Midas prepares for permitting odyssey at Stibnite in Idaho

VANCOUVER — Junior Midas Gold (TSX: MAX; US-OTC: MDRPF) has invested a lot of time and money in sketching out a promising development scenario at its rebranded Stibnite gold project, 16 km east of Yellow Pine, Idaho. The company’s most important journey is about to begin, however, as it prepares to start the environmental permitting process at the brownfield site.

Formerly known as the Golden Meadows project, Stibnite has over a century of exploration and mining history. Midas has dusted off the old data and chipped in its own exploration work to pull together a sizeable gold resource that stretches across three open-pittable deposits: Yellow Pine, Hanger Flats and West End.

In mid-December the company released a prefeasibility study that models a US$970-million development, which would produce 388,000 oz. gold annually over a 12-year mine life. 

More importantly, however, the company has faced Stibnite’s legacy issues head-on and devised a plan that include the protection and re-establishment of an upstream fishery.

“In broad concept the mine is quite similar to our preliminary economic assessment (PEA). The principal changes really relate to the environmental footprint,” president and CEO Stephen Quin says during a phone interview.

“We’ve realigned the access road to a completely different route using an updated forestry road to stay away from major drainages completely. Internally we’ve relocated the mill from an area of undisturbed forested wetland to the old town site,” he adds.

And in-depth stakeholder engagement throughout the project-design process has been Midas’ hallmark. Quin says the company took its PEA and approached regional communities and non-governmental organizations to ask for input. At Hanger Flats the company decreased its open-pit footprint — and sacrificed economic ounces — in order to trigger a 50% drop in waste material.

Salmon and other fishery enhancements are embedded in the company’s model, including removing man-made barriers and rehabilitating natural habitat to allow fish migration into the upper reaches of the watershed for the first time since the late 1930s.

Clean up and repair of mining-related impacts would begin in parallel with construction and continue through Stibnite’s operational life. Quin points out that the company estimates needing US$100 million — between capital and operating costs — to deal with the legacy issues.

“It’s been an extensive process through a variety of stages over a two-year period, and this is really the culmination of our social licensing programs to date,” Quin says. “The big actor, which is frequently underestimated, is the brownfield nature of our site. There’s a pit right through the river, and no fish can get past it. What does every single person have in common? They want it cleaned up.”

While Midas has crafted a plan to cope with Stibnite’s mining history, the company has also outlined promising economics. The latest study has a shorter mine life than previous designs due to the exclusion of around 900,000 oz. of inferred gold resources, but Quin says a longer mine life wouldn’t really add immediate value to the project.

Stibnite hosts probable reserves of 89 million tonnes grading 1.6 grams gold per tonne, 2 grams silver per tonne and 0.07% antimony. Contained metals are pegged at 4.6 million oz. gold, 7 million oz. silver and 137 million lb. antimony.

The project’s indicated resources total 94 million tonnes of 1.63 grams gold, 2.65 grams silver and 0.07% antimony, while inferred resources add 25.2 million tonnes of 1.32 grams gold, 2.15 grams silver and 0.05% antimony.

Widespread precious metal and antimony mineralization are related to igneous activity, and mineralization is localized along north- and northeast-trending structures, which are believed to be related to the nearby Tertiary-age Thunder Mountain caldera complex.

Midas would use conventional open-pit mining at Yellow Pine, Hangar Flats and West End, which all lie within 3 km. The deposits mostly hold unweathered sulphides, while the West End deposit contains some oxide and transitional material.

A single processing circuit has been designed to accommodate the ore types. Sulphides would be crushed, milled and treated with sequential flotation to produce two products: an antimony concentrate for off-site shipment to a third-party smelter; and a gold concentrate that would be processed on-site using pressure oxidation, followed by agitated tank leaching to produce gold-silver doré.

The operation would crank out 4 million oz. gold over the mine’s life at US$568 per oz. by-product cash costs. This would result in an US$832-million after-tax net present value at a 5% discount rate, along with a 19.3% internal rate of return and 3.4-year payback period.

“We evaluated options in regards to a smaller operation with a lower development cost, but in our situation the purpose of the study is really to enter into the regulatory process. I can’t look out there five to six years down the road and know where the gold price will be positioned,” Quin comments. “It might not be the flavour of the month with lower costs and mine scalability, but you’d be hurting the value of the project if you permitted a smaller operation.”

While Midas isn’t in a hurry to add tonnage, the company is exploring the option of mining higher-grade ounces during early years at Stibnite. 

Quin points to potential near-pit reserve expansions as “low-hanging fruit,” and mentions underground targets on the greater property package that could boost head grades.

Underground prospects include the Garnet deposit, where the company already has a database of 95 drill holes. The target could tack on between 1 million and 2 million tonnes, with grades ranging from 5 to 8 grams gold.

“These are small-tonnage prospects with high grades you can blend into the mill early. That’s a way you can add value and boost early payback,” Quin says.

Though Midas will pursue optimization measures as it moves towards a feasibility study, the company will focus on Stibnite’s permitting hurdles. Though the project appears to have local support, it still needs to achieve state and federal approval.

The company hopes that the social groundwork it has laid — and its willingness to address legacy issues — will help the process. Quin points out that a couple of impressive shareholders have recently stamped their financial approval on the company.

In March 2014, Teck Resources (TSX: TCK.B; NYSE: TCK) exercised its right to participate in a financing to pick up another 1.3 million shares at 90¢ per share. Teck now holds a 9.9% equity stake in Midas.

Meanwhile, Franco-Nevada (TSX: FNV; NYSE: FNV) forked over nearly US$15 million in mid-2013 for a 1.7% net smelter return royalty on Stibnite.

“I told a shareholder recently that those who know the project the least love it the least,” Quin says.

“Flip that around and we’ve had companies like Teck and Franco complete due diligence with regulators, and they’ve opted to invest. I think people who go out and do the homework have a different perception of the project risk compared to somebody who hasn’t been there and evaluated the current issues with the site.”

Midas has traded within a 52-week window of 43¢ and $1.14 per share, and reported cash and equivalents of US
$13.2 million at the end of the third quarter. 

The company has 142 million shares outstanding and closed at 53¢ at press time for a $72.4-million market capitalization.