Mining Expert Digs for Value at Midland Exploration

04/22/2019 5:00 am EST

Focus: COMMODITIES

Brien Lundin

Executive Editor, Gold Newsletter

Everything should be working in favor of gold, as evidence continues to grow that the U.S. economy, and in fact the broader global economy as well, is decelerating, suggests Brien Lundin, editor of Gold Newsletter.

Quite frankly, though, gold isn’t trading well. It’s just not showing any of the bullish character that I saw in January and February.

In light of this, it’s hard for me to recommend the kinds of resource-rich junior companies that we’ve been using to leverage the gold gains we were forecasting.

I do believe that the underlying fundamental of a dovish U.S. monetary policy will eventually prove too powerful for gold bears to overcome. But I can’t recommend any further purchases right now.

What I do recommend, however, is to use this market weakness to acquire our top exploration plays, particularly those with news on the way. Foremost of these at this point is Midland Exploration (Vancouver: MD), which is down about 10% from its levels of mid-March. 

The stock has nonetheless been trading in rock-solid fashion over the last week — and is doing so even in the midst of today’s gold sell-off — after releasing results from geophysical surveys from the Myrthril copper-gold-moly-silver discovery in the James Bay area of Quebec.

Mythril is a very exciting discovery, with high-grade sampling across a multi-kilometer target area that makes it a clear analog to the multi-million-ounce Eleanore project in the same region.

After sampling had outlined an anomalous area spanning some two kilometers in length by 100 meters-500 meters in width, Midland undertook an induced polarization (IP) geophysical survey over that anomaly and further on strike. The results  were about as impressive as geophysical surveys could be.

I was excited with the first rounds of sampling at Mythril over a two-kilometer length. (Excited enough to buy stock in the market shortly after I recommended it in these pages.) Now, with the target more than doubling in size, and still open, I can understand why the share price has remained rock solid even while the gold price falls.

The key point here is that Midland is in the midst of its initial, 2,000-meter drill program on its coincident geochemical/geophysical anomalies. The results should be end by the end of this month or early in May and, given the sampling and geophysical results so far, I would not be surprised if these drill results were market-moving.

It’s important to note that Midland management, ably led by highly regarded geologist Gino Roger, is a fierce adherent to the prospect generator business model.  That fact that they are choosing to drill Mythril with their own money should considered a key indicator of their regard for the project.

Midland just announced that BHP Group Ltd. (BHP), the world’s largest mining company, was making a strategic investment in the junior totaling C$5.854 million. Better yet was the above-market pricing — a C$1.70 unit with a full, 18-month warrant priced at C$2.05.

The investment came with a few rights, including a top-up right for BHP to maintain its pro rata interest, the right to participate in future financings up to a maximum stake of 19.9% in Midland, a right of first offer for any non-equity financings, including any copper off-take agreements, and a right of first offer if Midland seeks to divest  any part of its interest in the Mythril project.

That this strategic investment is coming now, shortly before the first drill results from Midland’s Mythril project, would not appear to be coincidental. It seems that BHP wants to secure a stake in Midland before these results.

Add it all up, and Midland is a strong buy. As for gold, absolutely nothing — a strong rebound or a continuation of this downside momentum — would surprise me. And don’t believe anyone who pretends confidence as to the metal’s short-term direction.

What I do know with a great deal of confidence is that, over the longer term, the gold price will rise as the massive U.S. debt load forces a devaluation of the dollar. In short, “patience” seems to be the word of the day for everyone, gold bugs and Fed officials alike.

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