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 Thu Aug 27, 2020
Tracker: US Forest Service accepts Draft EIS for the Stibnite gold-antimony project of Midas Gold
    Publisher: Kaiser Research Online
    Author: Copyright 2020 John A. Kaiser

 
Midas Gold Corp (MAX-T: $1.740)
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Tracker - August 27, 2020: US Forest Service accepts Draft EIS for the Stibnite gold-antimony project of Midas Gold

Midas Gold Corp announced on August 14, 2020 that the US Forest Service has released the Draft Environmental Impact Statement for the Stibnite gold-antimony project in Idaho. The DEIS consists of 80 reports comprising 27,000 pages which the public can access through the US Forest Service. This kicked off a 60 day public comment period which ends October 13, 2020. Comments can be mailed or submitted online to the USFS or through the more user-friendly Midas site called RestoreTheSite. Usually it is mine development opponents who submit comments on a draft EIS, but Midas is encouraging people to submit supportive comments. From early 2016 when Midas decided to initiate the permitting cycle rather than go into hibernation as desired by a key backer who subsequently bailed, Midas had spent USD $52 million as of Dec 31, 2019 on permitting; Stephen Quin estimates the total will be $70 million by the time a record of decision allowing construction to begin is reached, assuming that happens during H2 of 2021 as projected. After the comment period Midas and the USFS will address the comments and make adjustments to the Final EIS which along with a Draft Record of Decision is expected to be accepted by the USFS in Q2 of 2021. That will be followed by a "public objection" period which must be dealt with before a Final Record of Decision is published, hopefully in Q3 of 2021. The next important milestone will the release of the feasibility study expected in Q4 of 2020. A key question is the updated CapEx figure. During the August 20 Webinar about the DEIS a question was posed if Quin could give a percentage increase range for CapEx, to which he only responded that it will not be a doublling of the PFS Capex of USD $970 million. So in my Speculative DCF I am sticking with my $1.3 billion guess for CapEx.

On Aug 26, 2020 Midas announced that Paulson & Co is converting its CAD $82,102,500 notes into 199,692,804 shares which along with an existing position will give Paulson a 44.12% stake. The conversion prices are CAD $0.3541 and $0.4655 per share. There remains $15,409,901 convertible into 43,518,501 shares held by other parties. Issued will be 474,527,412 shares and fully diluted is now 540,201,499. Judging from Quin's comments during the Webinar there has been a lot of investor confusion about the capitalization. Most investors do not understand the concept of "fully diluted" which is the number of shares that would end up outstanding if every holder of a contractual right to acquire shares exercised that right (ie warrants, options, convertible debentures). I have updated my Speculative DCF model to reflect metal price changes along with the higher fully diluted figure. The CAD after-tax NPV per share is now $4.40-$7.00 for 10% and 5% discount rates at the current gold price of $1,931 per oz. The market is still pricing Stibnite as if the $1,350 base case price from the December 2014 PFS is the long term future price for gold. Although the stock has tripled since the start of the year, it still offers Good Speculative Value for an outcome in the range of USD $1.8 billion to $2.9 billion based on $1,931 gold. And if you think gold could challenge $3,000 over the next year before any meaningful inflation surfaces, the current $1.74 stock price is very cheap for the corresponding $9-$14 fair value price range.

It is also important to know that Midas scores high in ESG terms. The company has mounted a monumental effort to comply with the Idaho permitting cycle which has never dealt with such a large scale mine plan that is also a superfund reclamation project which will restore salmon access to the upstream watershed. It was not just the US Forest Service figuring out how to process the Stibnite plan but also multiple other affected agencies. The time, effort and capital Midas injected into the Stibnite permitting cycle lays the ground work for permitting other mines in Idaho when their turn comes. In addition there is the antimony by product whose LOM payable value at current metal prices is only 2.6% of the LOM value of gold, silver and antimony production from Stibnite. But it would represent 3%-4% of current global supply, none of which comes from the United States. Take a look at where global supply comes from in the graphic below. I only count Australia and Mexico as reliable suppliers but they only supply 1.3% of the 160,000 tonnes produced in 2019. The top 3 producers, China, Russia and Tajikistan, supply 91.7%. Furthermore, Midas has identified a high grade antimony vein separate from the gold system which contains at least as much as the by-product resource, and which could be very quickly accessed through a short adit driven from the river diversion tunnel. Not only would this make the United States self-sufficient in antimony supply, but it would also have enough extra to supply the needs of other democracies resisting the global march to autocracy.


 
 

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