One of my favorite mining companies, Midway Gold (NYSEMKT:MDW), which is constructing its Pan gold project in Nevada, has announced it has made an initial draw of roughly $18M from the project finance facility which was offered by the Commonwealth Bank of Australia. Midway has already spent $55M of the expected $76M capex and is now finalizing the construction of the Pan project which is still on track to pour its first gold in January 2015.
Midway was able to slash its capital expenditures by removing the need for an owner-operated mining fleet and using the run of mine leaching strategy at Pan's south zone. This has shaved off quite a few millions from the initial capital expenditures, and Midway also thinks it will need a lower working capital position to reach the free cash flow positive stage. This has led the company to reduce the project finance facility by $2M to $43M, whilst the $10M cost overrun facility remains in place. I'm a bit surprised about this decision as I'd have preferred to keep the PFF at the same level as you never know when an unexpected problem might arise. Additionally, the cost overrun facility is more expensive for Midway so it might have been a bit premature to lower the amount of the project finance facility.
Meanwhile, the company's contractor has been ramping up the mine rate to the desired 60,000 tonnes per day. Ore is being placed on the leach pad and Midway expects to start irrigating the leach pad within the next few weeks which should keep the company on track for a first gold pour before the end of January.
Disclosure: The author is long MDW.
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