Gold prices cause dip in Nevada exploration

Falling gold prices have wreaked havoc with exploration budgets for most mining companies active in Nevada.

The state produces in excess of 8 million oz. gold annually — more than 70% of America’s production. As a region of production, Nevada ranks third in the world, behind South Africa and Australia.

However, despite favourable geology, the low gold prices have forced many junior companies to leave over the past year. One notable departure is Toronto-based Romarco Minerals (R-T). After cashing in on its main asset in the Midas district, northeast of Winnemucca, for $33 million in stock from Franco-Nevada Mining, the company has ceased most of its exploration work, turning its attention instead to the blossoming dot-com world.

Romarco recently agreed to provide its sister company, Tullaree Resources (TUL-V), with $10 million to fund venture capital investments. Its only fieldwork this year will be at the McMahon Ridge target, at the Goldfield project in southern Nevada (the budget is expected to be down from last year’s US$1 million). The company spent more than US$2.5 million throughout Nevada in 1999; now it is looking for joint-venture partners for its other projects.

Oro Nevada Resources is another company — among several — that took the fast lane to the information super-highway.

The trend is an alarming one. Last year’s data have yet to be processed and made public; however, figures for the previous year clearly demonstrate the extent to which exploration has been falling off. Expenditures dropped to US$90.8 million in 1998, down from US$140 million in 1997, according to a study published by Nevada’s Division of Minerals. The study predicted expenditures would fall further in 1999.

Also, the average exploration budget in 1998 dropped 30% to US$1.9 million.

Some exploration companies, such as Vancouver-based Nevada Pacific Gold (NPG-V), are trying to form joint ventures with major companies.

Nevada Pacific is expanding its drilling program with partner Newmont Mining (NEM-N) at the 12,000-acre Limousine Butte gold project. It also controls 20 sq. miles of land in the South Carlin project, and has a joint venture with Echo Bay Mines (ECO-X) on the Moreau gold property, in western Arizona.

Nevada newcomer Boulder Mining (BLDR-C) is expected to spend US$50,000 on exploration this year at the Tybo West silver-gold property, 50 miles northeast of Tonopah. The expenditure will enable the company to earn a 75% interest in 25 claims that demonstrate potential for classic Nevada-style mineralization. Exploration targets are large, sediment-hosted manto and chimney-style deposits with high-grade values. Grab samples from the property returned values in excess of 56 oz. silver per ton.

To date, the company has identified six targets through basic prospecting techniques. Boulder’s president, John McAdam, says the property is essentially drill-ready, though the company prefers to conduct the basic exploration before drilling. This strategy has already paid off with the discovery of the Sheeted zone. The structure measures 500 ft. long and up to 50 ft. wide and contains micro-crystalline quartz veins in a latite porphyry.

Romios Gold Resources (RGRI-C) expects to spend $200,000 at the Scossa gold property in northwestern Nevada, 6 miles southeast of the Rosebud mine. The company is in the midst of a 4,000-ft. drilling program, early results from which have returned high-grade values. The second hole intersected 11 ft. of sheared and brecciated quartz veining. The first 5 ft. returned only low-grade values, but the last 6 ft. averaged 10.6 oz. gold per ton. The third hole, which was drilled from the same collar but at a different angle, repeated the pattern from the second hole. At a depth of 146 ft., the drill cut 11.5 ft. of vein material. The first 5 ft. ran 0.013 oz. per ton, and the second 6.5 ft. ran 8.6 oz. Assay results for a second batch of holes are expected soon.

Several old standards remain active in Nevada, including:

White Knight Resources (WKR-V), which is exploring several properties across the state, including the Quito gold property, near Austin;

X-Cal Resources (XCL-T), which recently gained 100% title to the Sleeper gold project, northeast of Winnemucca; and

Golden Phoenix Minerals (GPXM-O), which has completed a resource calculation at the Borealis project in the western portion of the state.

But while juniors are trying to keep busy, much of the exploration occurring in the state is taking place under the banner of bigger companies. For example, South African-based AngloGold (AU-N) and Gold Fields (GOLD-Q) both have programs for grassroots exploration throughout Nevada.

Notwithstanding programs in Ontario’s Red Lake camp and Alaska’s Pogo district, AngloGold is concentrating most of its exploration efforts in Nevada. Most of this work is occurring around the company’s 70%-owned Jerritt Canyon mine, in the state’s northeastern region. To develop reserves, AngloGold is constructing a decline into the Smith gold deposit, starting from the bottom of the Dash open pit. Underground drilling and bulk sampling will begin once the decline is complete.

Meanwhile, Gold Fields is focusing on pediment plays along various trends, particularly Battle Mountain-Eureka, says senior geologist Craig Nelson. With a reconnaissance budget of US$750,000, the company is employing geophysics (gravity and magnetics) to determine the depth to bedrock and pinpoint blind high-grade targets.

By far the biggest spender in the state is Placer Dome (PDG-N), which has earmarked US$20 million annually for exploration around the troubled Getchell gold mine, northeast of Winnemucca. The company is also active near the Cortez operation, in Crescent Valley.

While gold remains the target of choice for Nevada explorationists, various companies are on the lookout for other forms of mineralization.

Equal partners Cypress Development (CYP-V) and Mid-North Resources (MNU-V) recently drilled six reverse-circulation (RC) holes at their Gunman base metal property, near the Bald Mountain gold mine in eastern Nevada. Assay results are pending. Cypress, the operator, is looking for epithermal zinc-silver-copper mineralization on the 50-claim property.

Newcomer Bonanza Silver (BZS-V) has launched a 9,000-ft. program of RC drilling at the Cornucopia silver project, 70 miles northwest of Elko. The US$162,000 program, financed in large part by a US$150,000 private placement from its directors and family, will consist of 14 holes. Drilling will test for high-grade veins associated with the Eocene-aged Cornucopia caldera.

Bonanza can earn a 90% interest in the 480-acre property, which contains 31 mapped silver veins.

With little fanfare, Equatorial Tonopah, a subsidiary of Australian-listed Equatorial Mining, is quietly preparing the Tonopah copper mine, 26 miles northeast of Tonopah, for production by year-end. The operation entails resurrecting a molybdenum mine operated by Cyprus Amax Minerals in the 1980s, though Equatorial Tonopah is capitalizing on a blanket of secondary chalcocite mineralization, a half mile east of the main moly porphyry.

Primary molybdenite and chalcopyrite mineralization is hosted in a halo. Meteoric waters leached the copper and re-deposited it in a tabular body that has since been chopped by normal faults.

The company expects the mine to produce more than 50 million lbs. copper annually. Its other operation, the Mineral Park copper mine, near Kingman, Ariz., produces as much as 10 million lbs. per year.