Barrick boosts investment in Midas Gold

Barrick Gold (TSX: ABX; NYSE: ABX) is taking part in a bought-deal offering by Midas Gold (TSX: MAX; US-OTC: MDRPF) to keep its pro rata interest in the junior exploration and development company with a gold project in central Idaho.

Midas Gold is offering 33.2 million common shares at 60 ? per share for proceeds of $19.9 million, which will help advance a feasibility study and permitting at its Stibnite gold project in the state's Stibnite-Yellow Pine district.

Barrick's $4.4-million acquisition of 7.27 million common shares in the latest offer brings its ownership stake in Midas up to 19.9%, from its previous 19.6%.

Paulson & Co. also participated in the offering to keep its 29.11% pro rata interest of the junior's outstanding common shares.

A 2014 prefeasibility study assessed the potential for rehabilitating Stibnite - a brownfields site - including removing and reprocessing historic gold-silver-antimony tailings, as well as mining the Yellow Pine, Hangar Flats and West End gold-silver-antimony deposits.

The study envisions producing gold and silver dor?(C) and an antimony concentrate on-site, 161 km northeast of Boise, 61 km east of McCall and 16 km east of Yellow Pine.

Midas Gold's president and CEO Stephen Quin at Stibnite. Credit: Midas Gold.

The project would require remediation of the site, which was mined extensively for more than 80 years.

Gold, silver, antimony, tungsten and mercury mineralized materials were mined in the area starting in the late 1920s, leaving behind many open pits, underground workings, large-scale waste rock dumps, heap-leach pads, spent heap-leach ore piles, tailings depositories, a mill site, three town sites and an airstrip, some of which still exist today.

The milling of antimony-tungsten and gold sulphides stopped in 1952, due to low metal prices after the Korean War, but mercury operations continued on the Cinnabar claims until 1963.

Exploration resumed in 1974, and between 1982 and 1987, open-pit mining and heap leaching occurred at various intervals, depending on the season. Midas started exploration there in 2009.

Work at the project would include restoration of fish passage during and after operations, the removal of historic waste rock to an engineered storage facility, repair of the Blowout Creek channel (a source of significant sedimentation), reforestation of impacted areas, and other work, such as stream-channel repair.

"The ecosystem at the Stibnite gold project is in need of healing," the company says. "Our plan is as much about restoring the site as it is about mining it ... fish haven't been able to swim past the historic Yellow Pine pit since 1938, almost no topsoil can be found in the area today due to extensive erosion, and high amounts of sediment are running into the waterways, degrading water quality and fish habitat. Our plan will address these impacts - and we have designed the project so that a lot of restoration work will occur early on."

Midas started exploration at Stibnite in 2009. The project has 105 million measured and indicated tonnes grading 1.66 grams gold per tonne, 2.53 grams silver per tonne and 0.09% antimony, for 5.6 million contained oz. gold, 8.54 million oz. silver and 203.84 million lb. antimony. Inferred resources add 23 million tonnes grading 1.29 grams gold, 2.04 grams silver and 0.04% antimony, for 959,000 oz. gold, 1.52 million oz. silver and 20.52 million lb. antimony.

All of the deposits are open for expansion.

There is currently no antimony being mined in the U.S., and the country depends on its supply from China, Bolivia and Russia. Antimony, a strategic mineral, is used in the defense, aerospace and energy industries.

MWH Global environmental scientists Willow Campbell (left) and Erica Bishop conduct a macroinvertebrate survey at Midas Gold's Stibnite gold project in Idaho. Credit: Midas Gold

Based on the 2014 prefeasibility study, Midas says Stibnite would have a 12-year mine life, with total cash costs of US$597 per oz., and all-in sustaining costs of US$616 per ounce.

The study estimated capex of US$1.23 billion, including US$970 million in start-up capital costs, US$99-million sustaining capital costs, and US$56-million closure costs.

Payback could take just shy of three and a half years at a gold price of US$1,350 per oz., and the project's after-tax net present value, at a 5% discount rate, came in at US$832 million, with a 19.3% internal rate of return.

At the end of March, Midas had US$24.6 million in cash.

Franco Nevada (TSX: FNV; NYSE: FNV) bought a 1.7% net smelter return royalty in 2013, and Teck Resources (TSX: TECK.B; NYSE: TECK) took a 9.9% equity stake the same year.

Paulson & Co. invested US$25 million in March 2016, and Barrick invested US$38 million in May 2018.

At press time, Midas shares traded at 61 ? in a 52-week range of 56 ? to $1.11. The company has a $144.7-million market capitalization.