Stumbled into this stock when looking at a larger report on precious metals and noticed that RBC has a $2.00 target. Went searching and the report below is their most recent (20 Feb 14) but their target remains the same. Looks like an excellent bargain at this level so I jumped in. GLTA
Company Profile
Midway had three heap leach projects in Nevada including the Pan project that is in the permitting
stage, Gold Rock in the exploration and PEA stage, and Spring Valley that Barrick Gold is actively
exploring as part of an earn-in agreement. The Pan and Gold Rock Projects are located 80km west of
Ely, Nevada and 30km south east of Eureka, while Spring Valley is 30km northeast of Lovelock,
Nevada
Investment Rationale
Clear path to production in 2014: Pan is a straightforward heap leach project that could produce
80koz/year with cash costs of $690/oz starting in 2014 with low capital intensity.Gold Rock could be a
second mine: Gold Rock could be a similar heap leach project located 8km from Pan. The plan of
operations was submitted in April, 2013 to start the federal permitting process and permits could be
received in H2/2015. Pan and Goldrock could provide a solid production base of nearly 200,000oz/year
over the next four to five years.Spring Valley (30% Midway/70% Barrick) provides optionality: The
Spring Valley project has a resource of 4.1MMoz at 0.52g/t (M&I+I, 100% basis) that is amenable to
heap leaching and is being actively explored by Barrick Gold.Key projects remain under explored:
Midway's focus has been on bringing Pan into production; however, significant exploration upside
remains, which could extend the mine life or warrant an expanded mining rate, in our view. Gold Rock
has 12km of largely untested strike length, and we believe 1MMoz could be added to the resource
based on recent drilling at Spring Valley.Potential CatalystsQ1/14: Securing $60-80MM of project
financing for the Pan project.Q4/14: First production at PanLate 2014: While Pan remains the focus, a
PEA and additional drilling could be done at Gold Rock, later in 2014.Key RisksExecution risk: During
the construction phase, cost overruns or delays could create liquidity risk, and as with any mine startup,
there is a risk that production and cost targets are not met. However, we believe the straight
forward nature of the Pan project and experienced management team mitigate these risks.Exploration
risk: A portion of our target price relies on future exploration success, and as with any early stage
deposit, there is a risk that additional material is not located.Financing risk: Midway requires an
additional $60-80MM in financing for Pan.
Valuation
Our $2.00 price target is based on the average of 1.0x our 2014E NAV/share of $2.43 at a 9% discount
rate, and an adjusted market cap per ounce (AMC/oz) multiple of $40/oz and assumes that 1MMoz
could be added to the existing 5MMoz resource. The NAV and AMC/oz multiples are in line with peers.
Price Target Impediments
Financing Risk: As Midway doesn't have current production, there is a risk involved in raising adequate
funding to build its projects.Execution risk: During the construction phase, cost overruns or delays could
create liquidity risk, and as with any mine start-up, there is a risk that production and cost targets are
not met. However, we believe the straight forward nature of the Pan project and experienced
management team mitigate these risks.Exploration risk: A portion of our target price relies on future
exploration success, and as with any early stage deposit, there is a risk that additional material is not
located.Exposed to metal price volatility: Midway, like all of the companies in our universe, is exposed
to variations in metal prices, and a downturn in gold prices would have a negative effect on Midway's
shares, in our view.