Midway gets key permit; pushes Pan closer to production

Midway Gold (MDW-T, MDW-X) is closer now to production than it was at the week’s outset.

The State of Nevada handed the company the water pollution control permit needed to push its Pan Gold Project in the state closer to production. The issuance of the permit comes on the heels of Midway producing a draft of its environmental impact statement and puts it on track to reach construction late this year.

Production at Pan is being targeted for the middle of 2014.

The permit was issued after the Nevada Division of Environmental Protection determined that a future mine would not harm the waters of the state and that public safety and health would be protected. The environmental agencies work was, no doubt, made easier by the fact that property contains no surface water areas and that the proposed open pit wouldn’t go down the groundwater table.

Midway is run by a pair of former Newmont Mining (NMC-T, NEM-N) executives, with Ken Brunk, former senior vice president at Newmont, serving as chairman and CEO and Fritz Schaudies, who also worked at Newmont, serving as CFO.

If it can get Pan into production, it will be the company’s first producing mine, and from the looks of a feasibility study released at the end of 2011, it should generate considerable value for investors.

That study calculated an after-tax net present value (NPV) of $123 million using a 5% discount rate and a US$1,200 per oz. gold price. The after-tax internal rate of return (IRR) came in at 32% using the same gold price. It expects that it will cost US$99 million to build a mine with a mine live of nine years and average annual production of 81,000 oz. per year at total cash costs of US$585 per oz.

Pan hosts proven and probable reserves of 48.3 million tonnes grading 0.56 grams gold per tonne for 864,000 oz. of gold. Those reserves come out of measured and indicated resources of 80.04 million tonnes grading 0.44 grams gold for 1.13 million oz. of gold. The site also has inferred resources of 3.93 million tonnes grading 0.36 grams gold for 45,000 oz. of gold

The Pan property sits at the northern end of the Pancake mountain range in western White Pine County, roughly 35-km southeast of Eureka, Nevada. Geologically, the project is an oxidized, Carlin-style gold deposit that will be mined via open pits with gold extraction coming from heap leaching.

In Toronto on March 27, the day after the news was released, the company’s shares finished the day where they began, at $1.27. Over the last 52-weeks the company’s share price has fluctuated between $1.01 and $1.90 and it has 128 million shares outstanding.