RE: Doing My DDMidway Gold Corp (TSX-V:MDW)
Shares Issued 26,302,450
Last Close 1/9/2006 $2.15
Tuesday January 10 2006 - Street Wire
by Will Purcell
LesterLP-Assaying
The shares of George Hawes and Alan Branham's Midway Gold Corp. took another jump late last week, on a glittering assay from its Midway gold project in Nevada. The stock rose 47 cents in intraday trading, touching a high of $2.17. The toutable assay comes from a play Newmont Mining Corp. quit in 2004. That departure sent speculators into a funk driving Midway's shares from a high of $2.70 to less than 75 cents.
Midway's drill hit gives the play new promotability, but its Spring Valley property should keep top billing this year. The company will continue drilling on both projects, and that could lead to a prefeasibility study on Spring Valley this year. Midway's president, Mr. Branham, and its spokesman, Ron Cooper, offered Stockwatch intriguing looks at Midway's prospects.
The Midway revival
The latest boost came from a 30.5-metre drill hit in the new Dauntless zone of the Midway play. The company produced an assay of 15.41 grams per tonne over the interval, starting at a depth of 75 metres. The zone included one three-metre stretch with nearly 100 grams of gold per tonne, and another that topped 40 grams per tonne.
Those two zones and a 1.5-metre hit accounted for most of the gold in the hole. Midway's three higher-grade intervals averaged nearly 60 grams per tonne over 7.5 metres, while the remaining 23 metres of core samples averaged less than 1.5 grams of gold per tonne.
That latest hole added to a Dauntless story that began early this fall. Midway produced nearly 12 grams of gold per tonne over a 53.3-metre zone that tops out at a depth of 60 metres. That hole is about 100 metres northwest of the company's latest test.
Richer regions accounted for most of the gold in the earlier hole. A 4.6-metre interval was big news, with 108.43 grams of gold per tonne. Five shorter stretches also yielded higher grades. Midway produced an average of 42.6 grams of gold from about 13.6 metres of core. The remaining 39.7 metres of the zone managed a grade of about 1.5 grams per tonne.
The Midway project lies in the southern half of Nevada, just east of Tonopah. The project is in the central part of a trend that includes the 20-million-ounce Round Mountain deposit about 75 kilometres to the north. Two multimillion-ounce deposits lie a comparable distance to the south.
The company started its Midway gold hunt about four years ago and speculators showed interest when Newmont joined in 2002. Midway's early results attracted the major, which picked up an option that would give it 70 per cent of the play by paying the way to feasibility.
Newmont worked the project until the spring of 2004. Mr. Cooper said that Midway's former partner did its drilling "in a typical major way, looking for an elephant." Newmont spent nearly $4-million on more than 100 drill holes over two years, but failed to find its golden pachyderm.
Newmont's departure did not play well with investors, as Midway's shares lost three-quarters of their value over a few months. Shareholders seem happier now with their 100-per-cent interest in the project, after Dauntless began offering promise apparently unknown when Newmont left.
Mr. Branham said Dauntless was a "nice, solid vein system that could be a Sleeper type zone," adding that it was just what a junior needed. With the two big Dauntless assays, Midway will undoubtedly continue drilling, as the project seems capable of containing a significant amount of gold.
The amount remains unclear. Mr. Branham declined to comment on how many ounces his company was chasing at Midway. "Every time I say something, my lawyer wants to cut my tongue off," he said. Mr. Cooper, less willing to stifle investor interest, suggested Midway was chasing a potential two million ounces on the play. He said they had an idea of the dimensions of two other zones at Midway, and work in those areas pointed to a potential one million ounces.
The company will need more drilling to start proving anything close to Mr. Cooper's rosy expectation. That work will start this week. Midway completed six holes late last year, and about 15 more are planned. The company also is waiting for assays from the last few holes. Mr. Cooper is hopeful, as Midway found visible gold in some samples.
The two stellar holes at Dauntless bode well for the play, and the remaining assays could add more glitter to the story. If so, Midway could expand its drill program. Mr. Cooper seems confident of good news. "Put it this way, we will do more than 15."
Spring Valley
Mr. Cooper also had good words for Midway's other key Nevada play. "It is just an incredible project," he gushed, adding the company believed it had "well north of one million ounces" already defined. The company should soon have a resource calculation for Spring Valley that will meet reporting requirements and not worry Mr. Branham's timid lawyer.
Mr. Cooper said the estimate was due by the beginning of March. His eventual hope for the Spring Valley play is between 3.5 million and five million ounces of gold, spread across three main zones. The expected calculation will undoubtedly remain well below that number for now.
Spring Valley is in northwestern Nevada just east of Lovelock. The play covers three zones that have different characteristics, but they could become part of one open pit mine if all goes well. Much of the drilling so far went to the Sill zone, which produced higher grades at depths between 18 and 60 metres.
The Pond zone also got a good look. The company describes the area as having an intermediate depth and grade that could still work out in an open pit mine. Mr. Cooper said the Porphyry zone was thick, but with lower grades. That description also seems suitable for an open pit mine.
The Spring Valley deposit could have a large tonnage, but with a modest grade. That is the main knock against Midway's most advanced play. Still, Mr. Branham is optimistic his company can carve a mine out of the deposit. He says that a prefeasibility study is possible this year, or next year for sure.
Mr. Cooper was uncharacteristically mum about the potential costs at a Spring Valley mine, but Mr. Branham offered a few hints. He suggested that mining costs would run about $1 (U.S) per tonne, with an expected strip ratio of 2-to-1 at most. Heap leaching would add another dollar to the potential costs, with a gravity circuit tacking on another $2 (U.S.).
That would presumably bring the company's expected operating costs to about $5 (U.S.) per tonne. Mr. Branham added that typical mining cut-offs in Nevada were around 0.3 grams of gold per tonne. The current gold price supports his rough estimates for cut-offs and costs.
Mr. Branham envisions an open pit mine that would send the coarser material through a gravity circuit, with the rest of the rock going straight to heap leaching. That adds complexity to the circuit, but it could reduce environmental concerns, as Midway can cut back considerably on the cyanide required. "We do not have the toxic metals that goof up the circuit," he added. Midway's metallurgical work also suggests a promising gold recovery rate.
Drilling remains a priority at Spring Valley. The company will continue its program with just a single drill for the next few months. The Montana-based Mr. Branham said the weather gets nasty in Nevada and the mud becomes bottomless, posing added environmental and logistical worries. The company plans to add two or three more drills in the spring, once conditions improve.
The players
Mr. Branham took over as president of the company in April of 2004, ending a career with Newmont that began in 1983. The Colorado-born geologist spent several years exploring for gold in Nevada and he had some success, with finds along the Carlin trend and in the Great Basin. Selling investors on Nevada quickly turned tough, when his former employer parted ways with Midway. The Vancouver-based Mr. Cooper arrived late in 2004 to handle promotional and investor relations matters.
Mr. Hawes is Midway's largest shareholder. The New York resident runs a private real estate and development company, and he is a director of Gentry Resources Ltd., a petroleum company. Gentry's shares climbed steadily from less than 80 cents in 2001 to $6.75 late last year.
Midway was unchanged Monday at $2.15, trading 140,000 shares.
© 2006 Canjex Publishing Ltd.
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