Midas Gold (TSX: MAX) CEO Stephen Quin on Stibnite Gold Project's Permitting Update & Attractive Leverage to a Rising Gold Price
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Midas Gold (TSX: MAX)(OTC: MDRPF), Mr. Stephen Quin. Stephen, how are you this afternoon?
Stephen Quin: I'm doing okay. It's a rainy day here in Vancouver and things are going well.
Gerardo Del Real: Well, before we get into the recent bit of news, which basically translates into government being government, I have to ask you. We just got through a healthy dose of resource investment conferences. I've got to imagine that Midas was top of mind for a lot of people. Did you get to attend either of the three major ones?
Stephen Quin: Oh, yes. I was at the Vancouver Resource Investment Conference and it was definitely encouraging. A lot more people, a lot more interest. Standing room only for a number of the keynote speakers like yourself, and others. I think that's a good reflection.
And I was at the Roundup Conference which is more technically-focused, but also tends to reflect the state of the markets. And it was not quite record attendance, that was 2011, but it was over 6,000 people, which is a very healthy year. And again, that reflects interest. I think probably the thing that you could kind of really see is a lot of people talking about drilling this year and doing work this year, which means they've been able to access capital, which says the investors are back in the room. That's obviously an encouraging sign.
Gerardo Del Real: Agreed. Let's talk the latest bit of news as it relates specifically to Midas Gold. The headline reads, Draft Environmental Impact Statement for Stibnite Gold Project Advancing to Completion. If I were to translate that into real speak, I would say government being government causes multiple month delay on expected positive permitting decision for Midas Gold.
Can you give me your polished take on the latest bit of news? And then I actually found a lot of good in the delay that I think is inevitable now, because I think it's going to put you in the sweet spot of the market, but we'll talk about that here in a bit. I'll let you go ahead and take the stage and kind of break down the latest bit of news here.
Stephen Quin: Sure. So unfortunately we announced that the draft Environmental Impact Statement, or EIS, that was scheduled to be out this month, in January, has been pushed out. Essentially the review of the version that was going to be published by ourselves and by other agencies, essentially identified room for improvement and that those improvements needed to be brought into the document before it goes out for public comment. Because what you want to ensure is when you go out to the public review stage – and public is everybody, it's agencies, NGOs, Indian tribes, individuals, et cetera, – that the information that they have available is complete and comprehensive and accurately describes all aspects of the project. We need to ensure that's the case because we want a draft EIS that's going to go through the subsequent stages efficiently and effectively in a timely manner. And if there're omissions, gaps, errors, things like that, they're just going to extend the timeframe to go from this stage to the next stage.
So it is obviously disappointing. We hoped to have this out in January. As you indicated in the introduction, we've had a series of delays over time that have extended the process out. But we are getting close to the end of that process. We've been in it since September 2016. So we're sort of three years and four months into the process and hopefully have another year and a bit to go.
Gerardo Del Real: So let's look forward a bit. Obviously we have a $1,575 gold price right now, which again, if you do an NPV calculation and a sensitivity analysis, and you can easily do this, everyone, by going to the Midas Gold website, plugging in $1,500 or $1,575 on the gold price, and you can see where the net present value of the Stibnite Project lands. It's over a billion dollars U.S.
And where I'm going with the comment here, Stephen, is that this will put Midas in a position where it now looks like a favorable permitting decision will be issued you would say, what? Sometime in April or May 2021?
Stephen Quin: Yeah. We don't know their schedule until it gets published by the regulators. But that's the kind of range of timeframes. We anticipate that this delay is a two to three month delay, as we said in the news release. And essentially, it's always been about a year from draft EIS to final decision. So that pushes it out into about the Q2 2021.
Gerardo Del Real: Well, and the upside and the opportunity, everybody out there listening, is this. As exciting as a net present value in U.S. dollars of over a billion dollar is at $1,500, I encourage you all to plug in $1,800 and $2,000 because I firmly believe that the price of gold is headed higher. And I believe, if we're talking Q1, Q2 of 2021, $1,500 would be great. But I think we're going to be seeing much higher gold prices.
And that may put you in a very favorable position, Stephen, where you have the option of not just entertaining the many potential suitors out there and the leverage to negotiate there, but you may actually have the option of being able to put this thing into production yourself. I know that we've had conversations in the past about that and you've always been very clear that that would require a robust gold price. I would have to think that $1,500 and up would provide a lot of cover to entertain that type of scenario. Would that be accurate?
Stephen Quin: Yeah, for sure. And to sort of reiterate the point you made, this is a large project with a substantial amount of gold and therefore that's significant leverage to the gold price built into a project like this. And it has that leverage approach because all the capital is spent up front, but all the profit comes afterwards and so the capital doesn't go up in that higher gold price environment but the profit goes up.
So when we did our pre-feasibility study base case, we had a NPV of $830 million dollars at a 5% discount rate at $1,350 gold. You push that out to $1,500, that goes up to $1.1 billion. And you push that up to $1,650, and it goes up to $1.4 billion dollars. So the profit goes, we're talking at $1,650 gold, $1.4 billion NPV, which is obviously a significant increase from the $800 million at $1,350.
That leverage creates a project that's going to attract capital in many different forms and gives us, as the person looking for that capital, more and more options.
The challenge for developers in the last three or four years has been the lack of available equity. Debt's been available because debt's cheap and the yield is really low. And so people are chasing yield. So there's a lot of capital available for debt financings at pretty reasonable prices. The problem is you're only going to get debt for maybe 60% or 70% of your project capital, and the challenge that developers have always had or had for the last few years has been, "Well, where does the other 30%, 40% come from?" And traditionally that's been equity, but the equity has not been available as a general rule.
That should change very significantly in a higher gold price environment because that attracts money into the gold equity funds and the gold equities, and that makes valuations better and makes that equity component more readily available, which then allows you to meet that 30%, 40% equity input and obviously continue to tap the debt. So it does give you a lot more flexibility, gives you more options, gives you alternatives, which maybe haven't existed for the last two or three years.
Gerardo Del Real: And again, just for some context, we talk, we throw numbers out like $1.4 billion NPV. What's the current market cap of Midas Gold, Stephen?
Stephen Quin: We're about $150 million Canadian. So call that $120-ish U.S.
Gerardo Del Real: Point well taken. I don't think we can be any clearer, folks. I think that it's easy for people to do the math, right? About what the potential upside is? Again, even just if we hold here at this $1,500 level. But looking forward, I think it's more than likely that we see higher prices.
Let me ask you about the antimony aspect of this project. It's definitely material, not just for permitting but also for a potential offtake and for the potential to make that CapEx a lot less. Has there been any recent interest or follow-up, because I know at one point there were discussions about a potential offtake agreement. Has there been any interest on that front or progress made, Stephen?
Stephen Quin: Yeah. We continue to have discussions about potentially essentially monetizing antimony. And antimony is about 5% of cash flow in the pre-feasibility study. And it is a true by-product in the sense that we don't use it to drive the economics of the project until every tonne that's going to go into the mill has been carried by the gold.
So it is a true additional incremental revenue. So it's something you could look to monetize some of your non-core product. So we've had discussions with a number of parties and continue to have those discussions and there's a lot of interest.
Realistically, you can't crystallize that interest until the feasibility is out so we know what we're selling and they know what they're buying and the permitting is at a stage where there's greater certainty on the timeframe. They're primarily looking at project construction financing. So obviously they want to see line of sight to that construction starting. So it's the kind of thing that we will be in a much better position to crystallize sometime later this year than we would today.
Gerardo Del Real: Excellent. Stephen, I want to thank you again for the very thorough update and we'll chat soon. We'll chat soon. Thanks again.
Stephen Quin: Great. Thanks very much, Gerardo.