miningnews article

Macroeconomic factors headache for Midas

Rebecca Lawson
Tuesday, 31 July 2007

GOLD grades have risen by 21% in Midas Resources' updated resource for its Fortitude gold project, but a volatile Australian dollar and increased operating and capital costs have cast doubt on the commercial outcome of pit optimisation work.



In a statement to the market this morning, Midas said it was "encouraged" by the increase in the gold grade in its latest resource estimate, but increases to associated mining costs over the past 12 months and the volatility of the Australian dollar against the US dollar could cause a headache for the company down the track.

"..the rise in mine-related capital and operating costs over the past 12 months coupled with the recent adverse change in the $US-$A exchange rate means that there is no certainty that the pit optimisation work will yield a satisfactory commercial outcome," Midas said.

MiningNews.net was unable to reach managing director Geoff Balfe for further comment.

Before the market went into a freefall late last week courtesy of the housing and credit fears in the US, the Australian dollar had closed at US88.36c on Wednesday.

Subsequent to that, the Australian dollar fell to close at 85.16c on Friday but rallied yesterday to 85.68c.

Meanwhile Midas said the increase to the resource was a result of changes to certain assumptions about mining selectivity, which was the principal reason for the boost in contained gold by nearly 6%, using a gold cut off grade of one gram per tonne.

The new total resource stands at 5.327 million tonnes at 2.3gpt gold with a contained 388,000oz of gold.

The total resource consists of an inferred resource of 3.445Mt at 2.3gpt gold for 250,00oz of gold ounces and an indicated resource of 1.882 Mt at 2.3gpt gold from a contained 137,000oz of gold.

Midas previously released a downgraded resource for Fortitude last month, decreasing it from 6.64Mt at a grade of 2gpt gold for 437,193oz of contained gold to 6.13 million tonnes at 1.9 grams per tonne, for some 367,000oz of contained gold.

The reduction in contained gold and the lower grade were due to a different estimation methodology and input parameters, with discontinuous or narrow mineralised zones excluded from the latest estimation to provide a realistic in-pit model for the pit optimisation work.

"Midas and RSG Global believe the key to optimising the overall grade tonnage characteristics of the Fortitude gold deposit is mining selectivity (target mining block size)," Midas said about the latest resource.

RSG is carrying out open pit optimisation work using the latest resource estimate. Midas said the latest mining and treatment costs and a report were pending.

Shares in Midas climbed 1c to 14.5c in late morning trade today.