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Midway Gold Hovers in Spite of Multiple Million Ounce Resources

|Includes: Midway Gold Corp (MDW)

The last time we wrote about Midway Gold (TSX.V: MDW), in 2007, President Alan Branham told us that the biggest news at Midway was their Spring Valley Project in Nevada, “where we’ve drilled into the neck of an old covered volcano on land just north of the largest silver producer in North America.”

A lot has changed since then, including a joint venture deal with Barrick Gold Exploration on the Spring Valley Project, Nevada, and another with Kinross for that company's Thunder Mountain Project. The former deal in particular has added significantly to the merit and prospects of Midway, with a 40% stake in the advanced stage project. Gold investors seem to be giving Midway Gold a pass nevertheless.

To put it into perspective, the Barrick deal saw the company pretty much do a triple on the news--from $0.20 to $0.60--but in spite of all the results since then, the company hasn't yet recovered much of its former glory as a $3 to $4 per share stud.

Branham tells me he too is surprised at the muted reaction from investors. "I certainly expected that the Barrick announcement would have had a more profound effect on our share price, but we announced it in October 2008, when the world was falling apart."

At the time of our 2007 interview with Branham, the company boasted about 130,000 measured and indicated ounces at Spring Valley. There were another 195,375 ounces inferred for a total of just under 330,000 oz gold.

Nevertheless, the deep and widely disseminated resource had chops, and the company drew Barrick Gold Exploration into the fold by mid-2008. When the company announced the JV, Branham had this to say: "We believe that Barrick has the capability to develop Spring Valley into a producing mine. As evidenced by our recent results from 2008 drilling, the deposit continues to expand. Barrick has been an excellent partner by investing $12.3 million in equity placements in Midway since 2006 and by providing technical advice as we have expanded the discovery. They are currently Midway's largest shareholder at 10.51 per cent..."

In March of 2009, the company announced new drill results that upped its Spring Valley resources up to a remarkable 1.8 million ounces. Still the market had little to say. "Barrick has done an excellent job so far this year. They've spent about $2.5 to $3 million of the required $4 million on the Spring Valley project. They've increased to resource to 1.8 million ounces of gold. And they're now working on improving the resource category by twinning holes, doing column leach tests, gravity tests and so on. We've very happy about their progress."

"Now we've added Golden Eagle, too," says Branham. "At a 0.2 [gram per tonne gold] cut-off, it's just about two million ounces. And it's open depth, to the north and possibly to the west."

Branham says Golden Eagle is a prospective open pit mine, exposed at surface and mineralized to 1,000 feet. "It coalesces into higher grade veins at depth, so there's more potential there.

Midway acquired 75% of Golden Eagle from Kinross in 2008. Previously Santa Fe Gold had calculated a historic resource for the project of 32,191,280 tons grading 0.069 ounce per ton for 2,221,198 ounces in 1996. The Qualified Person has reviewed and updated the resource with 1.7 million ounces indicated and other 192K ounces inferred:

"The Indicated resource is 31.4 million tons grading 0.055 ounce per ton (opt) gold, containing 1.744 million ounces of gold using a 0.020 opt gold cut-off. There is an additional Inferred resource of 5.1 million tons grading 0.038 opt gold, containing 192,000 ounces of gold...Drill data indicates that there is additional growth potential to the west and north of Golden Eagle and at depth. Our next step will be drilling to test near-surface oxide zones and to test potential expansion to the west."

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