Midway bulks up gold resource at Spring Valley (May 02, 2011)

Two years worth of drilling by Barrick Gold (ABX-T, ABX-N) has allowed joint venture partner Midway Gold (MDW-V, MDW-N) to add significant gold resources to its Spring Valley gold project in Pershing County, Nevada.

 The partners now estimate the project hosts 144.8 million measured and indicated tonnes grading 0.45 gram gold per tonne for 1.22 million contained gold oz., as well as 103.9 million inferred tonnes grading 0.59 gram gold for an additional 1.97 million contained gold oz, all at a cut-off grade of 0.14 gram gold. This is up from a 2009 estimate of 1.8 million inferred gold oz. contained within 88 million tonnes grading 0.72 gram gold, at a cut-off grade of 0.2 gram gold.

Barrick is earning a 60% interest in the property from Midway under a March 2009 option agreement by completing US$30-million worth of work there over five years. Barrick has budgeted US$7 million this year for exploration, the minimum amount required under the option terms (as it has done the past two years, spending US$4 million the first year and $5 million the second year). Drilling in 2011 will focus on further expanding the resource and testing satellite targets, including those located on recently acquired land south of the existing resource, acquired by Barrick in December as part of the JV.

“We believe these new results show that Spring Valley is rapidly becoming a world-class gold system and could see further substantial growth with continued exploration along trend of the resource reported here,” commented Ken Brunk, Midway’s president and chief operating officer, in a prepared statement. “We are anxiously awaiting the commencement of drilling and future results from ground acquired late last year.”

Brunk noted the resource remains open at depth, to the south and to the north. Exploration drilling late last year near the recently acquired land 1.8 km south of the main deposit returned 12.2 metres of 1.2 grams gold per tonne at shallow depths. To the north, recent drilling intersected 295 metres of 2.5 grams gold, including a 71.6-metre section grading 9 grams gold.

Midway describes Spring Valley as a porphyry/diatreme-hosted gold system beneath pediment gravels in the Humboldt Mountains near Lovelock, Nevada. It has been exploring the 18.4-sq.-mile project since 2004, discovering at least six new zones of mineralization along the way.

Currently taking centre stage, however, is Midway’s Pan gold project in Nevada’s prolific Battle Mountain-Eureka gold trend. A shallow, sediment-hosted, oxide gold deposit, Midway recently completed a positive prefeasibility study for Pan outlining a more-than-one-million-oz. gold resource and planned production averaging 77,000 gold oz. per year. Initial capital costs for the mine total US$79.25 million, with expected cash operating costs projected to be US$473 per gold oz. using heap-leach stacking of 17,000 tons per day.

The Nevada-focused gold explorer also controls three other gold projects in the state, the most advanced of which is the Midway project. An epithermal gold system at the intersection of the Round Mountain and Goldfield trends, the project has been delayed of late by the townsfolk of Tonopah, who are concerned about possible future contamination of well water.

Midway’s shares dropped 9¢ to $1.91 after releasing Spring Valley’s updated resource estimate on May 2, a down day for gold.