Barrick takes stake in Midway Gold (May 29, 2006)

Vancouver — In what has become an increasingly common strategy among majors, Barrick Gold (ABX-T, ABX-N) will participate in a financing by Nevada-focused explorer Midway Gold (MDW-V, MDWGF-O).

Barrick has committed to purchasing more than half of Midway’s 3.725 million unit private placement, priced at $1.80 apiece. The major’s acquisition of 2 million units will give it a 6% equity position in Midway. Sprott Asset Management is also taking down part of the financing, committing to 1 million units.

The units, subject to the standard 4-month hold period, are composed of one common share and half a warrant. Full warrants are exercisable at $2.70 into shares for one year, with the company retaining a right to call them if its shares average at least $3.25 over 15 consecutive trading days.

Midway’s financing will recharge its treasury to the tune of about $6.7 million, which will be primarily earmarked for resource expansion at the Spring Valley project in northwestern Nevada. Additional exploration will also be conducted on the company’s 39-sq.-km claim block, which hosts the deposit.

A preliminary estimate at Spring Valley reviews measured and indicated resources of 9.1 million tonnes at 0.82 gram gold per tonne, containing about 239,000 oz. gold. The calculation is based on 164 drill holes, uses a US$450 per oz. gold price and a 0.35 gram gold cutoff grade. An additional 7 million tonnes of inferred resource averaging 0.84 gram gold (195,000 contained ounces) was also estimated within a potential pit shell.

Gold mineralization is hosted along the margin of a large diatreme-porphyry intrusive complex at Spring Valley. Midway’s drilling has resulted in the merging of three previously defined zones into a single zone about 1 by 0.5 km and extending to a depth of 300 metres. Mineralization remains open to the north, south, west and at depth.

The gold explorer is also active on its Midway project in Nye Cty., Nev., where recent drilling has intersected up to 7.6 metres of 8 grams gold in the Dauntless zone, a steeply dipping quartz vein system.

Investors jumped on the issue following the May 10 announcement of Barrick’s involvement in the financing, pushing the stock up by about 40, or 17%, to around $2.80. With 29.1 million shares outstanding, Midway posts an $81-million market capitalization.