Update: Midway Gold Increases Spring Valley Resource Estimate

Aug.12.14 | About: Midway Gold (MDW)

Summary

Midway Gold increases the Spring Valley resources by 31.5%.

This puts the project over the magical 5Moz threshold, and JV partner Barrick Gold will be keen on advancing this project even further.

This update re-emphasizes there's deep value in Midway Gold, beyond the near-term production Pan project in Nevada.

Midway Gold (NYSEMKT:MDW) has just announced a resource update on its 25% owned Spring Valley Gold project in Nevada, USA. Joint Venture partner Barrick Gold (NYSE:ABX) was responsible for the drill program which resulted in a 32% increase in the total amount of ounces to 5.4 million ounces of gold. What's more important is the fact the average grade in the measured and indicated categories jumped by almost 20% which means that the economics will very likely be boosted by the higher grade.

This resource update isn't unexpected as I was aiming for a 5Moz resource estimate at Spring Valley for a while. This puts the project in the league of major exploration projects in the USA, and there's no doubt Barrick Gold is now even keener to advance this project towards a pre-feasibility study in H2 2015 and eventually towards production. The resource update is nice, but I'm really excited about the substantial increase in the average grade which could indicate the economics of this project will be superior.

I still think Midway Gold is a buy, and this resource update once again confirms the company is so much more than just a one-trick pony. The company is fully funded for production on its Pan project in Nevada, has another 1Moz+ project in Nevada which is getting ready for some studies on the economic viability and the cherry on the pie is Midway's 25% free carried interest in the Spring Valley project which is being advanced by senior gold producer Barrick Gold. All stars are aligning, and Midway Gold offers excellent value right now.

Disclosure: The author is long MDW. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.