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 high-quality Canadian miners 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 30 million shares outstanding.

Midland is trading at about $1.22 per share within a 52-week range of $1.09 to $1.84, but Lemieux has a one-year target price on the stock of $2.75, giving Midland a net asset value (NAV) of $79.7 million. “Midland is a dynamic project generator with growth potential that applies the partnership model,” he writes 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 Casault and Patris gold projects to Osisko and Aurizon, 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 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 Martime-Cadillac project, which allows it to earn an additional 1% interest for every $1 million spent,” Lemieux writes 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 would begin a ground-based geophysical survey at Laflamme, 30 km west of the town of Lebel-sur-Quévillon in Quebec, and begin drilling there this month. At the Casault property — 140 km north of the town of La Sarre, in Quebec’s Abitibi — Midland and Osisko have started preparatory work on a 60 km induced-polarization (IP) survey.

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

Laurentian Bank’s Lemieux notes in an Aug. 22 research note that the IP survey targets an unexplored area within the Sunday Lake deformation zone. He points out that Midland controls more than 20 km along the major Sunday Lake deformation zone. Winter drilling returned intercepts from 19 holes, including 10.4 grams gold over 1.45 metres from hole 1207.

Under Midland’s agreement with Osisko, the latter can get a 50% interest in Casault by spending $6 million on exploration, and paying a total of $600,000 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, 30 km northeast of Rouyn-Noranda, Que., Midland has had an option agreement since December 2010 with Aurizon. 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 33 sq. km in the Cléricy and La Pause townships. In 2011 Midland discovered a gold-bearing structure north of the La Pause fault that graded 0.48 gram gold over 17 metres in drill hole 15. An IP survey last year in the southeastern portion of the property resulted in new drill targets along the direct extension of the drill hole.

Midland says exploration so far at Patris shows 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 km of strike length.

At its fifty-fifty joint venture with Agnico-Eagle on the Maritime-Cadillac project, midway between Rouyn-Noranda and Val-d’Or, several gold-bearing structures have been discovered through drilling since 2007 in ultramafic rocks of the Piché Group — namely in the Dyke East zone.

Highlights from this zone include 1.7 grams gold over 46.4 metres with 21.1 grams gold over 1.2 metres in drill hole 141-11-31; and 1.7 grams gold over 37.85 metres, including 12.6 grams gold over 1.5 metres in 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 from 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 1.7 sq. km 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, from 2.4 million tonnes at 6.54 grams gold per tonne. The mine is 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 this year and average 102,000 oz. gold production annually, from 2013 through 2014, with a mine life lasting through 2015.

At Laflamme, North American Palladium earned a 50% interest after spending $1 million on exploration. The property consists of 706 claims covering 360 sq. km. Drill highlights include hole 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 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.

A gold discovery was also made in drill hole 11-1
1, with an intersection of 9.7 grams gold over 1 metre. Midland says ground geophysical surveys and a recent VTEM survey have outlined new high-quality targets along the extensions of both discoveries.