Midway Gold Corp (MDW)

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This company completed an initial public offering (IPO) of its stock in 2010. View articles that reference this company. Recent IPOs:   Globe Specialty Metals   •   LogMeIn   •   Invesco Mortgage Capital   •   Medidata   •   Chemspec

 

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Remi Cossart

Midway Gold Corp (NYSE:MDW) is a gold and silver mining company which acquires land and extracts gold from reserves. Midway is located in North America and focuses primarily on properties in Nevada and Washington. The company makes money by selling the gold that it extracts for more than the cost of acquisition of the land and the cost of extraction. Midway has worked towards transitioning from an exploration company to a production company.^[1] For the full year 2010, Midway reported a net loss of 8.5M Canadian Dollar (CAD). ^[2]

Business Overview

Because Midway is still in the exploration phase, the company has not realized any commercial revenue. As a result, the company reported a net loss of 5.8M Canadian Dollar (CAD) in 2010. This compares to a loss of 2.6M Canadian Dollar (CAD) in 2009.^[2]

Trends & Forces

Midway Gold is in a transitional period

The company is in the process of switching from a exploration company to an extraction company. In the first part of its life, Midway was focused on finding reserves and understanding the approximate size and value of these reserves. As the company shifts to extracting gold from its reserves, the necessary equipment, infrastructure, and expertise change. The extent to which the company will effectively make this change is important for the resulting performance.^[3]

High Gold prices may be needed to justify extraction

The cost benefit analysis of gold extraction that Midway used may rely on elevated prices. In other words, certain mines may be relatively small and expensive to access and so gold prices must be relatively high to justify pursuing the reserve. If prices do not remain elevated, it may mean that certain reserves will no longer be economically viable. By contrast, if gold prices continue to rise, more of Midway's reserves may become economically profitable.^[4]

1. ↑ MDW 10-K 2011 Part 1 "Description of Business" pg 10
2. ↑ ^{2.0 2.1} MDW 10-K 2011 Part 1 "Consolidated statements of Cash Flows" pg F-5
3. ↑ MDW 10-K 2011 Part 1 "Risk Factors and Uncertainties" pg 15-17
4. ↑ MDW 10-K 2011 Part 1 "Risk Factors and Uncertainties" pg 17-20