Midlands Minerals to generate cash flow from Sian

Some industry observers might view Midlands Minerals‘ (MEX-V) decision to recover gold from loaded carbon fines at its past-producing mine in Ghana as a desperate move.

But Kim Harris, Midlands’ president and chief executive, sees it as a good way to weather the current financial crisis.

“For a junior explorer to have the ability to generate cash flow, at this time, is timely, given the current difficult market conditions”, she said in a prepared statement announcing the plan for Sian, a fully permitted open-pit gold mine with an existing carbon-in-leach plant.

Midlands’ Sian gold mine has a 30-year mining lease, a 400,000 ounce resource, and the company says it plans to make a production decision on the project about 18 months after it puts the remaining financing in place.

In the meantime, it has signed a contract with Gold Recovery, a subsidiary of Goldplat Plc (GDP-L), to begin recovering gold from loaded carbon fines on the Sian property. Goldplat first built its name in South Africa where it has become a leader in extracting precious metals from mining waste products.

In April Midlands assayed loaded carbon from Sian’s existing ten carbon-in-leach tanks and conducted a survey of the tailings dumps on the property. The company surveyed about 400,000 tonnes of tailings and the assay results confirmed the 93% gold recovery rate reported by Sian Goldfields, the mine’s previous owners. Sian produced 16,193 ounces of gold between 2001 and 2003 when the mine was closed due to the price of gold at the time and other operational issues.

The tailings assays also confirmed that there was an insignificant amount of refractory gold in ore that was processed between 2000 and 2003 and opens the possibility of adding a gravity circuit to the existing plant.

Gold Recovery then took its own samples from Sian and since then has started to re-bag and prepare the loaded carbon for shipment.

Midlands estimates that about 100 tonnes of carbon will be processed. But the total tonnage can’t be confirmed until all of the CIL tanks are emptied and final weighing takes place.

Under the agreement with Gold Recovery, a charge of US$130 per wet tonne of carbon received will apply and payments to Midlands will be calculated based on assay results.

For instance, for carbon assaying between 30 grams gold per tonne and 200 grams gold per tonne, Midlands will receive 70% of the agreed gold content.

For carbon assaying more than 200 grams gold per tonne, Midlands will receive 80% of the agreed gold content. (The agreed-upon-content means the final assay results upon which payments will be based.)

These final samples will be taken simultaneously by Midlands, Gold Recovery, and by two independent referees prior to processing. One sample is kept in secure custody for the purposes of due diligence.

The Sian property contains two previously producing open pit mines, Esaase and Ampeha. Sian has an indicated resource of 2.57 million tonnes grading 2.33 grams gold per tonne for total contained gold of 192,400 ounces and an inferred resource of 2.69 million tonnes grading 2.35 grams gold per tonne for 203,350 oz. gold.

Midlands’ contiguous Kwahu Praso project, which was once part of Sian, contains extensions of the Esaase and Ampeha trends. Sian and Praso are just 30 km northeast of Newmont Mining‘s (NMC-T, NEM-N) Akyem gold deposit.

Last year Midlands suffered a net loss of $1.24 million, up from a net loss in 2007 of $1.19 million. As of Dec. 31, 2008, the junior had cash and equivalents of $203,467, down from $2.46 million a year earlier.

In early May, Avion Resources (AVR-V) entered into an agreement to acquire a 16% stake in Midlands in a share exchange.

At presstime Midlands was trading at 18 per share. The junior has a 52-week trading range of 7.5-33 per share and has 53.6 million shares outstanding.