People, Economics, and Jurisdiction Matter
Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is president and CEO of Midas Gold, Mr. Stephen Quin.
Stephen Quin: Thanks, Gerardo.
Gerardo Del Real: Stephen, thank you for joining us.
Stephen Quin: You're welcome.
Gerardo Del Real: We're here at the New Orleans investment conference, cautious optimism? A little more foot traffic?
Stephen Quin: Yeah, definitely a better tone than it has been for certainly the last two or three years.
Gerardo Del Real: Excellent.
Stephen Quin: So that's encouraging.
Gerardo Del Real: Sure. For people who aren't familiar with the Midas story, can you share with us some of the news here in the past six months, which has been fast and furious. Can we backtrack a little bit maybe to the big financing with Mr. John Paulson and talk a bit about that?
Stephen Quin: Sure. If you go back a couple of years ago we've been in a holding pattern because we had limited funding available, so not able to push forward. But in March this year we did a fifty-five million dollar Canadian financing, which was fully back stopped by John Paulson and Co. Our existing share holders had the right to take out up to about twenty million of their financing, which they did, so that was over subscribed. Paulson and Co. ended up with about $35 million of that financing. Having that $55 million financing completed was definitely the driver that's now allowed us to get on and move the project forward.
Gerardo Del Real: As we know in the junior mining world, one of the things that I preach at the Outsider Club is you want to make sure that the share structure's intact and you have great long term share holders and that you have a project that's de-risked. You've gone through some of the most grilling, due diligence processes of any project that I know. I know Teck has been at the project, Franco Nevada has been at the project, the Paulson Group has been at the project. Can you share with us some of the details about how that went?
Stephen Quin: Sure. Because these fundings were raised during very difficult times, people were very careful with their money and they had a lot of different options to choose from. They did a lot of due diligence, the Teck process to probably about five months to work, sorry, the Franco Nevada process took about five months to work through, they brought a whole team of people, did a lot of due diligence, went to site, met different regulators, met community leaders, things like that, to really verify that they were comfortable that we could move the project forward. Similarly with the Paulson process we've met with them for about two years off and on discussing the project and they eventually came to site, did their due diligence, brought a team of people, met the lieutenant governor of the state, met mayors of local towns, a variety of that type of thing.
They're not just looking at the hard things, the drill holes and things like that. They're looking at your ability to move the project forward. That was an extensive process as well, it took us over six months to get that transaction announced. A lot of it was focused on due diligence and making sure that we had the right capital structure that worked for them and worked for us to move the company forward. We're very happy with the conclusion, the key point is that they gave us the money that we were able to start moving the project forward again instead of just being in a holding pattern.
Gerardo Del Real: Excellent. You mentioned something very interesting, you mentioned the fact that they did a lot of due diligence with the locals and I think Midas has taken a very unique approach. Can you talk a little bit about how you've engaged the local community? Because the board recently had an announcement that was made and you also have Midas Gold local, right? Can you share the details behind that approach?
Stephen Quin: Sure, if you step back a couple of years, we started or have been on that now almost three years. We looked at it and said, we've got the typical old mining company approach where we're Vancouver based, we've got people who aren't from Idaho on the board, et cetera. We started to look at and say, well really what we need to have to gain a social license to operate is local participation. We started a process which has been completed now, where initially we brought two very prominent Idaho directors onto the board, Keith Allred who is a leading conservationist who ran to be the Democratic for governor of Idaho. He came on our board and a lady by the name of Laurel Sayer, who is also a leading conservationist, came on the board as well. She worked for the Idaho Coalition Land Trust, which is basically groups that buy land to preserve it. It's a very preservation type of focus. It took quite a long time to get them onboard, due diligence was involved in that as well, of a different nature, how were people going to consider this project and them being involved in it.
We got that done a couple of years ago and then around the same time we also created an Idaho subsidiary where it basically is the operating entity for the company. The listed company now provides the cash to the operating company which does all of the work. All the employees and so on are based in the Idaho company. We created and independent board on that company, a lot of companies have subsidiaries, but we wanted a completely different approach so it has a board of six people and five of those six are not Midas people. We only had one Midas person on that board and the other five were completely independent. Four were leading local residents in the county where we operate and one was an operational fellow out of Denver. We created that structure and so they've been very involved in insuring the project from the inside as opposed to the outside is doing what it's supposed to be doing and what we're doing is correct.
Just recently, in September just ahead of filing the permit application, we made another change where we asked Laurel Sayer if would come off our board of directors at the parent level and become president and CEO of the operating entity in Idaho. This is a very different approach because now we a leading conservationist who is leading the permitting of a mining project in Idaho. Obviously, she's had two years to get familiar with us, our project, what we're planning to do and she's very passionate that there are projects that can work and that this is one that should be an example because of the brownfield nature of the site and the ability to clean it all up.
She moved off the Midas Gold Corp, the parent board, to become CEO of the operating entity in Idaho and we replaced her with a fellow by the name of Michael Bogart, Michael Bogart ran region ten of the EPA for the US government. He was counsel to the Secretary of the Interior federally on regulatory matters relating to promoting all types of different projects, not just mining. He was very heavily involved in a major war to rights allocation up in northern Idaho, so a variety of different things like that and a very collaborative person trying and reach across the aisle or reach across the communities into different groups and very successful in doing that. We've already strengthened our presence. He's also an Idaho resident, so we have a very strong Idaho presence. In fact, we have a majority of Idaho people that run the company day to day. It's a very different approach, having conservationists leading the permitting of a mine.
Gerardo Del Real: Absolutely. How important, you recently filed the PRO, Plan of Restoration Operations, how important has the local input been in preempting a lot of the problems that the typical project would face. What struck me when I visited the project was how engaged the locals were and how engaged you were with them in preempting a lot of the problems that typically you hear about later on in the process after the application's been filed. Can you share a little bit about how that's worked?
Stephen Quin: We prepared our draft permit application late last year. We weren't able to file it at that time because we didn't have the cash in place. Rather than just wasting time and doing nothing, we said why don't we take a draft of this permit application out to different community groups, to regulators, to NGOs, and different groups and have them look at it and critique it if they were willing to do that. A variety of groups were willing to do that. Some of them spent a lot of time and effort going through it. It doesn't mean, and we're not saying that that means they're not going to have comments later. But what it should do is short circuit that process to have what we actually filed, by the time we got that process completed, it's something much closer to what they're expecting to see, and questions that they had already answered, points that they thought we missed or we didn't address it in enough detail, we've added all that type of information.
It should result in a much more complete document that goes to through the review process more efficiently and more effectively. Time is money, so we may have lost some in the beginning, but we may have gained it in the end by going through that process and it was very extensive. I think we had over sixty meetings this year on it, we had over fifty meetings last year. Some of those meetings were two or three reviews of successive drafts. Well there's your comments, well here's the next version, did we add it or address your comments? It should all help the process of moving it forward relatively quickly.
Gerardo Del Real: Wonderful. Another unique aspect of Midas is that you're going through the permitting process, and here comes the fun part, you already have over 6.5 million ounces across all categories. You have excellent metallurgy, you have phenomenal exploration potential, and you're drilling again. As you know, one of my favorite things in this business is get out there and drill and see what's out there and see if you can add value via the drill bit. I'm excited for results, I know you've been drilling, where is that now?
Stephen Quin: Sure, there's really two types of opportunities. One we went from preliminary economic assessment to pre-feasibility study. One big difference between those two studies is you cannot use inferred resources in a pre-feasibility study. Between the two studies about a million ounces disappeared from the mine plan by the time it got to pre-feasibility study. We talk about this in the pre-feasibility study, that those ounces are not excluded for economic reasons. We use the pre-feasibility study economics, those ounces are still there, so it's really a question of confidence. The obvious thing is convert them from inferred to indicated so now you can use them in the mine plan. Part one of what we're aiming to do with that drilling is to convert the inferred from inferred to indicated. Therefore, they'll be used in the mine plan for the feasibility study. That drilling is underway and we're doing that in a variety of parts of the different deposits, but really focused on Yellow Pine and to some extent Hangar Flats because there's were the biggest bang for the buck we saw looking at all the different options out there.
The second type of opportunity is there are drill hole intercepts which didn't make resource, which are sitting in and around the pits. These are ounces that aren't in any category. They're not part of the six point six million ounces we have, but they're providing opportunity to add additional ounces. Obviously you just don't want to add ounces for the sake of adding ounces. What you want to do is add ounces that add value. The way they'll add the most value is if they're so valuable they come very early in the mine life. You don't care about something way down in the bottom of the pit, because that's going to be many years in the future, what you care about is something that maybe comes in year one or two or three or something like that. There's a number of targets like that.
Probably the highest profile one is this area called Yellow Pine Northeast, which is a bit of a misnomer because it's not actually part of the Yellow Pine deposit, it's on the other side of a big fault in a different type of rock. What intrigued us about it is in the 1930s a hole was drilled there where there was just under six grams of tonne gold (6 g/t) over forty-five feet, which is very nice grade. That's three times the grade we're planning to mine in the reserve pit. The question obviously was ‘was there more?’ In 2014 we drilled a few extra holes in that area and we tapped into an area about a hundred meters along the strike from that hole where we drilled about seventy meters or two hundred feet, over two hundred feet for five point four grams of tonne (5.4 g/t) gold.
That's still over two and a half times the grade of our reserve and over a significant thickness. The big question now is well how much of it is there? Is there enough to affect the mine plan? We've drilled another hole in to that area which has been completed and has been sent for assay, we don't have any results yet, so we'll just have to wait and see how they com out. It's a hard area to assess because when we drilled that area in 2014 you really couldn't see the mineralization the way you could in the other deposits where it's much more obvious. The question on this one is how does it grade? And if it maintains those very high grades then it becomes quite intriguing.
That's not the only opportunities like that. There's a similar area, Hangar Flats, where we have intercepts of three to four grams gold and one to two percent antimony that's just sitting on the side of the pit. Again, it doesn't make it into the mine plan because it doesn't have the continuity that we need. You see the very good grade intercepts, so we have some holes planned there probably early next year that we'll lay into drilling in that area and try and bring that into the plan. It's those kinds of things where they're exceptionally better grade than what we're already planning to mine where the real bang for the buck is in improving the value of the project.
Gerardo Del Real: Significant opportunities to hopefully increase the net present value. You still know where those million ounces are, you haven't lost them.
Stephen Quin: Nope they're still there.
Gerardo Del Real: Still have the antimony, you haven't lost the antimony.
Stephen Quin: Right.
Gerardo Del Real: Excellent.
Stephen Quin: The aim is to get it back into the mine plan and show the feasibility study having significantly more value than we showed in the PFS. That's the point of PFSs, pre-feasibility studies, they're aimed to say okay, here's where you are now and here's what you need to do before you go to feasibility study. Now we're doing what we said we were going to do in the pre-feasibility study and the aim is to bring that value back to the table so when we get to feasibility study it's part of the economics.
Gerardo Del Real: Assays maybe next couple of weeks? Next month?
Stephen Quin: We'll see how quickly they turn around. Surprise is that the labs are very busy, so there's a lot of people drilling. The resurgence the industry, the labs haven't ramped up people as much as they might have done, so we're seeing maybe a month turn around. That's not that far away, maybe by Thanksgiving.
Gerardo Del Real: Wonderful. You have a world class resource, you have long term committed shareholders, cash in the bank stands at approximately how much?
Stephen Quin: About $40 million at the end of Q2.
Gerardo Del Real: Assays are pending.
Stephen Quin: Assays are pending.
Gerardo Del Real: Wonderful. Steve, thank you so much. Appreciate your time.
Stephen Quin: Thank you, Gerardo. You're welcome.