Nevada entrepreneurs

After 44 years and 11 months with the United States Geological Survey, I finally retired in 1981. I was only 70 years old and was certainly not ready to hang it all up. I wanted, and needed, to be productive. I had been planning my move to the industry for some time, and had completed final reports on my work in Nevada and in Saudi Arabia. So I began looking around for something to do. But I was a little shy about selling my services to mining companies, something I had never done.

I attended professional meetings, where I dropped subtle hints to geologists working for companies with active exploration programs. I received plenty of encouragement, but not much else. One geologist knew I had a fair retirement income, and he advised me not to work too cheaply, as that might affect how much other consultants were able to charge.

This sad state of affairs continued for nearly a year. Then in 1981, Robert Reeves, a former USGS colleague, and I attended a meeting of the American Association of Petroleum Geologists in San Francisco. At the time, Bob was teaching the Permian Basin at the University of Texas. Knowing I was on the loose, he suggested that he, Victor E. Kral, and I form a consulting firm and pursue our own projects. That sounded like an excellent idea to me, and I was eager to make firm plans.

We held our first meeting at Vic’s home in Sparks, Nev., and agreed to form a consulting business. Later, in Odessa, Tex., at the Reeves home, we discussed several options, but none worked. We finally decided to form a company that we would finance ourselves. Our first objective was to pick up properties in certain critical areas of Nevada where there might be a hope of finding an ore deposit. We named our company Victor E. Kral Associates (VEKA), after Vic. He was widely known in the mining industry and had an excellent reputation as a mining geologist in Nevada. He was the perfect choice for our first president.

Bob, Vic and I had worked together in the early war years. Vic had left the USGS to work with a small exploration group, and then with the Nevada Bureau of Mines, and later with the Ford Motor Co. and the Hanna Mining Co. Vic and Bob had both graduated from Nevada’s Mackay School of Mines. Vic had earned a degree in mining engineering, while Bob had earned a degree in geology and gone on to get a doctorate in geophysics from Stanford University.

Later, another Mackay graduate, Gerald Hartley, joined the group. Like Vic, Gerry was a mining engineer. Together we made a strong team: Gerry and Vic had an engineering approach, and Bob and I had the geologic approach.

Drawing on my background in Nevada’s regional geology, I quickly suggested several possible projects. I proposed we first carry out a staking program in likely areas in the Battle Mountain, Carlin and Getchell mineral belts, searching for deposits that might continue downdip or along strike of known orebodies. We also looked for areas where potentially favourable host rocks might be found in likely structural settings, as close to the surface as possible.

During the first year, 1982, we staked 1,250 claims and then began to do a little exploratory work. We had soon run through our available capital and began to look around for partners who might want to invest in our program. The response at first was a deafening silence. One geologist, Allen Park, visited our properties and wrote to me saying, “I think your properties have about one chance in ten thousand of a significant discovery!” I took this as a challenge. Since we had only about 15 groups of claims, the odds were not good.

I had put most of my terminal pay from the USGS into our project, as well as a year’s worth of consulting income. Our 15 blocks of claims were scattered throughout northern Nevada. We knew they were not sure bets, but we did believe they had a good chance of paying off. First, however, we badly needed cash. We offered our claims to many individuals and companies without success. What were we to do? Fixed expenses, such as assessment costs and exploratory work, quickly depleted our available cash. Where to turn?

Fortunately, Vic found a way to save us. He had, on occasion, consulted for Andrus Resources, a petroleum company in Houston, Tex. Andrus was primarily in oil and gas production, but it made occasional forays into the metals field. We had been turned down by many of my old “friends” in and out of major corporations.

Vic proposed to Andrus Resources that it finance our exploration projects, and, surprisingly, the people in charge agreed. We ended up with a 50-50 partnership with the company. This was a windfall, and we were delighted. Most companies had offered partnerships in which they would receive 60-70% any profits, and we would receive 30-40%. Bill Andrus and his associate, Charles “Butch” Robinson, seemed like they would be good partners. Best of all, Andrus Resources gave us full responsibility for the geologic program, a decision it has never had cause to regret.

We began exploration in the southern part of Battle Mountain at the Modoc mine. It contained a small gold-bearing vein system, and we believed there was potential for a gold deposit in depth. We drilled and found the potential ore zone to be too deep to be profitably operated, so we turned instead to a project at Marigold.

The Marigold mine had been operated on a small scale during the 1930s and had yielded a few thousand tons of gold ore containing about 0.25 oz. per ton. The area had been explored by many companies after mining ceased in the 1940s. The orebody had been drilled downdip thoroughly, with mediocre results. Exploration had been carried on in the footwall zone of the deposit, also with poor results. Our objective was to explore the property north along the strike, out into the valley, where the continuation of the orebody would be entirely covered by alluvium. Most geologists involved in exploration are leery of such projects, because the alluvium can be thousands of feet thick.

Because there was no obvious major range-front fault, I thought the target would be shallow, and fortunately I was right. We hit mineralized rock in the first drill hole, which encouraged us to move south to a second hole, which yielded fair gold values. The third hole encountered material low in gold and silver but higher in base metals. I considered this a discovery. At this time, we were in touch with many mining companies who were monitoring our exploratory programs.

One of these companies was Cordilleran Explorations (Cordex), a division of RayRock Mining. Andy Wallace, Cordex’s director of exploration, offered us a deal on the property based on our promising drill-hole data. We accepted, and Andy continued the exploratory work. By the time the drilling was completed, Cordex had found gold reserves of 350,000 oz. in an orebody that could be mined in an open pit. The mining began in 1989, with the ore treated in a 300-ton-per-day cyanide mill. Low-grade ore was treated on leach pads. The operation continued until 1995, when the main orebody in VEKA’s section was exhausted, In all, about 343,000 oz. gold valued at US$126 million were produced. There is, however, potential for other orebodies on the property in zones beneath the main pit and in other areas along strike from the main pit, but low gold prices from 1997 to 2000 have discouraged exploration.

So once again, I was without much to do, and I began to tell people I would be available for consulting jobs; this time, several interesting projects came my way.

— The author worked with the U.S. Geological Survey for 44 years, in the western U.S., Central America and the Middle East. This is the third in a series of excerpts from his book A Passion for Gold: An Autobiography, published by the University of Nevada Press.