Midway Gold Corp V.MDW

Canaccord: Sell rating and $0.10 target for Midway Gold

[shakerman640]

According to Canaccord Genuity:

https://personal.crocodoc.com/JtKH058

Midway Gold Corp.

Rating: SELL↓ from HOLD

PRICE TARGET: C$0.10↓ from C$0.60

Lowering Recommendation

Living on the edge (of default)

Investment thesis

Midway Gold reported its Q1/15 financials along with a press release regarding a downward revision to the resource estimate. Their Q1/15 results and variances with our forecasts reflect the consequences of a start-up project experiencing problems with an ill-conceived plan to leach run of mine ore (South Pan) leading to a buildup of significant inventories (permeability issues, clay build up) while failing to meet its obligations under a Senior Debt Facility with the Commonwealth Bank of Australia (CBA, US$47.5 M). The updated resource estimate is a significant (55%) downward revision in ounces (tonnage driven) versus the 2011 resource estimate by the same consultants after accounting for changes in the interpretation of the geological model. We highlight that our revised Pan model provides less than a 5% IRR at our LT gold price (US$1296).

The combination of a lower valuation for the Pan project (down 55% or C$0.44/sh) to C$0.38/sh (>2015) and the near term consequences of a low recovery from South Pan on 2015 free cash flow from Pan (down C$0.11/sh) and inventory buildup (down C$0.06), which was offset somewhat by adjustments to Corporate G&A (+C$0.12, only 2015) led to a significant reduction in our target price (down 80-85%, down C$0.50) to C$0.10 which implies a negative return from current levels. The uncertainty regarding the path forward for the company remains high, in our view, given its debt obligations such that we lowered our recommendation from Hold to Sell as we no longer believe that MDW will be a going concern after 2015. The company's flexibility and options are limited in the near to medium term so they are effectively ‘living on the edge’ of default, as we see it.

The next likely significant catalyst will be negotiating yet another waiver and a potential revision of the obligations related to the CBA Senior Debt Facility and the filing of the technical report on the revised reserve plan for the Pan project (late June 2015). We will re-visit our assumptions if warranted after these milestones are met.

[shakerman640]

According to Canaccord Genuity: https://is.gd/FR5oUg Midway Gold Corp. RATING: SELL (unchanged) PRICE TARGET: C$0.10 (unchanged) Company Update Mining activity at Pan suspended Investment thesis Midway Gold announced that it has reduced its workforce at the Pan open pit, heap leach gold project in Nevada as mining activities have been suspended. The workforce reductions involve not