Midas Gold (TSX: MAX) is assessing ways to lift the economics of its wholly owned Golden Meadows gold project in Idaho’s historic Stibnite mining district ahead of a prefeasibility study that’s due in mid-2014.
In a Sept. 10 project update, Midas says it has made “notable progress” on several fronts, including resource modelling, mine-plan optimization and mineral processing.
Work completed at the past-producing Golden Meadows property since publishing a preliminary economic assessment (PEA) last September includes wrapping up 35,000 metres of drilling and recovering historic data from previous project operators. After evaluating this material, Midas has generated better geological models with tighter resource parameters. These changes, it warns, may result in a “modest” reduction in Golden Meadow’s global resource estimate compared to the PEA.
Before it can publish the updated resource, Midas says it would need to finish a 5,000-metre program. Consequently, it has pushed back the resource revisions for the project’s three main deposits: Yellow Pine, Hangar Flats and West End.
The resource estimate for Hangar Flats and a mineralized area called “Scout Ridge” are expected by year-end, Desjardins’ analyst Adam Melnyk notes. The resource revisions for Yellow Pine and West End are due in early 2014 instead of the third quarter, he adds.
“Given the development uncertainty and the push back in project timelines introduced in Midas’ project optimization update for Golden Meadows, we view this announcement negatively in the short-term,” Melnyk says. “However, our positive long-term view of the robust economics and exploration potential of the project is unchanged.”
To improve the project, Midas has completed a 42-hole auger drill program to evaluate the historic tailings in the forthcoming prefeasibility study.
Midas may also exclude some of the high-cost resources that are slated to be mined later on at Hangar Flats and West End. Midas says removing these resources will have little impact on Golden Meadow’s estimated net present value, but could lower the project’s environmental impact and sustaining costs.
“However, removal of these areas would also clearly reduce potential life-of-mine production for Golden Meadows,” Melnyk cautions.
The PEA envisions Golden Meadows as a 20,000-tonne-per-day operation, producing 348,000 oz. gold and 6.4 million lb. antimony per year throughout its 14.2-year life. The cost to bring Golden Meadows online is US$1.2 billion, including US$879 million in capital costs and US$303 million in sustaining costs. The project has an after-tax net present value of US$1.5 billion and a 27.2% internal rate of return, using a 5% discount rate and a US$1,400 per oz. gold price.
To cut costs and environmental risks, Midas intends to move the proposed facilities near Scout Ridge, noting the area is central and contains shallow bedrock for mill foundations, and is farther away from waterways and forested wetlands. The location also allows the company to use conveyors to move mill feed instead of haul roads. However, the Vancouver-based junior cautions that if it defines a resource at Scout, it would need to mine it from underground.
Midas says it prefers bio-oxidation of gold concentrate over the pressure-oxidation method in the PEA, mainly because it could lower capital and operation costs.
The company’s shares recently closed down 3% at 91¢, within a 52-week range of 66¢ to $3.64.
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