High-grade hits lift Fronteer

VANCOUVER — A $20-million, five-rig exploration program at the Long Canyon gold project in Nevada has quickly justified itself by returning 16.4 metres grading 21.2 grams gold per tonne in the first set of results for partners Fronteer Gold (FRG-T) and AuEx Ventures (XAU-T).

The 2010 drill program aims to extend the 2.6-km long gold zone along strike to the northeast and southwest. At the end of the 2009 program, drills hit some of the best intercepts to date at the project in step-out holes to the north and northeast, including 35 metres of 9.29 grams gold and 22.4 metres of 13.28 grams gold.

Fronteer, which owns 51% of Long Canyon and is the project operator, started the 2010 program by following up on these hits. The choice worked out well, as hole 435C cut 11.3 metres of 2.2 grams gold at 195 metres, followed 10 metres later by 21.2 metres carrying 16.4 grams gold.

Moving 150 metres to the northeast, hole 453C returned 46.6 metres grading 3.79 grams gold, starting 216 metres downhole. And hole 451, collared 400 metres to the south, cut 47.3 metres of 6.4 grams gold, starting at 213 metres depth and including 7.6 metres of 24.8 grams gold.

Two other notable hits from the new drill pattern extending the northeast end of the zone include 22.3 metres of 6.5 grams gold in hole 450 and 53.4 metres of 2.7 grams gold in hole 446, including 9.1 metres of 5.9 grams gold.

Fronteer and AuEx are spending $19.8 million on exploration at Long Canyon this year, aimed at moving the project to the prefeasibility stage. Just as the new exploration program kicked off, the partners announced a new resource estimate for the site, which pegged measured and indicated resources at 12.2 million tonnes of 1.71 grams gold. Inferred resources add 10.4 million tonnes averaging 1.65 grams gold.

The gold resource at Long Canyon is contained in a shallow, oxidized deposit, stretching 2.6 km along strike. In some places, the deposit is 400 metres wide. Initial metallurgical testing indicates the mineralization responds well to heap leaching, with recoveries as high as 90%.

In December, a preliminary economic assessment gave Long Canyon a pretax net present value of US$145 million at a 5% discount rate, and predicted an open-pit mine could generate a 64% internal rate of return, using a gold price of US$800 per oz.

The study, which was based on an earlier, smaller resource, predicted Long Canyon could produce 93,000 oz. gold annually for six years, at an average cash cost of US$351 per oz. Building the mine would cost US$66 million with a payback period of 1.3 years.

Long Canyon sits just 6.5 km south of a freeway in northeastern Nevada.

Fronteer also released news from another Nevada project, this one a joint venture with Newmont Mining (NMC-T, NEM-N). The Sandman project, near Winnemucca, hosts four defined gold deposits. Newmont, acting as project operator under its earn-in agreement, completed a 19-hole drill program at one of those deposits, Silica Ridge, in April.

Results from the first five holes of the program shows Silica Ridge still hosts more high-grade, oxidized gold mineralization. Hole 172 returned 3.6 metres of 15 grams gold and 22.2 grams silver per tonne, hole 168 cut 1.5 metres of 16.3 grams gold and 18.4 grams silver, hole 174 intercepted 5.8 metres of 2.47 grams gold and 11 grams silver, and hole 165 hit 1.1 metres of 9.2 grams gold and 11.2 grams silver.

In addition, the Winnemucca Bureau of Land Management recently approved a new exploration plan for Sandman, which increased the permitted area of exploration and development work from 5 sq. km to 100 sq. km. The expanded land package would allow the partners to test eight new geophysical targets, something Newmont plans to start immediately.

Newmont signed an earn-in deal for Sandman in mid-2008, with an aim of advancing the project to a production decision within three years. The major can earn an initial 51% interest by spending US$14 million within three years and then making a production decision based on a feasibility study. Newmont could then increase its stake to 60% by spending a further US$10 million to develop a mine.

Two years into the deal, Newmont has met its earn-in obligations to date, having spent US$8 million on exploration. For Newmont, aside from being a high-grade oxide gold project, Sandman offers the additional benefit of sitting within trucking distance of its Twin Creeks gold mine. As such, the partners may not need to build a standalone milling facility.

Fronteer announced the latest drill results from Long Canyon and Sandman within a space of three days, and during that time the company’s share price gained 87¢ to reach $7.07, a new 52-week high. A year ago, its shares traded as low as $3.51. Fronteer has 120 million shares outstanding.

AuEx also saw a healthy boost on the Long Canyon results, gaining 46¢ in two days to close at $3.51. AuEx has a 52-week trading range of $2.42-$3.81 and 37 million shares outstanding.