Fronteer and AuEx increase Nevada resource

Vancouver – Joint venture partners Fronteer Gold (FRG-T, FRG-X) and AuEx Ventures (XAU-T) have released an updated resource estimate for their Long Canyon gold project in Nevada with a significant increase in the indicated category.

The update comes after the companies conducted 30,000 metres of infill drilling last year. Fronteer, with a 51% interest in the project, was in charge of operations, while AuEx, at 49%, paid its proportional share of the costs.

The new resource estimate contains an 81% increase in the measured and indicated category and a 17% increase in the inferred category, reflecting the focus on infill drilling last year.

The resource now stands at 12.24 million measured and indicated tonnes grading 1.71 grams gold per tonne, and 10.39 million inferred tonnes grading 1.65 grams gold, both using cutoff grade of 0.2 gram per tonne. The 2009 resource used a cutoff grade of 0.3 gram per tonne, but it was lowered for the updated resource to reflect the results of a preliminary economic assessment (PEA) released in December.

On a day of when the TSX lost 99 points, or 0.8%, neither company fared well on the news. Fronteer dropped as much as 36¢ before closing down 16¢ or 2.8% at $5.59. AuEx dropped as much as 22¢ before closing down 8¢ or 2.3% at $3.46.

Both companies emphasize the continued growth potential of the project. In January step-out drilling intersected 48.8 metres grading 4.23 grams gold per tonne in hole 411, 400 metres from the northeastern edge of the existing resource. Hole 402, also a 400 meter step-out, hit 7.6 metres grading 15.6 grams gold, and hole 372, drilled from the same collar, cut 15.2 metres carrying 2.45 grams gold.

For the year ahead the two companies plan to spend $19.8 million on development and exploration to advance Long Canyon to the pre-feasibility stage. Work will include mining and engineering studies, environmental baseline monitoring, community relations and 45,000 metres of infill and exploration drilling. Currently five drill rigs are on site.

Last year’s PEA was based on a resource of 4.8 million indicated tonnes grading 2.4 grams gold and 8.8 million inferred tonnes grading 1.6 grams gold, using the 0.3-gram-per-tonne cutoff. It did not factor in last year’s 30,000 metres of drilling. The PEA outlined an open-pit heap leach operation churning through roughly 4,300 tonnes of ore a day for six years.

With $66 million in capital costs and direct cash costs of US$351 per oz., the payback period was estimated at a little over a year. The net present value was estimated at US$145 million with a pre-tax rate of return of 64% using a 5% discount rate and a US$800 per oz. gold price. Total gold recovery from heap leaching averaged 87% during the life-of-mine.

Fronteer had $170.3 million in cash and short-term deposits as of March 31. The company has two other project in Nevada as well as projects in Turkey and Labrador. Fronteer Gold, which was until recently named Fronteer Development, has 120 million shares outstanding.

AuEx Ventures has numerous joint ventures in Nevada and Utah, as well as projects in Argentina and Spain. The company has 37 million shares outstanding.