Midland showcases partnership model

Junior Midland Exploration (MD-V) has assembled a number of gold, base metal and rare earth element projects in the Abitibi and James Bay area of Quebec but it is perhaps best known for championing the partnership model.

The company has partnerships with Agnico-Eagle Mines (AEM-T, AEM-N), Aurizon Mines (ARZ-T, AZK-X), North American Palladium (PDL-T, PAL-X) and Osisko Mining (OSK-T), which mining analyst Eric Lemieux of Laurentian Bank Securities says allows the junior “to remain active in exploration while preserving its cash position and tight share structure.” The company has about 30 million shares outstanding.

Midland Exploration is trading at about $1.22 per share within a 52-week range of $1.09-$1.84 but Lemieux has a one-year target price on the stock of $2.75 giving Midland a net asset value (NAV) of about $79.7 million. “Midland is a dynamic project generator with growth potential that applies the partnership model,” he wrote in a July research note. “We believe that in light of current market conditions, Midland’s partnership model is beneficial.”

The company has optioned its Casualt and Patris gold projects to Osisko Mining and Aurizon Mines respectively, and has joint ventures on its Cadillac-Maritime project with Agnico-Eagle and at its Laflamme project with North American Palladium. Midland also has the Ytterby property, a rare earth project in northern Quebec near the REE Strange Lake deposit in joint-venture with Japan Oil, Gas and Metals National Corporation.

Midland says it fully intends to continue securing new partnerships for its recently acquired properties. Lemieux, for one, likes the model, particularly in such tough funding environments for juniors.

“Agnico-Eagle is solely financing activities at the Maritime-Cadillac project, which allows it to earn an additional 1% interest for every $1 million spent,” Lemieux wrote in a research note. “Similarly, Osisko may spend $6 million in exploration at the Casault project and pay $0.6 million to Midland in order to earn a 50% interest.”

In July, Midland and operating partner North American Palladium said they will begin a ground-based geophysical survey at Laflamme, about 30 km west of the town of Lebel-sur-Quévillon in Quebec, and will begin a drill campaign there in September.  At the Casault property, about 140 km north of the town of La Sarre in Quebec’s Abitibi, Midland and partner Osisko have started preparatory work on a 60 km induced polarization survey.

Casault —about 40 km east of the Detour Lake gold deposit owned by Detour Gold Corp. (DGC-T) — is also about 3.5 km east of Balmoral Resources’ (BAR-V) Bug Lake zone. The property consists of 324 claims covering a surface area of about 178 square kilometres.

Laurentian Bank Securities’ Lemieux noted in an Aug. 22 research note that the IP survey targets an unexplored area within the Sunday Lake Deformation zone. He also points out that Midland controls more than 20 km along the major Sunday Lake Deformation zone. Winter drilling returned intercepts from nineteen holes including 10.4 grams gold over 1.45 metres from hole CAS-12-07.

Under Midland’s agreement with Osisko, the latter can get a 50% interest in Casault by spending $6 million in exploration work and making payments totaling $0.6 million over five years.  During the first year of the option agreement, Midland will act as project operator. Once Osisko earns its 50% interest, it has a three-year option to acquire an additional 15% interest, Lemieux says, by completing a bankable feasibility study or by taking on all exploration, development and mining operations.

At the Patris project, about 30 km northeast of Rouyn-Noranda in Quebec, Midland has had an option agreement since December 2010 with Aurizon Mines. Under the agreement Aurizon can earn a 50% interest in the property over four years by making cash payments totalling $230,000 and spending $3 million on exploration.

The Patris property consists of 77 claims covering a surface area of about 33 square kilometres in Cléricy and La Pause townships. In 2011 Midland discovered a major gold-bearing structure north of the La Pause Fault that graded 0.48 gram gold over 17 metres in drill hole 15 and an induced polarization survey last year in the southeastern portion of the property resulted in new drill targets along the direct extension of that drill hole.

Midland says on its website that it believes exploration so far at Patris shows strong potential for gold discoveries similar to deposits in the Cadillac and Malartic gold mining camps because it covers the faulted contact between sedimentary rocks of the Kewagama Group and mafic and ultramafic volcanic rocks of the Malartic Group over more than 5 kilometres of strike length.  

At its 50-50 joint venture with Agnico-Eagle Mines on the Maritime-Cadillac project, midway between the cities of Rouyn-Noranda and Val d’Or, several new gold-bearing structures have been discovered through drilling since 2007 in ultramafic rocks of the Piché Group, namely the Dyke East zone. Highlights from that zone have included 1.7 grams gold over 46.4 metres including 21.1 grams gold over 1.2 metres (drill hole 141-11-31); and 1.7 grams gold over 37.85 metres including 12.6 grams gold over 1.5 metres (drill hole 141-10-23).

In the property’s V4 West Zone, drilling has returned intercepts of 8.6 grams gold over 5.5 metres including 13.8 grams gold over 3.3 metres (drill hole 141-10-26); and in the Maritime Contact East Zone, 3.3 grams gold over 14.7 metres including 6.1 grams gold over 5.7 metres were reported from drill hole 141-08-14B.

Meanwhile, an exploration drift at 1,000 metres depth on the adjacent Lapa property runs southeast to the edge of the Maritime-Cadillac property, which covers a surface area of about 173 hectares along the Cadillac Break. Agnico-Eagle’s Lapa underground mine has been in production since 2009. Lapa is Agnico-Eagle’s highest grade mine, with gold grades more than twice as rich as the company’s average. Lapa has 501,000 oz. gold in reserves (2.4 million tonnes at 6.54 grams gold per tonne). The mine is just 11 km east of the company’s LaRonde mine, and 60 km west of the Goldex mine. (Lapa is expected to pour 100,000 oz. gold in 2012 and average 102,000 oz. gold production annually, from 2013 through 2014, with a mine life lasting through 2015.)

Finally at Laflamme, North American Palladium earned a 50% interest after spending $1 million on exploration.  The property consists of 706 claims covering a surface area of about 360 square kilometres. Drill highlights include hole LA-11-08 that returned  0.66% nickel, 0.35% copper, 0.17 gram platinum per tonne, 0.16 gram palladium per tonne, 0.11 gram gold and 1.4 grams silver per tonne over 8.0 metres, including a higher-grade interval at 1.55% nickel, 0.53% copper, 0.26 gram platinum, 0.28 gram palladium, 0.13 gram gold and 1.9 grams silver over 1.6 metres.

In addition a new gold discovery was made in drill hole LA-11-11, with an intersection of 9.7 grams gold over 1.0 metre. Midland says ground geophysical surveys and a recent VTEM survey have outlined new high-quality targets along the extensions of both discoveries.