Kaiser Bottom Fish OnlineFree trialNew StuffHow It WorksContact UsTerms of UseHome
Specializing in Canadian Stocks
SearchAdvanced Search
Welcome Guest User   (more...)
Home / Works Archive / Trackers
Trackers
 Mon Aug 3, 2020
Tracker: What's Next for Midas Gold Corp?
    Publisher: Kaiser Research Online
    Author: Copyright 2020 John A. Kaiser

 
Midas Gold Corp (MAX-T: $1.560)
RSProfileWebTreeForumSEDARQuoteFREE

Tracker - August 3, 2020: What's Next for Midas Gold Corp?

Midas Gold Corp has escaped the stigma of a never-ending permitting cycle for its Stibnite gold-antimony project in Idaho, which has allowed the stock to more than double from the $0.63 stock price at the start of 2020 when we confirmed the Good Spec Value rating and Favorite for 2020 status. Midas, which has been my top gold optionality pick for several years now due to its potential to produce 350,000 oz gold annually once in production as a 20,000 tpd open pit mine, plus a significant antimony by-product credit that could become critical to American security of supply should global Chinese supply evaporate, suffered badly during the Covid-19 market meltdown of March 2020. Midas was in the midst of a US $35 million financing set at $0.53 on February 27, 2020, which was revised to $0.4655 and managed to close despite the stock dropping as low as $0.265. This financing will enable Midas to meet its spending obligations until the end of 2021. The problem with Midas has been the endless series of delays by the Forest Service and related agencies who have never managed a permitting cycle with this scale and complexity, for it also involves reclamation of an environmental disaster of a former mine site. A turning point took place at the start of July when the Forest Service confirmed that the timing for acceptance of a draft Environmental Impact Statement was still on track for August 2020. This was the first time the timeline has not been delayed. So we are waiting for the filing of the draft EIS, which will kick off a 45 day public comment period during which every anti-mining lobby will weigh in with objections. However, because this is really the Idaho permitting agency on trial, and because so much effort was put into creating an acceptable EIS, I do not expect any fatal objections. The most important milestone we are waiting for is Midas publishing a feasibility study which will tell us how the cost structure has changed since the PFS was published in December 2014. That PFS was based on a $1,350 base case gold price, and it barely hit development hurdles, and until May 2019 the price of gold languished below the base case price. That is what made Midas Gold such a leveraged gold optionality play, for at $1,600 plus the project implied a $3-$6 target price. The equivalent today after including dilution to fund the permitting cycle, which has cost USD $53 million to the end of 2019 and its projected to be $70 million by the time a permit is granted, would only be $2-$4 today. But gold has now reached the $1,900-$2,000 range, well beyond most people's expectations, with a breakout into the $2,000-$3,000 range more likely than a breakdown. In Tracker July 27, 2020 I show what the Stibnite project is worth under the PFS assumptions, which indicates a range of $3.86-$5.71 at $1,936 gold. More drilling has beefed up the PFS ore schedule, but how have CapEx and OpEx fared since the PFS? Midas plans to publish its FS in Q4 of 2020, assuming the draft EIS is filed as planned and the comment period doesn't create any problems. CEO Stephen Quin has guided that OpEx will be unchanged or slightly lower, but there will be an increase in CapEx. How much he has not revealed, though he has also refrained from warning about a blowout. So I have created a speculative DCF model which incorporates most of the PFS ore schedule, reduces OpEx slightly and boosts CapEx 30%, the results of which are also in the Tracker. The result is a $4.78-$7.46 target range reflecting a 5% discount rate for the higher price and 10% for the lower price at $1,936 gold. The FS will establish the new cost structure and the market will be able to assign its own future gold price. Midas now expects a final EIS and Draft Record of Decision to be filed in Q2 of 2021, and a Final Record of Decision in Q3 of 2021. So a mining permit allowing a production decision is now plausible within one year. Once the draft EIS is filed, the market will turn Midas into a proxy for gold price expectations, which is why I continue to see the stock as Good Spec Value at current prices and as a core position in any resource sector portfolio. The ultimate milestone will be a buyout, likely by the Barrick-Newmont controlled Nevada Gold JV which has surplus roasting capacity to which Stibnite's ore could be trucked, thus avoiding the expensive cost of building and operating a pressure oxidation autoclave to process the refractory ore. Depending on what the gold price is doing and what the Nevada Gold JV's internal cost numbers indicate, this could result in a higher buyout price than one might otherwise expect for a standalone operation.

 
 

You can return to the Top of this page


Copyright © 2024 Kaiser Research Online, All Rights Reserved