Positive economics for Midway’s Pan

VANCOUVER — A preliminary economic assessment of Midway Gold’s (MDW-V) Pan gold project in White Pine Cty., Nev., predicts an open-pit mine could produce 44,000 oz. gold annually for roughly US$450 per oz.

Pan is home to 38.8 million measured and indicated tonnes that carry an average grade of 0.55 gram gold per tonne. Midway considered three production scenarios in its project assessment — in-pit crush and convey, truck haulage and contractor mining — and found that, despite a higher capital cost, the in-pit crush and convey option demands the lowest operating costs and produces a slightly higher rate of return, making it the option of choice.

The open-pit mine would produce crushed ore with an average grade of 0.62 gram gold. A heap leach would then recover some 72% of the contained gold. The mine would produce an average of 44,000 oz. gold annually, though in its peak year production would reach 52,000 oz. Over a 7.25-year mine life the operation would produce 327,000 oz. gold.

To build the operation is expected to cost $59 million. For that investment Midway should expect a 23% pretax internal rate of return, enabling the company to pay back the investment capital within 3.3 years. The project carries a pretax net present value of $49 million, using a 5% discount rate. Midway used a long-term gold price of US$950 per oz.

Pan is home to several sediment-hosted oxidized gold deposits that make the project a classic Carlin gold system. Several exploration companies have explored the deposit, which was first discovered in 1978. The current measured and indicated resource sits within four deposits, known as North and South Pan, Nana and Black Stallion that strike for more than 3 km.

Midway now plans to start another round of drilling at Pan to further expand the resource base, as the deposits remains open in several directions.

And the company is well financed to do so, having just closed a $6.6-million financing. Midway sold 11.1 million units at 60¢ apiece, with each unit composed of a share and half a warrant exercisable at 80¢ for two years.

Midway’s share price remained unchanged on the Pan news, at its 52-week low of 42¢. The company has a 52-week high of $1.09 and 90 million shares outstanding.