Midlands Minerals Corp. – Analysis by J Taylor

Here are some of the near-term factors that cause me to say that:

• Starting with the Sian Mine, MMC is expected to commence production in the very near term. It has a mill and all necessary infrastructure to begin production immediately, although it would need to raise $19.2 million to get the mill running again.

• The immediate goal of the company is to establish an open-pit gold resource of at least 1 million ounces. That can be done mostly by infill drilling within the existing pit and to an extent by drilling both north and south of the existing pit on the Sian Mine. Given evidence of a nugget effect, management plans to bulk sample the deposit with the view that average grades are higher than the 2.3 grams per ton that are currently factored into the company’s 400,000-oz. resource.

• Initially, given the current mill and assuming an increase in the resource to at least 1 million ounces (which I do think is likely), management believes it can produce 30,000 ounces per year at a cash cost of less than $400. Assuming $400/oz. cost and a $1,000 gold price, the project would throw off $18 million per year, which would more or less give a one-year return of capital required to get the mill back up and running.

• A tailings stockpile grading approximately 1 gram per ton containing an estimated 64,000 ounces would also likely be used in tuning up the mill when it is re-commissioned. Not knowing what the recovery rates might be on this material, it’s hard to say how much cash flow this could bring to the company. However, assuming a 50% recovery, the project would generate another $32 million in revenue with minimal costs associated with it since it has already been mined and is lying near the mill.

Longer term, there is reason to think this company’s Sian and contiguous Praso projects could evolve into a multimillion-ounce open-pit gold target. So far, the 400,000 ounces of gold come from an area that represents just 5% of the entire soil anomaly that has been used in part to establish drill targets. And, as noted above, the thinking is that this small area, denoted by the red dot on the map on your left, may well contain upward to 1 million ounces, subject to infill drilling that is now getting underway. We would also like to mention that the existing carbon in leach (CIL) mill could easily be ramped up to much larger levels of production if the remaining 95% of the favorable exploration acreage proves to contain large-scale gold mineralization.

The idea here is to generate cash flow from near-term production to explore and develop a world-class multimillion-ounce gold deposit both from surface and at depth where grades are running somewhat higher.

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