Check out Your Prospects at Sedar.com: How an astute investor does her due diligence on Midway Gold

By Katherine Young April 23, 2007

Imagine for a moment that you’re single and have recently met an attractive new woman, or man, as the case may be. You’ve taken them out for dinner. Perhaps she’s ridden in your car. Maybe you’ve met his friends. And then you start wondering, who is this person really? What’s their relationship track record like? How about their sexual history? What kind of risks am I taking? Are they financially secure? And you begin the subtle, socially-coded process of seeking answers to your questions, which, let’s be honest, are absolutely crucial to this thing going forward.

It’s the same when you find a company you’re interested in investing in, but luckily for the economic stability of the world, far less complicated. When it comes time to do due diligence there is no better tool that I’ve found than Systems for Electronic Documents Analysis and Retrieval, or SEDAR.com. It helps takes the mystery out, which in investing, unlike relationships, is only a good thing.

Established as an interface between public companies, regulating bodies and the interested public, Sedar has become an invaluable tool for investors doing due diligence. Since 1997, the Canadian Securities Administrators has ruled that it is mandatory for most reporting issuers to file securities related documents on Sedar. So, any public company that you wish to learn about will have filed certain documents that are in the public domain. You can access them on the SEDAR site and have an in-depth look at the past and current goings-on of a company. If only we were this sensible in relationships.

One company that recently caught my gaze was Midway Gold Corp. President Alan Branham told me that the biggest news at Midway was their Spring Valley Project in Nevada, “ where they’ve drilled into the neck of an old covered volcano on land just north of the largest silver producer in North America.”

Once I knew I was looking for information on the Spring Valley Project, the onus then fell to me to find out what Midway has reported at Sedar. Looking under “Company Profiles” and then Midway’s “Associated Documents”, I found the last NI 43-101 technical report that was filed on June 9, 2006. Opening the document I found that it was for the Spring Valley property.

Unfortunately, Sedar doesn’t title the documents that are listed under any given company. So, while I looked for the Spring Valley information, I had to estimate the date each document was filed, or I would have been lost looking through literally dozens of each type of news item that most companies file with Sedar every year. And, while my computer may be slow, it is cumbersome even for the technologically up-to-date to open PDF file after PDF looking for the press release in question. It’s a shame Sedar doesn’t recognize this and reorganize their site.

Ranting aside, I scanned the 139 page document for the most important information, finding the resource estimates on page 16. They reported 2,083,000 measured short tons at 0.032 oz/ton Au (0.91 g/t) totaling 67,500 Troy ounces of measured resource. The indicated resource was 7,946,000 short tons Au at 0.022 oz/ton (0.62 g/t) grade equaling 171,643 Troy ounces indicated. The table also included inferred resource estimates which added another 7,753,000 short tons at 0.025 oz/ton equaling 195,375 Troy ounces inferred.

Technical it is, but not as complicated as you may think. For a great resource on how to interpret the 43-101 report see Journey to the Heart of the 43-101 by Doug Hadfield at www.resourcex.com

It’s always helpful, of course, to have the president of the company put it in perspective for you, like Branham did for me about Midway. “We’ve drilled in excess of 200 holes. We’ve delineated several zones of gold hidden under some shallow, gravel cover and it’s got the attention of Barrick Gold Corporation who have bought 7% of our company in equity placements. We’ve got three drill rigs drilling right now trying to expand that discovery.”

Interest by a large company like Barrick Gold is probably even better reassurance of quality than having several other gorgeous, athletic, attractive men/women interested in your prospective partner. I was encouraged. Barrick doesn’t leave things to chance.

Branham told me that Barrick invested 11 months ago for the first time and for the second time in November, funding Midway’s exploration program. Branham said that Barrick was so interested to find out what Midway had in the ground that they lent Midway a drill rig, which are apparently hard to come-by in Nevada at the moment.

With Barrick in pursuit I didn’t see why I shouldn’t be, but determined to cover my bases and complete my responsibility, I continued the process of wading through too many press releases and financial statements, trying to hit on news of the Barrick placement. I finally found the eleven-months-ago one dated May 18, 2006. To my great frustration, it was called, simply “news release” with no other identifying label, and there were about 4 dozen other news releases to confuse it with. Nonetheless, it was there and described the private placement where Barrick, and, as it turns out, Sprott Asset Management invested $6,705,000. The November private placement was easier to find; Midway had raised another $5,000,000.

So far so good. Barrick had made a substantial contribution; and the resources looked good for a start. But Midway’s latest press releases were about a recent acquisition. Branham told me that he was excited about the new asset. “They have a nice resource of about a half million ounces that we believe we can grow quite substantially. 1 million to ten million ounces are not unknown along that trend. It’s a prolific trend.”

I wanted to check the resource estimates and assay results for the Pan property, so I looked up Pan Nevada on Sedar as well. Importantly, the Pan 43-101 said, “additional drilling and careful geologic study could provide a better understanding of the specific geologic controls and could lead to the identification of local zones of higher-grade mineralization…MDA believes there is good potential to both expand existing resources and discover new mineralization…”

So far Midway checks out. Just one more thing, if an exploration company plans to carry out an exploration program they need the cash to do it. I looked up Midway’s most recent Management Discussion and Analysis (MD&A) on Sedar and found a healthy cash flow – $5.7 million in the bank (dated back to September 2006 before the second private placement,) which carries them a good deal closer to feasibility. Large resources, high grades, interest from the big players and cash flow to boot.

So now we’ve done a good deal of due diligence on this prospective relationship. We’ve got to know its founders. We’ve checked out its assets. We know it has solid cash flow. Still, it’s important to remember: Investing is like love. You pay your money; you take your chance.

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