Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MDW > SEC Filings for MDW > Form 10-Q on 9-Nov-2012All Recent SEC Filings

Show all filings for MIDWAY GOLD CORP

Form 10-Q for MIDWAY GOLD CORP


9-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Quarterly Report filed on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under the heading "Risk Factors and Uncertainties" in our Form 10-K filed with the SEC on March 9, 2012, and elsewhere in this report.

This discussion and analysis should be read in conjunction with the accompanying unaudited interim consolidated financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the unaudited interim consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Midway to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis Midway reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that Midway believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but Midway does not believe such differences will materially affect our financial position or results of operations. Critical accounting policies, the policies Midway believes are most important to the presentation of its financial statements and require the most difficult, subjective and complex judgments, are outlined below in "Critical Accounting Policies," and have not changed significantly.

Cautionary Note Regarding Forward-Looking Statements

In addition, certain statements made in this report may constitute "forward-looking statements". These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of Midway to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include, without limitation, the statements regarding Midway's strategy, future plans for production, future expenses and costs, future liquidity and capital resources, and estimates of mineralized material. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, risks and uncertainties related to: our expected plans of operation to continue as a going concern; the establishment and estimates of mineral reserves and resources; the grade of mineral reserves and resources; anticipated expenditures and costs in our operations; planned exploration activities and the anticipated outcome of such exploration activities; plans and anticipated timing for obtaining permits and licenses for our properties; anticipated closure costs; anticipated liquidity to meet expected operating costs and capital requirements; estimates of environmental liabilities; our ability to obtain financing to fund our estimated expenditure and capital requirements; factors expected to impact our results of operations; the expected impact of the adoption of new accounting standards; and risks related to development, bonding, permitting, construction, other activities related to mine development; unexpected changes in business and economic conditions; significant increases or decreases in gold prices; changes in interest and currency exchange rates; metallurgy, processing, access, availability of materials, equipment, supplies and water; results of pending and future feasibility studies; joint venture relationships; political or economic instability, either globally or in the countries in which we operate; local and community impacts and issues; accidents and labor disputes; competitive factors, including competition for property acquisitions; availability of external financing at reasonable rates or at all and those additional risks as described under the heading "Risk Factors" in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 9, 2012. Forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continues" or the negative of these terms or other comparable terminology. Although Midway believes that the expectations reflected in the forward-looking statements contained herein are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements are made based on management's beliefs, estimates, and opinions on the date the statements are made, and Midway undertakes no obligation to update such forward-looking statements if these beliefs, estimates, and opinions should change, except as required by law.

Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates

The mineral estimates in this Form 10-Q have been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms "mineral reserve", "proven mineral reserve" and "probable mineral reserve" are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in United States Securities and Exchange Commission ("SEC") Industry Guide 7 under the United States Securities Act of 1933, as amended. Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.

In addition, the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases.

Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.

Accordingly, information contained in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

Overview

Company Overview

Midway is a development stage company engaged in the acquisition, exploration, and, if warranted, development of gold and silver mineral properties in North America. Our mineral properties are located in Nevada and Washington. Our Pan project is in the development stage.The Tonopah, Spring Valley, Gold Rock and Golden Eagle gold properties are exploratory stage projects with identified gold mineralization. The Thunder Mountain project is an earlier stage gold and silver exploration project.

Business Strategy and Development

We are currently working towards transitioning from a development stage company to a gold production company with plans to advance the Pan gold property located in White Pine County, Nevada through to production by the second half of 2014.

The map below shows the location of Midway's properties located in Nevada, USA.

[[Image Removed]]

Highlights for the third quarter 2012:

Pan project - An Environmental Impact Statement ("EIS") is being prepared by the Bureau of Land Management ("BLM") and cooperating agencies as part of the permitting process for a mining plan of operations submitted by Midway.

Spring Valley project - Assay results were received from drilling by Barrick conducted in the second quarter of fiscal year 2012.

Gold Rock project - Commenced the drilling program, designed to support production start-up in 2016.

Pan Project, White Pine County, Nevada

The Pan property is located at the northern end of the Pancake mountain range in western White Pine County, Nevada, approximately 22 miles southeast of Eureka, Nevada, and 50 miles west of Ely, Nevada. Access is via a seven mile dirt road running south-southeast from US Highway 50, at a point about 17 miles southeast of Eureka, Nevada. Eureka has a population of about 2,000. Water is readily available from wells west of the property. In March 2011, we contracted a third party vendor to obtain permits to extend power lines to the property.

Highlights

Engineering and permitting activities continue to progress on schedule. Recent developments for the Pan project include:

Completion of the scoping phase of the federal permitting process, including public meetings. Baseline studies are complete and JBR Environmental, a third-party consulting firm, is currently preparing a draft version of the Environmental Impact Statement (EIS).

Selection of Jacobs Engineering Group for front-end engineering of mine related infrastructure including project buildings, roads, electrical and water supply.

Acquisition of adequate water rights for mineral processing and completion of a production size water well and five monitor wells.

Completion of engineering for the heap leach pad and ponds by SRK Consulting.

Completion of engineering design and permitting for a new access road and selection of a contractor.

Selection of Summit Valley Technologies (SV), a division of FL Smidth, to provide gold recovery equipment for the processing plant. SV is a world-wide leader for supplying gold recovery equipment.

Ongoing large scale column tests to determine gold recovery amounts from larger size material which could reduce crushing requirements and lower capital costs.

Ongoing diamond drilling for crusher site characterization, reverse circulation drilling to test deep exploration targets, and follow-up condemnation drilling beneath proposed mine facilities.

Mineral Reserves and Resources

Cautionary Note to U.S. Investors - In this Quarterly Report we use the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource", which are geological and mining terms as defined in accordance with NI 43-101 under the guidelines adopted by CIM, as CIM Standards in Mineral Resources and Reserve Definition and Guidelines. U.S. investors in particular are advised to read carefully the definitions of these terms as well as the "Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates" above.

In October 2011, we reported an updated resource estimate for the Pan project based on results from 2011 drilling received to date. The updated measured and indicated resource estimate exceeds one million ounces of gold. The 1.13 million ounces of gold are contained in 37 million tonnes of 0.49 grams per tonne (gpt) gold in the Measured category and 43 million tonnes of 0.40 gpt gold in the Indicated category using a 0.14 gpt gold cutoff grade. The updated resource was prepared by Gustavson Associates, LLC ("Gustavson"). The mineral resources are summarized below.

                 Updated Resource Estimate, Pan Project, Nevada

                                     Measured Resource
             Cutoff (gpt)         Tonnes         Grade (gpt)       Gold ounces
                      0.27       27,352,000              0.59           520,000
                      0.21       30,857,000              0.55           547,000
                      0.14       36,920,000              0.49           579,000
                      0.07       50,924,000              0.38           622,000




                                    Indicated Resource
             Cutoff (gpt)         Tonnes         Grade (gpt)       Gold ounces
                      0.27       27,126,000              0.52           453,000
                      0.21       32,652,000              0.47           495,000
                      0.14       43,118,000              0.40           551,000
                      0.07       73,925,000              0.27           645,000




                             Measured Plus Indicated Resource
             Cutoff (gpt)         Tonnes          Grade (gpt)      Gold ounces
                      0.27        54,478,000              0.56          974,000
                      0.21        63,509,000              0.51        1,042,000
                      0.14        80,037,000              0.44        1,130,000
                      0.07       124,849,000              0.32        1,268,000




                                     Inferred Resource
              Cutoff (gpt)        Tonnes         Grade (gpt)       Gold ounces
                       0.27       1,771,000              0.58            33,000
                       0.21       2,229,000              0.51            37,000
                       0.14       3,928,000              0.36            45,000
                       0.07       9,693,000              0.20            63,000

Note: The tonnage and total ounces of gold were determined from the statistical block model. Average grades were calculated from the tonnage and total ounces and then rounded to the significant digits shown. Calculations based on this table may differ due to the effect of rounding. See "Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates."

On November 15, 2011, we announced completion of a Feasibility Study showing robust economics for the Pan project. Mineral reserves were based upon a design pit using Lerchs Grossmann generated pit surfaces that maximize revenue based on a $1,200 per ounce three-year trailing average price of gold. Cutoff grades of 0.21 gpt in the South pit and 0.27 gpt in the North & Central pits produced the project's highest NPV.

Table 2: Total Pan Mineral Reserves, November 2011

      Pit          Cutoff Grade        Metric Tonnes        Gold Grade         Ounces Gold
     Area          (grams/tonne)         (x 1000)          (grams/tonne)        (x 1000)

                                           Proven
North & Central              0.27              13,085                0.60               251
     South                   0.21              12,160                0.61               236
   All Pits                                    25,245                0.60               487

                                          Probable
North & Central              0.27              10,994                0.50               178
     South                   0.21              12,073                0.51               199
   All Pits                                    23,067                0.51               377

                                    Proven plus Probable
North & Central              0.27              24,078                0.55               429
     South                   0.21              24,233                0.56               435
   All Pits                                    48,311                0.56               864

Note: The tonnage and total ounces of gold were determined from the statistical block model. Average grades were calculated from the tonnage and total ounces and then rounded to the significant digits shown. Calculations based on this table may differ due to the effect of rounding.

We have determined that the Feasibility Study and the status of the project's permitting meets the requirements to establish proven and probable reserves, as defined under SEC Industry Guide 7, and the proposed program for the property is developmental in nature.

Mining and Production

The Pan gold deposit contains mineralization at or near the surface and spatially distributed in a manner that is ideal for open pit mining methods. Gold grade distribution and the results of preliminary mineral processing testing indicate that ore from the Pan deposit can be processed by conventional heap leaching methods. The method of material transport evaluated for this study is open pit mining using a 21.6-yd3front end shovel as the main loading unit with a 16-yd3 front end loader as a backup loading unit. The ore will be loaded into 150-ton haul trucks and transported to the primary jaw crusher, which will be set up at the mouth of the pit. The primary jaw crusher is a semi-mobile unit mounted on skids that will be moved to the mouth of whichever pit is being mined. The crushed ore material will be conveyed to the secondary crushing site, crushed to P80 -inch (North) and P80 1-inch (South), agglomerated, and conveyed to the heap leach pad. The waste material will be loaded into the 150-ton haul trucks and hauled directly to the waste dump. The truck haul method was chosen over in-pit mobile crushers and mobile conveyors in order to simplify waste dump construction and allow for more flexibility in day to day mining activities.

                                Operating Costs

                                          US$                  US$
                 Description         Per ton of ore      Per oz of gold
                    Mining                      2.78              227.97
                  Processing                    2.58              211.82
                     G&A                        0.37               30.49
               Production Taxes                 0.52               42.99
              Contingency - 10%                 0.29               23.51
             Total Operating Cost   $           6.54     $        536.78




                             Initial Capital Costs

                          Description                   US$
                Construction and owner's capital     84.2 million
                        Contingency (5%)              6.8 million
                 Working capital and inventory        8.2 million
                             Total                 $ 99.2 million

Metallurgy and Processing

Material from the North and South Pan pits will be processed using conventional heap leaching methods. Ore from both pits will be crushed by the primary in-pit mobile jaw crusher and secondary and tertiary cone crushers to P80 -inch (North) and P80 -inch (South) prior to leaching. The fines will be agglomerated. Crush size and leach kinetics are based on current metallurgical testing. Additional testing for optimization is underway.

Barren solution will be distributed on the leach pad with drip tube emitters. Pregnant solution and storm water storage ponds are integral to the leach pad system. Pregnant solutions will be treated in an adsorption/desorption refining (ADR) plant using conventional unit processes.

The Feasibility Study was prepared to the standards of NI 43-101. The open pit Mineral reserves and resources were completed by Gustavson, with Terre Lane and Donald E. Hulse acting as the qualified persons.

We incurred $1,152,876 and $4,366,559 of Mineral Exploration Expenditures at the Pan project in the nine months ended September 30, 2012 and 2011, respectively. These expenditures were primarily for salaries and labor, which represented 60% of total expenditures during the nine months ended September 30, 2012. For the comparable period during 2011, expenditures were primarily for engineering and consulting, and drilling which represented 34% and 19% of the total expenditures for the Pan project, respectively. Beginning on January 1, 2012, we began to capitalize certain permitting and engineering activities as part of our plans to advance the Pan project to production and in the nine months ended September 30, 2012 we capitalized $4,224,020 of these costs as compared to nil for the comparable period in 2011 and $2,176,070 for the three months ended September 30, 2012 as compared to nil for the comparable period in 2011.

Tonopah Project, Nye County, Nevada

The Tonopah property is located in Nye County, Nevada, approximately 15 miles northeast of the town of Tonopah, 210 miles northwest of Las Vegas and 236 miles southeast of Reno. The property is over the northeastern flank of the San Antonio Mountains and in the Ralston Valley. Water for exploration purposes is available from water wells for a fee from municipal sources. Power is accessible from existing power lines crossing the property, however capacity is unknown and may be limited.

There was no activity on this project during the third quarter of 2012.

We incurred $222,603 and $1,493,695 of expenditures at the Tonopah project in the nine months ended September 30, 2012 and 2011, respectively. Salaries and wages, and property maintenance and taxes represented 39% and 33% of total expenditures during the nine months ended September 30, 2012. Drilling expenses for the comparable period in 2011 represented 54% of total expenditures. The Tonopah project is without known reserves, as defined under SEC Industry Guide 7, and the proposed program for the property is exploratory in nature.

Spring Valley Project, Pershing County, Nevada

The Spring Valley property is located in the Spring Valley Mining District, Pershing County, Nevada, approximately 20 miles northeast of the town of Lovelock. The property is accessed from Nevada State Highway 50, which extends eastward from US Interstate 80 and is paved to the Rochester turn-off; thereafter it is a dirt road. Water for exploration purposes is available from water wells drilled on the property under temporary grant of water rights. Power is accessible from existing power lines; however capacity is unknown and may be limited.

Gold has been intercepted over an area 5,200 feet long by 3,500 feet wide that extended to a depth of 1,400 feet, suggesting the presence of a large mineral system. The Spring Valley project is under an exploration and option to joint venture agreement with Barrick. Barrick is funding 100% of the costs to earn an interest in this project. Barrick spent $7.6 million (unaudited) in 2011. Barrick's total expenditure through the end of fiscal year 2011 of approximately $17.7 million exceeds the cumulative $16 million expenditure required. Barrick has informed Midway that it intends to conduct and fund an $11 million program in fiscal year 2012 that includes both exploration drilling and development work in preparation for an internal pre-feasibility study. Exploration will be focused on in-fill drilling in the north resource area and expansion drilling of the south resource area. The development work will include metallurgical, geotechnical and hydrological studies. This program exceeds the minimum required 2012 program.

Barrick provided us with results from second quarter 2012 drilling. During the quarter, Barrick completed 6,035 meters of reverse circulation and 2,970 meters of core drilling. Highlights of the drill intercepts include:

157 meters of 1.75 grams per tonne (gpt) gold in SV12-561c including 17.1 meters of 8.06 gpt

144.9 meters of 1.65 gpt gold in SV12-565c including 1.5 meters of 113.52 gpt

80.8 meters of 1.61 gpt gold in SV12-570 including 1.5 meters of 45.60 gpt gold

30.5 meters of 1.20 gpt gold in SV12-568 including 1.5 meters of 8.33 gpt and

13.7 meters of 5.38 gpt gold including 3.0 meters of 15.05 gpt and

80.8 meters of 1.10 gpt gold including 1.5 meters of 5.21 gpt

Other higher grade intercepts include

1.2 meters of 14.16 gpt gold in SV12-571c

1.5 meters of 8.30 gpt gold in SV12-572c

1.5 meters of 12.14 gpt gold in SV12-579

3.0 meters of 10.39 gpt gold in SV12-589

Development drilling is gathering metallurgical, hydrological and geotechnical data for a scoping-level economic evaluation. Hydrology studies are underway and geotechnical drilling will follow. A second round of metallurgical test work is expected to begin later this year.

Spring Valley has an estimated 2.16 million ounces of gold in the measured and indicated categories, consisting of 0.93 million ounces in the measured category and 1.23 million ounces in the indicated category at a cut-off grade of 0.14 grams per tonne (g/t). There is an additional inferred resource of 1.97 million ounces of gold at the same cut-off grade. The measured resource is contained within 59.0 million tonnes grading 0.49 g/t, the indicated resource is contained within 85.8 million tonnes grading 0.45 g/t and the inferred resource is contained within 103.9 million tonnes grading 0.59 g/t.

Measured and indicated resources are estimated pursuant to Canadian industry standards. See "Cautionary Note to U.S. Investors Regarding Reserve and Resource Estimates" above. The Spring Valley project is without known reserves, as defined under SEC Industry Guide 7, and the proposed program for the property is exploratory in nature.

Barrick is funding the majority of the ongoing costs of this project. In the nine months ended September 30, 2012 and 2011, we incurred $128,916 and $266,423, respectively, primarily to fund engineering and legal costs incurred on the portion of the Seymork land that falls outside of the area of interest under the Barrick joint venture agreement.

Gold Rock Project, White Pine County, Nevada

The Gold Rock property is situated in the eastern Pancake Range in western White Pine County, Nevada. The property is 8 miles southeast of our Pan project. Access is via the Green Springs road from US Highway 50 approximately 65 miles from Ely, Nevada. Water for exploration purposes is available from wells in the region under temporary grant of water rights. It is anticipated that power will be available from the line being extended to serve the nearby Pan Project.

An Environmental Assessment (EA) study for expanded drilling at Gold Rock has been completed and permits have been received. An amendment to the EA is currently in progress to add additional exploration targets.

A core rig and a reverse circulation (RC) rig are now operating on the property. The drilling program, designed to support production start-up in 2016, will consist of approximately 20,000 meters of core and RC drilling designed to significantly expand and upgrade the current Gold Rock resource. A new resource . . .

  Add MDW to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MDW - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.