NEVADA SPECIAL — Royalty sisters demonstrate a Midas touch in Nevada

Toronto-based partners Franco-Nevada Mining (FN-T) and Euro-Nevada Mining (EN-T) are well on their way to developing the Midas project into a major gold mine.

Yet they have no intention of finishing the job. Franco-Nevada and Euro-Nevada are distinct companies that share common management, and a way of doing business that sets them apart from most other North American mining companies: they buy royalties on projects owned by other companies or develop their own projects, but only to the point where they can sell them and keep the best possible royalty.

With the Midas project in Nevada, Franco-Nevada and Euro-Nevada have gone further than they normally do — to the point where a prefeasibility study could be ready by the end of the year.

The companies have spent the past four years assembling land in the Midas area, the only part of the Carlin trend that produced a significant amount of gold in the days before the great open-pit projects. At least 300,000 oz.

gold and 3 million oz. silver are known to have been extracted from the high-grade vein systems at Midas.

Last year, 106 holes were drilled in a 104,820-ft. program. In the previous year, 85 general reconnaissance holes were drilled.

In 1995, expenditures at Midas amounted to US$5.5 million, and the land position was expanded to 25,500 acres, compared with 10,000 acres in 1994.

By the end of September 1995, drilling concentrated on the Rex-Grande zone, which is known to contain 13 million tons grading 0.16 oz. gold and 2.65 oz.

silver, including a high-grade core of 2.4 million tons grading 0.69 oz. gold and 11.22 oz. silver. The zone, which is open to the north, east and south, was extended on a 200-ft. stepout drilled to the south in 1995. The last hole of the season returned 300 ft. of 0.61 oz. gold and 7 oz. silver, suggesting potential for expansion.

Three widely spaced holes were drilled to test the newly discovered Acme zone, 1 mile south of Rex-Grande. Two of the holes returned strong gold values of 120 ft. grading 0.224 oz. gold and 0.84 oz. silver, and 30 ft.

grading 0.143 oz. gold and 0.113 oz. silver. The intercepts are relatively shallow, and the partners believe more drilling could result in the definition of an open-pit resource. The Acme will receive more drilling this season.

A seventh rig has been set up on the Midas property, and, accordingly, the 1996 exploration budget has been increased to nearly $5 million. More than $3.4 million of that total will be used to develop the Rex-Grande deposit, including the drilling of 46 infill holes to confirm continuity of the zone, 25 reverse-circulation (RC) holes to step out in the three open directions, comprehensive metallurgical testing, ore reserve modelling and a preliminary environmental impact study.

The objective at Rex-Grande is to complete a prefeasibility study by December 1996.

The remainder of the budget will be used to explore other parts of the Midas property. Seventy-three RC holes, comprising an estimated 53,000 ft. of drilling, will test seven targets in the core area, including the Acme zone, which the partners believe could evolve into an open-pit mine.

Franco-Nevada Vice-president David Harquail says that although Franco-Nevada and Euro-Nevada are taking Midas farther than they have taken other gold projects, the partners’ overall strategy has not changed.

“We’ve been trying to blanket the Carlin trend with royalties, but we’ve not only been buying existing royalties — we’ve been trying to create them. Our idea was to assemble large packages that the majors didn’t have the patience to do, and then turn them over to the majors, while keeping a royalty.” Midas is one such land package, and Harquail says that once the prefeasibility numbers are available, Franco-Nevada and Euro-Nevada will be in a position to start talking to majors.

“Once we’ve shopped it around, we’ll know if that’s the route we can go. Our fallback position will be to hire contract miners to mine it. We don’t want to mine it ourselves.”

He said a third possibility would be to form a joint venture with a major company that would serve as operator. At present, Franco-Nevada is in a joint venture with Queenston Mining (QME-T) on a property in Kirkland Lake, Ont.

When asked why Franco-Nevada and Euro-Nevada do not operate the Midas project independently, Harquail explained that the companies’ expertise is more financial than operational.

“There are enough operators out there; we don’t need to compete. We’re trying to keep our edge, which is to focus on the next deal. We don’t want to get too caught up in operating or developing any one project; we just want to keep looking for the next one.”