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A research note from Haywood Securities suggests that Midas Gold’s development and production schedule could see delays, but is positive on the company’s metallurgical processing update.
This Wednesday, Midas provided an update on an extensive independent metallurgical test program being completed at its Idaho Golden Meadows gold-antimony project. The company completed its preliminary economic assessment (PEA) for Golden Meadows in 2012, and has been working on a preliminary feasibility study (PFS) for the project; it’s slated to be completed later this year.
Metallurgy
The test program focused on defining the metallurgical parameters for Golden Meadows, and the results form a key factor in the PFS. As Midas Gold’s president and CEO, Stephen Quin, said in Wednesday’s release, “[s]uccessful completion of this program marks a major milestone on the road towards completion of the Preliminary Feasibility Study.”
To be sure, the test work conducted by Midas and its independent metallurgical consultants over the past two years has had favorable outcomes. Quin stated, “[o]verall results of the metallurgical test program support excellent overall gold and antimony recoveries from all three deposits.”
In other words, Midas was “able to demonstrate, to a level of confidence required to support its planned PFS, metallurgical parameters that are generally comparable” to those set out in its 2012 PEA, considering the different types of mineralization, deposits and processing methods contemplated.
That’s good news according to Mark, who believes the results show “gold and antimony recoveries that [are] marginally better than our expectations.” Midas is anticipating gold recovery to dore of roughly 88 to 91 percent from Hangar Flats, 90 to 92 percent for Yellow Pine and 81 to 84 percent for West End — all a few percentage points higher than what the Haywood analyst predicted.
Timing
Mark expects to see Midas meet its target to complete its PFS for Golden Meadows by year end. However, that means the company will submit its plan of operations for Golden Meadows, moving into the permitting stage, during the first quarter of 2015. With the “project permitting clock” slated to start at the beginning of next year based on expectations from Haywood, the analyst is expecting production to start at the project in mid 2021.
“The permitting process will involve multiple local, state and federal regulatory bodies and stakeholders, and is projected to take about 4 years to reach completion” Mark’s research note states. He has “confidence the project ultimately will be permitted” though “there are no assurances with regards to the time frame of permitting completion.”
Still, Midas is already working hard to streamline the permitting process. The company “has outlined a clear permitting management strategy to optimize data collection and quality verification,” and is also “constantly interacting with regulators and stakeholders … to potential[ly] streamline interagency co-ordination and project review after the Plan of Operations has been submitted.” Mark’s note also stresses that Midas’ experienced management team is an important factor in the company’s “value potential.”
Furthermore, the research note highlights that this is a “catalyst-rich year end” for Midas, with a resource update expected in September to precede the anticipated PFS later in the year.
Overall, Haywood maintains its “buy” recommendation for Midas with the “very high” risk rating often given to development-stage mining companies. The firm has revised its 12-month target share price to C$1.30 from $1.40 based on changes to the projected timeline for development and production at Golden Meadows.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned.
