In the latest of a series of strategic investments in junior mining companies, Barrick Gold (TSX: ABX; NYSE: ABX) is acquiring a 19.9% stake in Midas Gold (TSX: MAX; US-OTC: MDRPF) and its Stibnite gold project in Idaho.
Midas will use the US$38-million investment from Barrick to fund a feasibility study and meet permitting requirements. It expects to complete the feasibility study in the third quarter of this year.
Stibnite, 244 km northeast of Boise, is the eighth-largest gold reserve and the fourth highest-grade, open-pit project in the United States. It also has significant antimony and silver credits.
A prefeasibility study (PFS) in December 2014 forecast that Stibnite would produce 337,000 oz. gold a year over a 12-year mine life, based on probable reserves of 4.6 million oz. gold at an average grade of 1.7 grams gold per tonne. At US$1,200 per oz. gold, the PFS outlined a US$513-million, after-tax net present value at a 5% discount rate, and a 14.4% internal rate of return.
The brownfields project consists of historic tailings and three past-producing areas — Hangar Flats, Yellow Pine and West End — all of which are open in multiple directions and within 1.6 km of each other, north to south.
Hangar Flats was mined first as an underground mine, and the mill was next door. Then mining moved to Yellow Pine, which operated as both an open-pit and underground mine.
An updated resource earlier this year outlined 104.9 million measured and indicated tonnes grading 1.66 grams gold, 2.53 grams silver and 0.09% antimony for 5.61 million contained oz. gold, 8.54 million oz. silver and 203.84 million lb. antimony.
Inferred resources add 23.2 million tonnes grading 1.29 grams gold, 2.4 grams silver and 0.04% antimony for contained metal of 959,000 oz. gold, 1.52 million oz. silver and 20.5 million lb. antimony.
In 2013, Teck Resources (TSX: TECK.B; NYSE: TECK) acquired a 9.9% stake in Midas Gold and Franco-Nevada (TSX: FNV; NYSE: FNV) bought a 1.7% net smelter return royalty the same year. In 2016, Paulson backstopped a $55-million financing. Other shareholders include Sun Valley, VanEck and Oppenheimer Funds.
The project is in a past-producing area around the historic town of Stibnite, where gold, silver, antimony, tungsten, and mercury have been mined in underground and open-pit operations since the late 1920s. (The former town of Stibnite is in the middle of the current project.)
The Hangar Flats and Yellow Pine mines produced 90% of the antimony and two-thirds of the tungsten that the U.S. government used during World War II and the Korean War.
When the U.S. stopped producing strategic stockpiles of these metals, it was shut down and abandoned, and nothing really happened until the 1970s, when the gold price went up and people started to look at it again, but with a focus on gold.
Exploration restarted in 1974, followed by open pit and seasonal on–off heap leaching from 1982 to 1997. Midas started exploration there in 2009.
Midas Gold has spent US$160 million on Stibnite since then, some of which was spent on extensive environmental baseline programs to assess environmental conditions and excessive disturbance at the site by prior owners.
“When the mine was operating from the 1920s to the 1950s — initially underground mining at Hangar Flats then open-pit mining at Yellow Pine — there were no significant environmental regulations,” says Stephen Quin, who founded the company and has been president and CEO since 2011.
“When they started, they dumped tailings directly into a creek, but that was inefficient from a water perspective because they needed water to recycle, so they put in basic retaining dams to stop the tailings going downstream, but more to capture the water to reuse it than for the purpose of protecting the environment,” he explains.
As a result, tailings spread across the whole Meadow Creek valley through more than 30 years of operations. Those tailings contained antimony and arsenic.
“You ended up with elevated arsenic in surface and groundwater, and it contaminated a large portion of the Meadow Creek valley,” Quin says. “Even with the dams, there were no liners, so you have elevated levels of metal going into ground and surface water and erosion was a substantial issue, because Meadow Creek ran through the tailings area and every spring, a bunch of tailings would wash downstream.”
The highest profile issue is the Yellow Pine open pit, which was dug right across a tributary of the Salmon River in the 1930s, cutting off salmon migration to spawning beds upstream.
Another problem was Blowout Creek, where a hydro and water retention dam was built. Previous operators ran it during the mining operations but after the mine was abandoned in the 1950s, there was concern that the dam would fail and cause significant damage. So the regulators decided to breach the dam and drain it, but the breaching process got away from them and the dam washed out, and had a significant impact downstream.
“Blowout Creek is now eroding the hillside and it’s the single largest source of sediments going into the watershed,” Quin notes. “Every spring, chocolatey water comes down because of high levels of suspended solids.”
Numerous other factors from town sites, equipment maintenance facilities, haul roads and other mining-related activities have left a legacy of environmental impacts, he adds.
In its plan of restoration and operations, filed with regulators in September 2016, Midas Gold laid out an integrated plan for the restoration of the legacy impacts in conjunction with the redevelopment of the site as a modern mining operation.
“The parties that created the worst of the disturbance don’t exist anymore to go after for cleanup, and what we’re proposing to do is integrate cleanup of the site with redevelopment,” Quin says.
Those efforts will include picking up tailings and processing them to get the remaining metals out, and then redepositing the tailings in a properly designed and lined tailings facility. Midas would also create a proper passageway that would allow salmon to swim upstream for the first time since the 1930s.
The U.S. Forest Service is expected to publish a Record of Decision in November 2019, Quin says, adding that both Republicans and Democrats in the state legislature supported the redevelopment in a rare joint house memorial passed by both houses of the state legislature.
Quin doesn’t expect the results of the feasibility study will be all that different from those in the PFS. “It’s the same project — our resource was increased in the first quarter of this year but it’s not that different, it’s just better defined,” he says. “Our hope is to come out with something quite similar to what was there before.”
The processing will involve floating off the pyrite to make concentrate and processing the concentrate on-site to make gold bars. When antimony grades are high enough, the plant could float off the stibnite to create a saleable antimony concentrate.
Quin says there is also exploration potential — mostly small tonnage, high-grade, near-surface underground targets clustered just east of where it plans to put the mill. The targets are antimony and gold, and include Scout and Upper Midnight. Scout is an antimony target discovered in the 1960s, and Upper Midnight is from 1970.
In a research note, Kerry Smith of Haywood Securities says Stibnite is a good addition to Barrick’s investment portfolio.
“In addition to having a large, ~4.6 million oz. reserve grading 1.7 grams gold per tonne, which would deliver an average of 337,000 oz. gold per year for 12 years, the exploration potential in this district remains very high.
“Barrick was attracted to four key features — potential capital cost and operating synergy opportunities with their Nevada operations that Barrick could realize, a stable location, excellent exploration upside, and meaningful production and operating cash flow.”
Stibnite is 89 km from Centerra Gold’s (TSX: CG) Thompson Creek molybdenum mine and 129 km from eCobalt Solution’s (TSX: ECS; US-OTC: ECSIF) Idaho cobalt project.