Categories: Precious Metals
Topics: General Precious Metals

Midas Gold (TSX: MAX) Chairman Marcelo Kim on Positive Feasibility Study & Next Permitting Steps for Flagship Stibnite Gold-Antimony Project, Idaho

Feb. 5, 2021

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the chairman of Midas Gold — Mr. Marcelo Kim. Marcelo, it's a pleasure to have you on. How are you today?

Marcelo Kim: I'm doing well, Gerardo. Thank you and thank you for having me on.

Gerardo Del Real: Thank you for taking the time. It's really been a busy 2021. You recently completed a positive Feasibility Study for one of the best undeveloped gold-antimony projects in the world — the Stibnite Gold Project in Idaho, of course. You also reached an agreement to begin environmental restoration. That bodes well for the ongoing permitting application. 

You have completed a share consolidation in connection with the NASDAQ listing. So there's a lot of moving parts that I want to get into. I would love for you to give the audience just a brief overview of your background for those that may not be familiar with your history.

Marcelo Kim: Yeah sure, Gerardo. I joined John Paulson [Paulson & Co.] in 2009 and have been working here all of my life actually. Started off as a generalist, looking across capital structures at different industries. Then, in 2010, when John started a gold-focused fund, he asked me to focus full-time on gold. 

Since then, I've been focused on gold. But over the past few years, it has broadened out into some other resource sectors and some of the macro investments that we make here. But certainly cut my teeth in gold and have been exposed to the sector for a very long time.

Gerardo Del Real: Excellent. We know that the last several months has brought in, not a new team, but definitely a shifting of personnel and duties. Stephen Quinn, whom I'm very familiar and very supportive of, someone who did a phenomenal job with Stibnite and Midas, is no longer at the helm. 

Laurel Sayer, whom I'm also familiar with and has done a phenomenal job in her own right, is now in charge there. Can you speak a bit to the thinking behind the restructuring?

Marcelo Kim: Sure. We've been involved with Midas since 2016, and we've been mired in this permitting process for the better part of four years. As you know, we had numerous delays. But I think, encouragingly, last year we hit a very important milestone, which was the filing of the draft EIS [Environmental Impact Statement]. The reason why that was such an important milestone is, leading up to the publication of that document, that's where you have the scope for really substantial delays because you're gathering as much information as you can. That's what happened to our project. 

Post the comment period, basically, it's a very well-known path to getting your Record of Decision, thereafter. There could be some delays here or there but they're very minor in the scheme of the delays that we've had in the past. For us, that became a very important marker for us to look at; the next 12 months and what Midas is going to look like.

And I'd say there were two big themes. The first one is, obviously, needing to beef up the team with board members that had different skills and expertise. Notably, we brought on Chris Robison who’s the former chief operating officer from Newmont. So he can help us on the technical aspects of mining. 

We also brought on Dave Deisley – Donlin Gold is the only major [US] project that's been permitted recently – and he helped lead that effort for NOVAGOLD. 

We also brought on Bob Dean who's an investment professional from Idaho. And we also brought on Jeff Malmen who works for Idaho Power and is someone who's very well-known in the state. And finally, Alex Sternhell who's a Democrat from DC as we navigate some of the new administration here in the United States.

You'll notice that the big focus there was making this a US company. After all, we are a US-based project. The team in Idaho, where we have the bulk of our team, is based in Boise. We felt it was important as we embark on becoming a producer, eventually, that this be a US-focused business. 

Secondly, you've seen there's been a big focus recently on critical minerals and the sourcing of critical minerals domestically and making sure our supply chains are secure. It was very disingenuous, to be honest, for us to be talking about antimony and the critical use of antimony for the US government by being a Canadian company, to be honest. 

We felt with those changes, we really needed to become a US company, so that's the focus that we took. Those were the decisions behind why we made those changes last year.

Gerardo Del Real: I've received a lot of questions from subscribers and shareholders alike about the new administration. It was interesting to me that on January the 15th, you had an announcement that the federal agencies had authorized and directed the company to perform the agreed-to immediate clean-up actions to address the contaminated legacy conditions at Stibnite. 

That was an interesting announcement given that the permitting application is ongoing. Can you provide some context on the approach moving forward with the new administration? Is it business as usual… or do you sense a change in approach?

Marcelo Kim: I'll separate that into two parts: on the agreement that we signed and then just generally. And I'll start off with the general permitting framework. Our lead agency is the US Forest Service. And the people who are assigned to our project are mostly career US Forest Service people. So they're not political appointees. We think the permitting itself is on its own path. 

On the AOC [Administrative Order on Consent] front, the reason why it was such an important and meaningful agreement for us was it finally allowed us to make good on the promises that we've been making about wanting to improve water quality at the site. Without the agreement, we would have to rely on the permit for the mine. 

And by having this other agreement – which carves out the mine permitting separately and allows us to go in there today and start all of the work that we've committed to in phase one of the agreement – that really advances one of our corporate goals which has been to restore water quality, restore fish passage, and clean up legacy tailings and waste dumps in the site.

As we think about the new administration, the new administration has made it very clear that they're open to mining for the right minerals, and you can throw critical minerals in there. Anything with a renewable energy tilt, I think, will be very well received. 

Certainly, a part of our story that was not focused on too much in the past… but antimony has brought uses in what we call the green economy going forward. There's a company, for instance, called Ambri that's backed by Bill Gates that's developed a very low-cost calcium antimony battery. They just signed an agreement with a company called TerraScale to develop 250 megawatt hours of capacity at a project in Reno.

Antimony doesn't get as much airtime as maybe cobalt and lithium but the bearings that are used for wind turbines for wind energy sources are heavily used with antimony. Solar panels; the tinting that goes into those panels uses antimony. And all of the wiring, for instance, the cable sheathing has to be coated with antimony. Otherwise, it can combust. 

Antimony is a very important driver of what we'll see going forward in many of the uses for renewable energy. Importantly too, the supply of antimony is dominated by China, Russia, and Tajikistan. Ninety-two percent of the world's supply comes from those three countries; China and Russia being the dominant ones. 

The US currently produces no antimony. And our project, once it's up and running, would account for nearly 30% of total US demand. So it becomes a very meaningful contributor in improving the supply chain for this country.

Gerardo Del Real: Towards the end of last year, you completed and announced the positive Feasibility Study for the Stibnite Gold project. It's obviously impressive at $1,850 [per ounce] gold. Using an NPV of 5%, you come out at $1.9 billion and average annual cash flow of $594 million – that's US dollars, by the way – in the first four years of operation. 

Can you give us a little overview as to the metrics outlined in the study and the approach moving forward? You and I had a private conversation where I've been pretty vocal that I think Stibnite is a clear takeout target. And I thought our discussion was insightful, and I'd love for you to share some of the details of the company's approach moving forward.

Marcelo Kim: Sure. The Feasibility Study, which was really recent, has a lot of really good information in it. We just filed the full Technical Report. But, really, the highlights are… this is a very large mine with 4.8 million ounces of reserves. In the first four years, the average annual production is about 463,000 ounces. It peaks in the fourth year at 570,000 ounces. The all-in sustaining costs [AISC] are sub-$450 an ounce. 

The first four years are the best because we access the highest grades at 2.2 grams a tonne versus 1.4 grams a tonne for the life of the mine. But that's what really drives that US$1.9 billion of NPV… is bringing the most valuable ounces forward. We were very happy with those results. 

The US$1.9 billion compared to our current market cap of US$414 million – and that's including all of the convertibles so that's on a fully diluted basis – that's about 0.2-times NAV. I think, as we get more progress here with permits, when you look at companies that have already received their permits, they trade closer to 1.0-times NPV. So we expect the market will start giving us more value as we continue to hit our permitting milestones.

Regarding the development of this mine, it's a US$1.3 billion capital number. We think about 60%-70% of that can be built through traditional debt packages. The rest of it has to be done through a form of equity or some sort of hybrid form. But we think that's readily doable for a company like ours given that the value of this project is US$1.9 billion. We expect the company’s stock will reflect that value more and more as we reach our permitting milestones. And that will afford us the ability to actually build this mine.

In terms of what we want to do with the company, we like to only focus on what's in our hands and what's in our control. Again, one of the reasons why we made all of those changes to the board was we were taking a 12-month view lookout. And knowing that this company was equipped for permitting but it wasn’t equipped for building a mine. And so we've really beefed up the team on the board side, initially. And what we expect to do is continue beefing up on the management side to ultimately build this mine. 

We think one of the best value options for shareholders here would be to build this mine because it would be the largest independent producing mine in the United States; the lowest-cost mine. And we think that's probably the best value for shareholders. And that's why we wanted to make all of those changes ahead of time so that shareholders can reap the benefits of all of that.

Gerardo Del Real: Marcelo, there's a lot to like there. There's still substantial exploration upside at the property. I've been there multiple times, as you know, and that exists, and I’ve got to believe that'll get factored in when there is that eventual re-rating that we're all anticipating. This has been a good conversation. Is there anything else that you'd like to add, Marcelo?

Marcelo Kim: No. I mean, Gerardo, thank you for your time. I think just to summarize things, we have a very valuable gold asset. But I think there are a couple aspects that just aren't well understood by others. 

One is the restoration aspect. We are going to start improving water quality at the site. That was the reason why we signed this agreement with the EPA. We think that makes it a very attractive project for anybody, whether you're a government partner, whether you're a local stakeholder, whether you're a shareholder. 

Secondly, this company will become probably one of the first projects out there to improve the United States' position with critical minerals and making sure we source critical minerals domestically. And it's not just a small amount; it'd be almost 30% of US demand. And antimony – even though it doesn't garner all of the attention that some of these other metals do – is critical to our nation's defense and energy sectors. 

We expect the support for this project from government partners, from our local stakeholders, and from the broader investment universe to really open up. That's one of the reasons why we've also applied for this NASDAQ listing. We expect in the next couple of weeks, when that's done, for investors to really embrace the story going forward.

Gerardo Del Real: I’ve got to believe the local community is excited about the 550 direct jobs that will be created during operations.

Marcelo Kim: And they're very high paying jobs as well. And this is an area in Valley County that used to be a mining community decades ago but was never adapted to the changes. And so we're going back again, restoring the site, but also trying to restore that part of the area economically. We're very proud of being able to do that.

Gerardo Del Real: I'm looking forward to getting back onsite. Marcelo, thank you again. This was great. I appreciate it!

Marcelo Kim: Thank you, Gerardo. Take care.

Gerardo Del Real: You as well.

Marcelo Kim: Okay. Bye-bye.