Newmont shrugs off speculation about new Carlin gold find

Management of Euro-Nevada Mining (TSE) is waiting to hear if Newmont Gold’s (NYSE) latest discovery on the Carlin gold trend in Nevada is going to live up to its name. Situated about 200 ft. from the northeastern boundary of Euro- Nevada’s wholly owned Chicago claims in the vicinity of Newmont’s Blue Star mine, “the Beast” is being tested by at least one drill rig.

While Newmont spokesman James Hill declined to offer any information on the nature of the Beast, he confirmed that the name is simply an acronym for Blue Star East zone.

One of 15 gold deposits owned by Newmont along the 45-mile Carlin trend, the Blue Star mine produced 8.9 million tons of low-grade oxide material last year grading about 0.03 oz. gold per ton.

As drill results from Blue Star East would not be considered material to shareholders of Newmont, which already has 20.5 million oz. of gold reserves at Carlin, it may be some time before any information is offered to investors.

Euro-Nevada Chairman Seymour Schulich also refused to comment on speculation that the Beast may extend across the Chicago’s boundary or that he has already been approached by Newmont officials regarding a deal.

Euro-Nevada’s sister company Franco-Nevada Mining (TSE) completed 10 holes on the Chicago claims before they were transferred into the Euro royalty portfolio. None of those holes yielded anything significant. But if insiders are correct, it won’t be the first time that Euro- Nevada has benefited from discoveries made by Nevada’s biggest gold producers.

Back in November, when American Barrick Resources (TSE) said it had intersected 120 ft. of grade 0.46 oz. while drilling to the north of its Goldstrike gold mine, shares of Euro-Nevada reached a new high of $9.13. Euro-Nevada holds a 4% net smelter royalty and 5% net profits interest in the North block where an 800-ft. stepout hole on the same trend intersected 540 ft. of grade 0.41 oz.

Recently, the issue has risen to $14.50 and could go even higher if the Blue Star East zone lives up to its name, according to Catherine Gignac, a mining analyst with McNeil Mantha Inc. of Toronto.

Asked if Newmont had obtained any economic values, Hill replied: “We are not ready to talk about it yet.”

For similar reasons, Barrick isn’t planning to provide a hole-by-hole account of exploration on its North claim block even though Euro- Nevada owns a royalties on the property.

Having encountered economic gold mineralization averaging 0.3 oz. in 10 of 16 holes drilled in an area spanning 1,600×600 ft., Barrick will continue to explore throughout the year until it gets a better indication of what is there.

Most of the drilling will focus on the “Purple vein” which, according to Barrick, is the most important centre of exploration activity outside of the Goldstrike mine.

As Barrick is spending $365 million to expand production at Goldstrike to 900,000 oz. from 207,000 oz. last year, it could be years before the Purple vein factors into company’s annual gold output. “Nothing is going to happen in the short term, that’s for sure,” said Barrick spokesman Isabelle Mulligan.

But that wouldn’t prevent Euro- Nevada’s share price from being affected by ongoing exploration on the North claims, according to Gignac. “The size of the float is so small that it doesn’t take much to move the stock,” said Gignac who was referring to the approximately nine million shares (of 11.9 million outstanding) not held by management.

Meanwhile, Euro-Nevada recently increased its land position in Nevada to 11,000 acres by acquiring a 100% interest a 6,000- acre property between Newmont’s Gold Quarry and Carlin mine for $750,000.

Euro apparently outbid both Newmont and Barrick for property which means Euro and Franco- Nevada now hold royalties on about 28% of the land between in an 18×3 1/2-mile stretch between the Dee and Gold Quarry mines. “The area encompasses about 90% of the known reserves on the Carlin Trend,” said Schulich.

Euro-Nevada’s interest is subject to a reserved 2% net smelter return royalty or, in the event of a farm- out, 20% of Euro’s net receipts. It has granted Franco-Nevada a 6- month option to acquire half of Euro’s interest in the claims for $375,000.

With about $37 million in cash and short-term deposits between them, Franco and Euro now have plenty of money for future acquisitions, Schulich said.