Sneak Peek: An Insider Interview From Junior Mining Monthly
Today we're bringing you an exclusive interview by Junior Mining Monthly's Gerardo Del Real with Midas Gold (TSX: MAX)(OTC: MDRPF) President & CEO Stephen Quin.
Commodities are set for a historic 2020. With Gerardo's experience and connections, his readers will be well positioned to capitalize.
Along with precious metals, a host of critical metals are poised to deliver gains to investors in the coming months and years. To see Gerardo's research on one of the biggest trends in the commodities sector right now click here.
Editor, Outsider Club
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Midas Gold (TSX: MAX)(OTC: MDRPF), Mr. Stephen Quin. Stephen, how are you today?
Stephen Quin: Very good, Gerardo.
Gerardo Del Real: Listen, I know that the share price – I'm going to get it out of the way right up front – the share price has pulled back. I think it presents a heck of an opportunity, especially in the context of all the recent M&A.
The one thing that has stood out to me from all of the deals, the common denominator tends to be projects with scale. The Stibnite roject obviously provides that scale. The exploration upside is substantial, despite the nearly 7 million ounces and the antimony credit that the project boasts. So scale is something that has been top of mind with all of these deals.
The second point, obviously, projects in safe jurisdictions are getting a premium to market. So I would love for you to just comment on that briefly, Stephen, before we get into all of the behind the scenes busy work that you've been at here recently.
Stephen Quin: Sure. I think it's a valid point, Gerardo. Obviously share price, we seem to go through this perhaps more obviously than some companies, but we get into this tax-loss selling period at the end of the year and the stock gets hammered, and then hopefully in January or end of the year, once tax-loss selling is over, we bounce back.
It is a tremendous opportunity because, as you sort of indicated, the Stibnite gold project is one of the largest undeveloped gold deposits around with very good margins based on the pre-feasibility study we've done. Obviously, a feasibility study is well advanced.
Those kinds of assets should attract premium valuations in the market. But the development part of the cycle is always the most challenging because there's very little news. Most of that news is things are taking a bit longer or they're being delayed, and then that tends to make not a very exciting market, as opposed to being out there drilling holes and discovering more gold.
Gerardo Del Real: Nearly everyone I speak with, even people that are frustrated with the recent price action of a lot of the juniors in the context of $1,500 gold, nearly everyone I speak with believes 2020 will be a pivotal year in the precious metal space, meaning higher prices.
The most recent piece of news from Midas Gold now puts the company in what I believe coincidentally is going to be the absolute sweet spot of this new bull market. I think we're going to be in an environment here in 2020, early 2021 in the next 12 to 15 months where gold is $1,600, $1,700. You have nearly 7 million ounces, and the final ROD for the project is now slated to be roughly in very early Q1 2021.
Can we talk about the latest piece of news and how things are progressing?
Stephen Quin: Sure. So the next big milestone for Midas is to get the Draft Environmental Impact Statement out, Draft EIS. We got a schedule update from the Forest Service, which is the lead agency, last week. They told us that they intend to publish the Draft EIS in January next year. It's a little bit later than we hoped. We hoped to have it out before the end of the year, but in reality it's very close to where they anticipated getting it out.
That's a major milestone because that leads into the public comment period, which will follow that in Q1, which we'd always anticipated being Q1 anyway, even if the Draft EIS came out at the end of the year. Then the feasibility study will follow that, and then the Record of Decision, the final decision, will follow that.
So as you say, 2020 and beyond looks like a pivotal year, not just for the gold sector, but for Midas Gold with major milestones being delivered throughout the next 15 months or so.
Gerardo Del Real: Let's talk about the feasibility study. That's going to be, I believe, an important catalyst and a big milestone for the company, obviously. We know the extended permitting schedule has provided some opportunities to look at things not just differently, but you've been allowed to bring third parties in to really optimize and review everything that's looking to be published in the feasibility study, which the bulk of it is done. Is that accurate, Stephen?
Stephen Quin: Yeah, that's definitely correct. The additional time has not been wasted. It's been put to good use. Well, what you would typically do is you'd finish a feasibility study and then you'd often undertake what's called a value engineering exercise where you bring external parties or you do it internally. You go back and look at it and say, "Okay that's what I thought was the best number, but can I beat it up some more and can I get some better value out of different things now that I've got a chance to think about it?"
So because the feasibility study has been delayed because it's tied to the permitting, can't get it out ahead of the permitting, we've basically taken that opportunity to bring a lot of that value engineering forward and incorporate a lot of that thinking into the feasibility study. So when the feasibility study comes out it should reflect the benefits of those types of things.
So join Outsider Club today for FREE. You'll learn how to take control of your finances, manage your own investments, and beat "the system" on your own terms. Become a member today, and get our latest free report: "The Golden Bull: Three Junior Miners Dominate 2019"
After getting your report, you’ll begin receiving the Outsider Club e-Letter, delivered to your inbox daily.
The major areas we've been focused on, which we've publicly announced for quite a while and repeated, are things like improve metallurgy performance, a bit better recovery, a bit courser grind, less reagents, things like that based on test work that was done subsequent to the last study. The second is some improvements in the mineral resource where we converted some of the inferred to indicated, which allows us to make it into ore. Then some replacement to historical data, which had some high-grade material in it. That should help boost the grade in the early years.
So things like that factor into the value engineering, but there are other things we're looking at as optimizing the mine scheduling, when do we get grade through, keep the strip ratio to an optimal level, different things like that, and a whole variety of things that we're just really wrestling to ground to bring the best case to the table we can.
Gerardo Del Real: Can we talk a bit about the antimony in the project, Stephen? I know there were conversations in the past and I know there was interest in the past to possibly look at being able to monetize that. It's not an insignificant antimony credit.
Can you speak to that a bit and just how you're viewing that now because we haven't touched on that in several months?
Stephen Quin: Sure. So antimony is a byproduct of our gold production. It's about 4-ish, 5% of our cash flow in the pre-feasibility study. It is significant, we would produce about 100 million pounds of antimony. Round numbers, it's $3 to $4 a pound over the last two or three years, so a significant amount of cash flow comes from the antimony.
The other twist to antimony is it's on the US list of critical minerals. It's also on European lists and various other jurisdictions because it's one of those commodities that's dominated by Chinese production, both primary metal but also a smelting and refining capacity, and yet it's extensively used in the defense sector, the energy sector, a significant part of the economy, and there is no substitute or alternative. So having that combination of economic benefit and critical minerals aspect gains a project some attention from other jurisdictions, from regulators and groups like that who are focused on the critical minerals side of things.
Obviously, the potential is there with these byproducts. You've seen it in a copper mine selling gold streams or gold mines selling copper or other metals to turnaround and monetize that as part of your project financing package to build the mine. Given the value of the cash flow and the rarity of the metal, I think there's going to be some significant interest in that.
Gerardo Del Real: And just to be clear, you have a fully diluted market cap of, I think, approximately $215 million Canadian right now, I believe. The life of mine production just from the antimony of 100 million pounds. The cashflow generated from that, I think it's almost twice what your current market cap is, including the gold. Is that accurate, Stephen?
Stephen Quin: Yeah, that's kind of a crazy world that we live in for development companies that your mine of byproduct is worth more than your market capitalization. So it is the challenging situation for development companies, and others of our peers see similar effects. It's just people lose interest when you're in permitting and move on to more exciting stories. And yet the value in these companies like Midas is much more clearly defined because you have a resource, you have a reserve, you have permitting almost finished, you're almost at the next major milestones, and yet your valuation is less than an exploration company.
Gerardo Del Real: And again, just to tie it up, this is the opportunity folks. There's an $832 million net present value. That's US dollars by the way, so that's over a billion Canadian, obviously. That's using $1350 gold, and I'm citing the numbers from the pre-feasibility study from December, 2014. So using $1350 gold, you have a net present value of over a billion dollars Canadian. You have a fully diluted market cap right now of approximately $215 million Canadian.
That disconnect, folks, for an asset in a project with this kind of scale, this kind of exploration upside and in the jurisdiction that it's in will not hold up. I think, again, 2020 should be a pivotal year. Lots of near term catalysts. Looking forward to the feasibility study. Stephen, anything else you'd like to add to that?
Stephen Quin: No. I think just look at the market trading for our company over the last several years. This time of year is always showing itself to be a good opportunity for investors who've got patience, and the project on a standalone basis, ignoring the tax off selling opportunity, it looks like a good opportunity for patient investors as you work your way through this process.
Gerardo Del Real: Absolutely agree. Stephen, I'm looking forward to chatting in January once we get that Draft EIS out and the feasibility study, which of course will follow. Have a great holiday and a great New Year, and we'll chat soon.
Stephen Quin: Great, and Merry Christmas to everybody.
Gerardo Del Real: Thank you, Stephen.
Stephen Quin: Great. Thank you.
To your wealth,
Gerardo Del Real
Editor, Junior Mining Monthly
To get more insights and full issues from Gerardo, check out this special presentation from Junior Mining Monthly.
You'll Never Be On the Inside!
After getting your report, you’ll begin receiving the Outsider Club e-Letter, delivered to your inbox daily.