
Stibnite’s antimony production, as a byproduct of its gold production, would be equal to about 30% of U.S. demand. Here’s how we use antimony:
- 40% - Flame retardants
- 39% - batteries, explosives, nuclear shielding and ammunition
- 21% - Non-metal products like rubber and glass
The project’s high-profile and massive gold endowment attracted some serious investors.
Giant investment manager Paulson & Co. own approximately 44.1% of Midas Gold’s common shares. Giant mining company Barrick Gold owns 11.3%.
Those owners demonstrate the quality and value of the Stibnite project.
The U.S. Forest Service should complete its final environmental impact study in the second quarter of 2021. The record of decision should come in the third quarter of 2021.
Stibnite Holds More Discovery Upside
Don’t think that the current deposit is all we get. The area around Stibnite holds enormous potential for more gold.
There’s a lot of truth in the old saw about the best place to find a new gold mine is in the shadow of the headframe of an old gold mine. That just means that metal deposits tend to cluster.
The metal comes in with super-hot fluids. The “plumbing” of these deposits follows weakness in the rocks. If you find one, you need to look for more. And the Stibnite deposit is a great example. It’s not one big deposit, but a collection of many. And that opens the door to find more.
The geologists at Midas identified twelve priority exploration targets. Three could expand the resources at existing deposits. Three are priority underground prospects. Three have the potential to add “bulk tonnage” to the overall mine. And three are brand new targets identified by remote sensing.
Those last three, called Mule, Salt & Pepper and Blow-out are exciting. These are anomalies found by flying special geophysical equipment around the Stibnite property.
That means there are three reasons to own Midas Gold today:
- Massive Upside – The current gold price is so much higher than expected, that the company doesn’t have an NPV calculation for it. We know that at a gold price of $1,650 per ounce, Stibnite’s NPV is 5X the current market value. In addition, the company has 12 opportunities to grow the size of the project through further exploration.
- Social Good – This is the best-case scenario among gold miners developing mines today. There are many examples of companies that failed because of social outcry. Midas Gold is best in class in social license and that matters.
- Rising Metal Prices – More money printing is coming. There is no path out of the pandemic-induced recession that doesn’t include trillions of dollars from the government. That’s going to continue to spur the gold price higher. The best way to take advantage of that rise is through gold deposits like Stibnite. It has the benefit of being developed but not produced. That means the gold reserves will increase in value with the rising gold price…but they don’t deplete through production.
Midas Gold is coming out of the “boring” permitting phase when mining stocks tends to gain value quickly.
If you want a great gold play with a feel-good story to go with it, you need Midas Gold (TSX: MAX) in your portfolio.
We caught up with Midas Gold (TSX: MAX)(OTC: MDRPF) CEO and President Stephen Quin to go over why the Stibnite Gold Project is so special.
Exclusive Interview with Stephen Quin
President and CEO, Midas Gold
Gerardo Del Real (GDR): This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president and CEO of Midas Gold (TSX: MAX)(OTC: MDRPF), Mr. Stephen Quin.
Stephen, how are you?
Stephen Quin (SQ): Very good, Gerardo. Thanks for having me on.
GDR: Thanks for coming on. I thought it'd be a good opportunity to have you on to talk about the multiple near-term catalysts for Midas.
We'll talk about the feasibility study, and before we get into all of that, I just want to give you an opportunity to set the table there, Stephen, and give us a little overview of everything that's going on. Then let's take it step by step.
SQ: Sure. I certainly will. Maybe it's a good opportunity to remind listeners that Stibnite is a very large, high-grade open pit with a significant amount of production, in the 350,000 to 380,000 ounces a year range over at least a dozen years, making it one of the largest, lowest-cost gold development projects out there. We've been in, as I often call it, permitting purgatory for the last four years, waiting to deliver some milestones. But in August 2020, we delivered a major milestone with the Draft Environmental Impact Statement coming out. That really started us down the final track to getting things finally permitted and out the door.
GDR: Well put. Let's talk about the feasibility study. You expect that here soon. We also expect to see for the first time in quite some time the use of some higher gold prices, some scenarios that factor in the new higher-price gold environment. Is that accurate, Stephen?
SQ: Yeah, for sure. The feasibility study we've announced is scheduled to come out in Q4 2020. Obviously, we're already into Q4, so it's within the next couple of months. Obviously, it will be significantly updated.
The project, from a 50,000-foot view, will look very similar. It's a 20,000 tonne-a-day milling operation producing that 340,000 to 380,000 ounces of gold a year, sort of a dozen-ish years of life with three pits. Those kinds of key parameters stay the same.
I think that the two big external differences are, number one, the tax rates in the U.S. When we did the pre-feasibility study, the federal income tax rate was 35%. It's now 21%. That would obviously be a big win. Biden has publicly stated that he would anticipate the tax rate going to 28%. That's still a 7% reduction from where we were at 35%. So it's a win-win in either scenario from a tax rate perspective, that we would see a reduced tax rate, which obviously should be helpful to the economics of the project.
But, as you mentioned, the biggest driver is this is a gold mine, and so a higher gold price will have a significant impact on the economics of the project. We did the pre-feasibility study back in 2014, at $1,350 gold. We did scenarios that took us up to $1,650 gold, which seemed like a really optimistic scenario when we did that.
Obviously, we're significantly above and have been much higher than that in recent months. The challenge with volatile metal prices is, what do you put the pin on? We have to identify a base case, and we'll do that. Undoubtedly, it'll be higher than the $1,350 we used in the pre-feasibility study. What we'll essentially do is provide a range of gold prices so people can pick their own gold price and then look at the valuation of the company in that gold price environment. Because if you just pick one scenario, well, you're going to be out of date the day after you publish. Giving this broader range that takes us up to high prices like we've seen in the last few months and low prices like we saw back in the PFS days will give people a maximum opportunity to look at the leverage of the project to different gold prices, and, obviously, higher gold prices will have a positive impact on economics.
GDR: One of the reasons why I've always been a strong supporter of Midas is the fact that the project works at much lower prices, and I don't expect lower prices. I'm pretty clear about the fact that I believe this new $1,900 gold price environment is going to be the base case scenario moving forward, and I expect prices to be higher than they are today. But it doesn't necessarily have to play out that way for Midas Gold and Stibnite to be a very, very profitable mine for at least a dozen years.
I can make a pretty compelling argument that there is enough at Stibnite for this to be a project that delivers for decades on end. Can you speak to the cost parameters of the project? Because they're compelling. Everyone talks about higher gold prices and optionality and how great these deposits might be if gold just gets to $3,000. Midas and Stibnite doesn't really need higher prices. They're welcomed, of course, but we don't need it for this to work and to work in a robust fashion.
SQ: Sure. We did scenarios in our pre-feasibility study that went down to $1,200 an ounce and still provided a good return on the project. Our all-in sustaining costs are in the $600 an ounce range. Even at $1,200 an ounce gold, you've got a 100% margin on your cost of production. So it really illustrates the robustness of the project, and that's really driven by grade. It's going to be up around 1.5 grams, 1.6 grams for life of mine. But the early years, we're mining around 2 grams a tonne gold open pit with a pretty modest strip ratio, and really what drives the low operating cost is grade and, obviously, scale as well. It's a sizable deposit, so you get economy of scale with good grade. That's definitely going to give you a pretty robust scenario.
GDR: The other way that we mitigate risk here is through the designation of the project. I believe it's been designated a high-priority infrastructure project. I've been pretty expressive about the bipartisan support that the project has received. I believe that's what will lead to a favorable permitting decision.
Can you speak to the antimony aspect of the project? It's a gold project. That is the dominant metal here, but the antimony absolutely has helped move forward and expedite, I believe, the permitting process, despite the many delays. Right?
SQ: Yeah, absolutely. Antimony has been declared a critical mineral by the Department of Interior. It's definitely attracted more interest than just its economic clout would suggest. It's a byproduct that produces about 5-ish percent of our cash flow, but we would be the only domestic mining producer of antimony in the United States. There's basically none in North America. It's a Chinese-Russian dominated commodity.
But it's essential for the defense sector, energy sector, and many other sectors as well. That's why it was designated as a critical mineral. Because antimony was designated as a critical mineral, we are the only project out there that has a reasonable prospect of production in anything like a reasonable time frame. It ended up, as you mentioned, the project being designated a high-priority infrastructure project.
What does that mean? Essentially, it means improved coordination and collaboration between the federal agencies to get the project through the permitting process. You look back, and permitting in the U.S. seems to take forever and is much more time consuming than in other jurisdictions. But we're definitely seeing a lot of attention to the project from significant levels of the agencies because of the critical minerals aspect. It brings another layer of attention to it because of its potential to address a strategic interest in the United States. I think that's a positive viewpoint that helps the overall project move forward.
GDR: I'm always very critical of companies that do things the wrong way and try to make it a point to, one, not support them and, two, point them out. It's great to be behind a project that not only will be incredibly profitable for myself and subscribers and the state of Idaho but also will actually make a site that's been long abandoned lively once again. I couldn't be happier to support your team and the project. Stephen, anything else that you'd like to add to that?
SQ: We often talk about economics, Gerardo, but this is an environmental good works project. This site was the largest antimony-tungsten mine in the United States during the Second World War/Korean War, but it left a huge amount of mess and impact behind. Our project is designed to remediate and address all of that impact. It's not just economically a good project with lots of jobs and taxes and benefits to investors, but it's also environmentally a good project.
GDR: Fantastic. Stephen, thank you so much for your time. I appreciate it.
SQ: Thanks very much, Gerardo.
The Opportunity
Midas Gold is heading toward final permitting for its Stibnite Gold Project in Idaho.
At recent gold prices, the net present value of the project is over US$2 billion. Yet Midas Gold stock trades for a fraction of that valuation.
Not a single Idaho legislator opposed the project during the comment period.
It is very rare to get support like that.
And it’s also very rare to get a gold asset this large and low cost. It will be the largest gold mine in the lower 48 states when built.
The value of Midas Gold stock will be unleashed upon permitting, which is expected in 2021, making right now the perfect time to look at it.
Shares are below US$1.00 but are worth several times that and could get there quickly on coming news.
Resource Stock Digest will keep you up to date.
And you should also check out the Midas Gold website and sign up to get news right from them by clicking here.
— Resource Stock Digest Research
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