Midas Gold (TSX: MAX) CEO Stephen Quin on Latest High-Grade Drill Results at the Stibnite Gold Project
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Midas Gold (TSX: MAX)(OTC: MDRPF), Mr. Stephen Quin. Stephen, how are you this morning?
Stephen Quin: Very good, Gerardo. Thank you.
Gerardo Del Real: Excellent. So, I understand you're back in Idaho.
Stephen Quin: Yes. Down here visiting the office and attending some events down here. Obviously we put out some drill results today which were encouraging.
Gerardo Del Real: Well, I would say they were more than encouraging. You hit, among other intercepts, a 50.3 meter intercept of 3.22 grams per ton gold, and a 60.1 meter intercept of 2.23 grams per ton gold. More importantly, you're turning what was classified as waste, and we all knew it wasn't, but you're turning what was classified as waste into potential ore and that's going to be a big positive. Can you talk a bit about that?
Stephen Quin: Sure. This is part of our ongoing program that was designed post the pre-feasibility study to convert inferred material that lies within the reserve pits into indicated. The reason you need to do that is, under 43-101, the Canadian regulations, you can't use inferred mineralization in a pre-feasibility or a feasibility study. And so we lost ounces between the two, the PEA and the PFS. And we want to get them back in for the feasibility study and it has sort of a double impact because firstly, because they're inferred and they're inside the reserve pit, they're treated as waste, so they actually have a negative cost associated with them. Because you have to mine them and treat them as waste, which means throw them away, so there's a cost associated with that. Simply by converting them from inferred to indicated allows you to now treat it as ore. Obviously you not only recover the value of having treated it as waste, whatever cost you attributed to that, but you also have the profit related to the mineralization that's in it.
And these holes, the reason we drilled these areas in particular, is because of the better grade. The average resource grade at Hangar Flats is 1.6 grams a tonne. So when you're seeing 3 plus grams a tonne intercepts, obviously that's almost double the grade of the resource. But also, this area was picked because it had significant byproduct, both silver and antimony. And that substantially pushes up the gold equivalent grade. In that 50 meter intercept at 3.2 grams you mentioned, there were 36 grams silver and 1.2% antimony, which pushes the gold equivalent grade up to about 6 grams a tonne. So obviously, that's very high-margin material, and we wanted it in the feasibility study so that we can see the benefits of that material being included in the economics of the project.
As you said, it wasn't unexpected. That's the reason we were drilling, we knew it was there to some extent because it was inferred, but we needed the additional confidence to upgrade it to indicated by putting this additional drilling in, and obviously we're pleased with the results, that it was there.
Gerardo Del Real: Absolutely, I should mention of course that you are preparing an updated resource estimate, and of course the feasibility study. You did some geotechnical drilling, how's that coming along there, Stephen?
Stephen Quin: Yeah, we're just pushing that along. Obviously, we've done a fair amount in the past, this is the sort of refinement level drilling, additional detail to feed into both the pit slope, in the case of the core hole that we reported today, which wasn't intended to hit mineralization, it went into the pit wall, but it's intended to help design the pit walls to maximize the slope there. And then we moved on and started doing geotechnical drilling for foundations to make sure where we're putting all the infrastructure is in good, solid ground that's appropriate. So that program just moved along fine, no surprises so far.
Gerardo Del Real: Excellent, excellent. Obviously we're in a better commodities market right now. Gold as I speak is at about $1,345 an ounce, silver is at $18.05. It finally pushed above that $18 level. So the Midas Project, the Stibnite Project is obviously becoming a lot more attractive and should start receiving a lot more attention. Can you provide a bit of context to people that may be new to the story as to the resource and the grade? Because it's among the best projects, unmined projects, in the entire United States in my opinion.
Stephen Quin: Yeah, it's definitely one of the largest, best grade, undeveloped gold projects in the United States, and certainly in the top five probably projects out there. Because the total resource is 6.5 million ounces of gold at about 1.6 grams a tonne. And the reserve is 4.6 million ounces of gold. So it's a very substantial resource and reserve. And by doing the drilling that we're doing, we're looking to convert some of the inferred to indicated, and just the scale of this project is very unusual. This was in production today as designed in the pre-feasibility study, it would be between the fourth and sixth largest gold mine in the United States. So it's a very substantial project, and pretty unique to be owned by an independent junior company. There's just very, very few assets of this scale, this grade, this margin, that are out there that are not owned by a major mining company.
Gerardo Del Real: Agreed, I had the pleasure of visiting the project a couple of times now, and the other thing that I think is important to note is the scale of the exploration upside. Can you touch on that just a bit Stephen?
Stephen Quin: Sure. When we acquired the project, and got control of it and really started drilling in 2011, 2011-2012 was really focused on defining three deposits that we knew about, but we expanded them significantly. And then really 2013-2014 were designed to take those projects to resource status so they could be included in a pre-feasibility, which came out at the end of 2014. Since the end of 2014, we haven't really done much exploration, it's all been very focused on advancing the project, feasibility into permitting. But there are over 20 other targets identified on the project for resource additions. They vary from expansions to the existing pits, where we have good grade mineralization. Like one of the intercepts we put out today extends below the pit, and it's 3.7 grams a tonne, and it's below the reserve pit.
So those kinds of things obviously potentially suggest that there's room for expansion in that type of situation, just expanding the known deposits. Then there are a series of high-grade underground targets, and the most advanced of those are things like the Scout, which is a high antimony deposit with gold and Garnet, which is a very high-grade gold deposit. And we are permitting access to those as part of the overall process to get underground and be able to evaluate them as high-grade underground targets. And the objective of those underground would be to provide some very good-grade feed. We're talking potentially 6, 8 grams a tonne gold equivalent grade going into the mill quite early in the mine life, and that has potential significant economic benefit by blending some smaller tonnage but very good grade in with your larger scale open pit operations.
There's a number of targets like that with very, very good grade intercepts in them. These aren't hypothetical, they have anywhere from a dozen to 70 drill holes in them. They just don't make resource at this stage in the game. And in order to make them into resource and then potentially into reserves, you need to get underground and do the detailed drilling that you require to convert them. So those are definitely high-priority targets from an economic perspective.
Gerardo Del Real: Excellent, excellent. Another aspect of the project, again, for those that aren't familiar with it, is the strategic and economic importance of the antimony on the property. Can we speak to that just a bit there Stephen?
Stephen Quin: Sure. The antimony is a byproduct, it's about 7 or 8% of cash flow in the pre-feasibility study we put out, that has the potential to increase because it was almost 10% of the cash flow in the PEA. And between the two studies, we excluded one historical dataset which had quite a lot of antimony data in it. So part of the objective of the drilling we did in Q1, the results were announced in Q1 Q2, in the pit was to bring that antimony back into the feasibility study. And I think based on the results we reported earlier this year I think that we've been pretty successful in advancing on that objective.
Briefly, what is antimony? Well its primary use is a flame retardant. Primarily synthetic things, any kind of plastics, or insulation around copper wire, the foam in mattresses and beds and chairs and carpets, they're all made of nylon, they would all burn if a cigarette dropped on them, or an electrical spark, or something like that. But the antimony prevents it burning, just causes it to melt instead. China's dominated that market for essentially most of the past hundred years, with one brief interruption which was basically during the Second World War, Korean War. When the Japanese invaded China they cut off supply to the Western world, and this project became the primary antimony supplier to the entire US war effort. There's even a telegram from Eisenhower when he was Supreme Allied Commander thanking the mine for its valuable contribution to the war effort. And that continued right through the end of the Korean War. Then when China re-emerged as a supplier, it basically started flooding the world with low cost, cheap antimony and this mine shut down, as an antimony producer.
But essentially what's happened since then is China's largely depleted its better quality reserves, and has had export restrictions on antimony since 2009. And the rest of the world's been feeling the pinch, and that pinch is just anticipated to get worse over time. It's become essentially a strategic mineral for primarily the defense and energy sectors, because of those two sectors where you don't want things to burn. It's military equipment and industrial energy equipment. So there are long term supply concerns. This project could supply a significant portion of that critical and strategic production requirement to the United States.
Gerardo Del Real: Excellent, excellent. Are there any considerations given to a potential off-take agreement being that gold, obviously, is the primary focus here, and to some extent silver. But have there been any considerations looking at that scenario, Stephen?
Stephen Quin: Yeah, we're starting to look at those types of scenarios as the permitting advances. You obviously want to have the money available to build the mine once the permits are granted, so we're starting the process to evaluate those different options. We've had informal discussions over the last two or three years, and there seems to be a lot of interest, particularly from industries that have that critical supply, or critical demand that we could supply. So those are the types of options we'll be looking at over the next little while as we advance through the permitting process and look to bring production financing to the table.
Gerardo Del Real: Excellent. Lastly, how are things coming along on the permitting front?
Stephen Quin: We're moving through the process now. It's an extended process. We launched in September, we filed in September last year, and we're targeting the end of Q1 2019 to have the Record of Decision granted by the federal regulators. We've gone through the first round of public input, that's more directed at what things the regulators should look at. So now the regulators are doing really the guts of the process now, which is the analysis, looking at alternatives, the alternatives to where you put the mill, the alternatives to where you put tailings, or development rock, or different things like that. And all those things get analyzed. And really as I say, we're in the guts of that process right now, and that will take essentially through the rest of this year and into early next year, which would then lead to a draft environmental impact statement coming out at the end of Q1 next year.
Gerardo Del Real: Excellent. Well the way things are looking in the market, you may be hitting a sweet spot with the production decision, and you may be looking at financing at a very opportune time as far as financing the mine. Stephen, I want to thank you so much for the thorough update. Is there anything else that you'd like to add?
Stephen Quin: No, just appreciating keeping people informed. As we commented earlier, this is a pretty rare asset of this scale and this quality, there's just very few assets like that out there. So people looking for exposure to a very large, high-quality gold asset in the United States, definitely look at Midas Gold.
Gerardo Del Real: I couldn't agree more, I think if you look at peer to peer evaluations as far as gold ounces in the ground compared to market cap, there's a pretty compelling case to be made for Midas Gold. Stephen, thank you again for your time. I look forward to having you back on soon.
Stephen Quin: Great. Thanks, Gerardo.