Denver-based Midway Gold (TSX:MDW,NYSE:MDW) is off to a good start this week following a double whammy announcement regarding both a resource upgrade and a budget boost. The Nevada-focused gold company saw its share price climb 4.12 percent following the news.
Causing all the fuss is no doubt the exciting 102-percent increase in the mineral resource estimate for Midway’s Spring Valley project. It now sits at 4.37 million ounces of measured and indicated gold. Additionally, the company has bumped up the measured and indicated resource’s grade by 20 percent. The project’s inferred resource now comes to 1.07 million ounces. To get to those results, the company revised its previous estimates using the results collected from the 2011 to 2013 drilling seasons.
As one Midway investor noted in a Seeking Alpha article, “[t]his update re-emphasizes there’s deep value in Midway Gold, beyond the near-term production Pan project in Nevada.”
The Investment Doctor also points out that while the resource update wasn’t unexpected, it does put the project “in the league of major exploration projects in the USA.” The substantial increase in average grade is also encouraging as it could be construed as an indication that the project’s economics will be superior.
Likewise, Haywood Securities analyst Geordie Mark views Midway’s news as positive for the company, explaining in a research note to clients that the updated resource “not only heightens the total known gold endowment on the project, but also shows a significant increase in the contained ounces and grade of gold within M&I resources. Whittle Pit constrained resources at Spring Valley also stand at 3.73 Mox gold grading 0.84 /g/t using $1,300 per ounce gold price.”
Indeed, the company is pleased that beyond the simple resource estimate, Spring Valley has excellent growth potential and exploration upside. That’s because the resource currently remains open to the south, the northwest and at depth. The company also notes in today’s press release that several high-potential drill targets have been identified outside the current resource area.
“We are thoroughly impressed with the continued growth and the significant quality upgrade at Spring Valley,” said Ken Brunk, president and CEO of Midway, reaffirming that the project continues to give the company confidence in Spring Valley’s future potential as a world-class gold mine.
In addition to the resource upgrade, Midway said that its joint venture partner, Barrick Gold (TSX:ABX,NYSE:ABX), has budgeted $17.4 million for the project, including $9 million for infill drilling and $8.4 million for preparation of a prefeasiblity study and other development-related expenses.
Mark added, the new “accelerated budget on the project heightens our belief in Barrick’s drive to move more rapidly to completing a PFS-level study on the project.”
Haywood has a “buy” rating on Midway Gold with a target price of $1.65. The firm’s investment thesis is based on its confidence that the company will evolve into a gold production company in the near term through the development of the Pan gold project in Nevada. So far, Midway has started construction on Pan and is projecting first gold pour for in late Q4. The company is planning on using an open-pit, heap leach operation to take advantage of Pan’s proven and probable reserves of 48 million tonnes grading 0.56 grams per tonne gold and containing 0.88 million ounces.
In all, Tuesday’s news remains encouraging, bringing to light the fact that given its project pipeline, Midway Gold is definitely more than a one-hit wonder.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.
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