RSD at Beaver Creek Interview Series: Midas Gold (TSX: MAX) CEO Stephen Quin

September 19, 2019

Sign up for the free RSD newsletter to get the latest
news and interviews delivered to your inbox.

 

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 Quin: Great to be here and thanks.

Gerardo Del Real: How are you?

Stephen Quin: Doing good.

Gerardo Del Real: I've got to imagine it feels much better this year than it did last year. Right?

Stephen Quin: Oh, for sure. There's a much more positive tone to the gold market. It's more muted than you'd expect at $1,500 gold, but it's definitely shifting people's perspective and thinking. They're much more actively engaged than perhaps they were a year ago.

Gerardo Del Real: Let's talk about that muted response, because that's the opportunity. Right? We have a gorgeous backdrop. We're in Beaver Creek. Nobody watches these videos for that. They want to know how they can make some money.

Stephen Quin: Right.

Gerardo Del Real: So here you are with $1,500 gold and Midas Gold is trading at just about the same place it was last year, when everybody was so pessimistic.

Stephen Quin: Right.

Gerardo Del Real: Let's talk about how things are progressing at Stibnite.

Stephen Quin: Yeah. Things are going well. Our permitting is moving along. It's a slow process in the US, but the offset we've always said to that is, you've got geopolitical stability. You own your asset, you're not going to get it expropriated or taxed to death or something you see in some countries.

So the permitting process is moving forward. I think the encouraging thing was the Forest Service does updates every quarter on the schedule and for the first quarter in awhile, in July 1st, there was no delay in the permitting. We seem to be much more focused on staying on track and pushing that forward.

The draft Environmental Impact Statement should be out by the end of this year and that should lead to a Record of Decision around the end of next year. We're only 15 months away from having a Record of Decision to move forward. That's not very long in the investment cycle.

Gerardo Del Real: If you receive a favorable permitting decision, which we're all anticipating, you may very well end up in the sweet spot of the cycle. Right? Everybody sees much higher gold prices here in the near to mid-term.

Can we talk about the bipartisan support that you received early on? Is that still something that exists? Has it continued?

Stephen Quin: Very much so. We have a very active social engagement strategy in the local area, but also across the state. Not just bringing friends who are going to be supportive regardless, but bringing people who just don't like mining. For example, a couple of weeks ago we had a couple up who were sort of generally not supportive of mining. They went up on a tour that we had arranged and went out with a healthy degree of skepticism about mining companies and what they're actually going to do and so on. They actually came away and said, "We're volunteering to bring to you our organization behind you to help move this forward."

So it's the unique situation of this site because it is brownfields, it's a mess. People get up there and see it, it doesn't look like this. There's waste dumps, tailings, pits and things all over the place and we're going to fix all of that and clean it up. It convinces a lot of people who may be still anti-mining, but not in this case because this is a different situation.

Gerardo Del Real: Let's talk about what you're going to do, because a lot of what you're going to do happens early on in the process. It's not a promise to do something 20 years from now during the reclamation process.

Stephen Quin: Correct.

Gerardo Del Real: This is something that's going to happen up front, a lot of it. Can you speak to that a little bit?

Stephen Quin: Sure. One of the largest NGOs in Idaho, when we first put out our first plan back in 2012, they said, "Well that's all great, but it's all happening in the end of the mine life and you've got to get permitted, built and then run it. So 25 years from now, you're going to do something good for me. Why can't you do something good now?"

So we re-looked at our plans and reconsidered them, we shifted a bunch of our new facilities to where there is historic disturbance, and what that does is it means we've got to clean up that historic disturbance before we put the new stuff on it. It front ends a lot of the cleanup of the historic impacts and gets things happening early.

The poster child is always fish and fish migration, salmon, they've been cut off since 1938 by a pit that cuts right across the river, a small river, and we're going to put a tunnel in the bypass of that pit that's fish friendly, that's used around highways and other things like that, and allow fish to migrate up right at the beginning of the mine life before production even starts.

That's a dramatically different scenario. It's not like, "Oh, you're going to give me something in 25 years. You're going to give me something early." Similarly, the old tailings that are there that are sitting across the site, they'd been there since the '50s, we're going to pick all those up in the first three or four years of operation. They'll all be gone and so that issue shall be permanently resolved right at the beginning of the mine life.

Gerardo Del Real: With $15-, $16- and $1,700 gold, Midas Gold is going to attract a lot of new eyeballs. For people that don't have an accurate representation of the situation on the ground with Midas Gold, that maybe read some of the negative press that tends to be out there from time to time, can you make absolutely clear how much Midas Gold has had to do with any of the mess that exists right now?

Stephen Quin: Yeah. We've not essentially touched the site other than doing drilling to evaluate what's there. All this mining, the highest negative impact stuff, happened in the 1920s through the 1950s. It was mostly during the Second World War, Korean War, when this site produced about 90% of the antimony and about 50% of the tungsten for the entire US war effort.

In the congressional record, it says in a statement before Congress that this mine shaved – this mine, not mining in general, but this one mine – shaved a year off the Second World War and saved a million American lives.

Gerardo Del Real: Wow.

Stephen Quin: You can imagine with that kind of importance, they didn't care what they were doing on site. It was get the metal out.

Gerardo Del Real: Right.

Stephen Quin: They left a big legacy of disturbance and we've come in and said from day one, we see the opportunity for a new mine to come in and clean all of this stuff up as part of its redevelopment plan for it and, as I said earlier, to do it early as opposed to do it late.

Gerardo Del Real: Let's talk about the opportunity again. You have some of the biggest, most supportive, long-term shareholders that a company can have. That includes the Paulson Group, Barrick Gold, Teck, amongst others.

Stephen Quin: True.

Gerardo Del Real: Can we talk about what's next? And can you provide a brief overview of the resource in place? Because it's pretty impressive.

Stephen Quin: Yeah. We've got a 6.6-million-ounce resource out there at the moment, of which 4.6 million ounces is in the reserve. The opportunity in higher gold prices is essentially two-fold. One is some of those ounces that are between the 4.6 and 6.6 now become economic and that's a positive, but we've also done some additional drilling and converted some of the inferred resource, which is your lowest confidence, into indicated, which also allows you to bring them into the mine plan.

There's kind of a double win there through the drilling we've done and the higher gold price that potentially more of that 6.6 goes into the mine plan, so it's not 4.6 anymore, it's some higher number. You don't just get the benefit of if gold went up $100 an ounce, you get $100 times 4.6 million ounces, well maybe it's $100 times 5 million or 5.5, or whatever the number is when the mine plan is finished. And obviously that torque continues. So you've got a higher margin and more ounces and is a double win.

Gerardo Del Real: I've heard some analysts speculate that there could be as many as 20 million ounces on the property. So obviously the exploration upside is substantial, despite what is an incredible, incredible resource. Can you talk a bit about that? I know that's in the future.

Stephen Quin: Sure.

Gerardo Del Real: But can we speak to that a bit?

Stephen Quin: Yeah, sure. There's been a lot of exploration done, primarily in the '70s, '80s, '90s era, which identified a whole bunch of other sites across the property. But most of them that they identified were sulfide deposits and they were running an oxide mine. They drilled 10 holes into it and say, "Oh, it's all sulfides. We can't process it." And they'd walk away.

When we got involved in the site, we started looking and evaluating some of those sites and saying, "Yeah, there's more potential here." But once you start the permitting process, you really kind of focus on the permitting and you don't want to change your project footprint.

But we are permitting a number of these sites that we're really interested in, their small-scale, high-grade, high-margin, underground deposits. So we're actually permitting to gain underground access to the first of those as part of the current permitting, so you can potentially bring that in very early.

That provides very high torque because you're not adding to a life that's already 12, 13, 14 years long, you're bringing in high-grade ore that might come in in year two or year three, or something like that and increase your margins early.

There's a lot of potential there for additional resources really kind of from a value perspective focused on those small tonnage, high-grade, underground targets because they can really add value to the company and the project very early in its life.

Gerardo Del Real: Now the company's name is Midas Gold, not Midas Gold and Antimony, because you have a very strategic antimony resource that I think is important for new people that may be looking at Midas Gold.

Can you speak to that, because it really benefits and I think it's helped the permitting process along as critical metals become more in focus?

Stephen Quin: Sure. So antimony is a metal that's primarily used for flame retardants, so it stops things burning. Two of the biggest sectors they use it in the United States are the military and Department of Energy because they don't want things to burn.

Gerardo Del Real: Sure.

Stephen Quin: Essentially, all the production that's available today comes from China. It's over 90% of the world's supply of processed antimony comes from China. China's used critical metals as a strategic weapon in the past. We've seen it with rare earths and they've done it with antimony. Antimony, they cut off exports in 2016 and will they do that again? What that's done is bring these critical metals into the attention of the regulators, the politicians, et cetera, in saying, "We should really have a domestic source of this metal."

Our project can potentially provide that domestic source and we're going to be producing it regardless, but it provides that avenue for the US to have its own domestic source of antimony production and that attracts a broader audience than just a gold mine might.

Gerardo Del Real: Absolutely. So stable jurisdiction, 6.6-million-ounce resource, exploration upside is excellent. What's the current market cap?

Stephen Quin: We're currently trading, with issued shares, at about $200 million market cap. Fully diluted – because we have some convertible notes which are primarily held by Paulson – when they get converted you'd be up around the $300-million mark. It's a pretty modest capitalization for a resource that's of this the scale.

There's a chart in our presentation, you can find it on our website, that looked at how many 300,000-ounce-a-year mines are there around the world, by which country. And what was really stands out on that slide is, there's only 18 mines in first world countries that produce more than 300,000 ounces a year. There's only five in the United States.

Gerardo Del Real: Right.

Stephen Quin: So potentially, on approval our project is number six in the United States, within the top 20 in the world in first world countries. That geopolitical stability is a real value given some of the challenges other jurisdictions have suffered in the last few years.

Gerardo Del Real: Excellent. Stephen, thank you so much. Appreciate it.

Stephen Quin: Great. Thanks so much Gerardo.

Gerardo Del Real: Thank you.

View Interview Archive

Subscribe to the RSD email list and get the latest resource stock activity directly to your inbox, for free.

Part of the Stock Digest family of websites

Small Cap Stock Digest

MARKET SUMMARY

INDICES

Name Last Change
DOW 28004.90 0.80%
S&P 500 3120.45 0.76%
NASDAQ 8540.83 0.72%
TSX 17028.47 0.33%
TSX-V 528.54 0.00%

Resource Commodities

Name Last Change
Gold 1469.11 0.02%
Silver 16.96 0.06%
Copper 2.64 2.635
Platinum 901.00 0.67%
Oil 57.72 1.65%
Natural Gas 2.69 1.53%
Uranium 25.03 0.32%

@RSDigest ON TWITTER