Pequop: Nevada’s Next Gold District?

Nevada is well-known for prolific gold districts such as Comstock, and the Carlin and Cortez trends. Now, Reno, Nev.-based AuEx Ventures (XAU-T, AUXVF-O) believes its Long Canyon and West Pequop projects could be sitting on a new gold district.

The projects are not located where one would expect to find them, near one of the known gold deposits. Instead, they are in the Pequop district, where there are no past-producing mines. The neighbouring projects are roughly halfway between the towns of Wells and Wendover in northeastern Nevada, south of interstate Highway 80.

Long Canyon is a joint venture with Fronteer Development Group (FRG-T, FRG-X), which holds 51% of the project and pays a proportionate amount of exploration expenses. West Pequop is a joint venture with Agnico-Eagle Mines (AEM-T, AEM-N), which holds 51%. Agnico has the option to increase its stake to 70% if it carries the project through to the feasibility study stage, and currently Agnico is footing the entire exploration bill.

The projects, says Ronald Parratt, president and CEO of AuEx, were discovered in 1994 by an Australian exploration company, which found a geochemical soil anomaly.

“I have worked in Nevada since 1978, and it’s amazing that something like this remained undiscovered until 1994,” he says.

Parratt says that mineralization here is Carlin-type, and that there is outcropping ore-grade mineralization.

“I am very familiar with Carlintype mineralization, and this is the kind of thing you expect to find — potentially several zones of mineralization in a large mineral district. It has all the characteristics (of Carlin-type mineralization).”

Those characteristics include: a high gold-to-silver ratio (about 10:1); the classic indicators of associated arsenic, antimony, and mercury; the absence of base metals; decalcification of the lime- stones; formation of jasperoids (silicified limestone); karst-like features; and cave-development-like features with collapsed breccias, Parratt says.

The mineralization is shallow, starting at typical depths of 75 metres, with occasional outcrops. It is usually associated with geochemical anomalies in soil and rock chips, as well as jasperoids. Typical high surface grades are 8 grams gold per tonne. High grades in soils are 5 grams, while high grades in rock chips can be up to 10-12 grams per tonne.

“You can find jasperoids in rocks that are altered that have 1 to 10 grams gold per tonne in outcrops within these areas,” Parratt says.

Parratt is optimistic that Long Canyon will eventually become a mine, seeing a good possibility that West Pequop will also be developed. The minerals consist of oxides, so they are more amenable to extraction than sulphides, and will not produce potentially harmful sulphide byproducts. Another advantage is that the mineralized zone is located above the water table, alleviating environmental concerns.

“The rock that overlies it is all Cambrian or Ordovician limestones and dolomites, the Notch Peak formation and the Pogonip formation. It’s an ore host for several big mines in Nevada, so it’s a receptive ore host as well, and a good rock to be exploring in,” Parratt says. “This whole range is a structural graben. The rocks are preserved and explorable. We see this whole area as being prospective going forward for the long term for exploration.”

Parratt estimates that US$10 million will be spent on both projects this year, and a higher amount next year.

There are four drill rigs on Long Canyon, two of which are diamond drills and two reverse-circulation. Holes have been generally drilled to a maximum depth of 185 metres. At presstime, drilling on Long Canyon was wrapping up, with AuEx anticipating releasing a National Instrument 43-101 resource estimate for the project in the first quarter of next year. Drilling will resume next year once a drilling program and a budget are finalized.

The surface anomaly on Long Canyon is about 1.5 km long, and the mineralized strike length identified so far is about 1.7 km. The joint venture has started drilling outside the anomaly, and some holes drilled there have returned mineralization.

Since mineralization at Long Canyon generally starts at depths around 75 metres or less and the mineralized zone is about 30 metres thick, AuEx believes the property would be suitable for open-pit mining should an economic deposit be found.

Drilling at Long Canyon this year has included intervals of 24 metres grading 3.1 grams gold per tonne from 111 metres depth in hole 149; 7.6 metres of 3 grams gold from 113 metres in hole 147; and 59 metres of 3.2 grams gold from 87 metres in hole 132.

Exploration at West Pequop is at an earlier stage, and a number of surface anomalies have not been drilled yet. There are four exploration targets on the project, named Mountain Top, Section 34, Acrobat/ Juggler and Range Front. Currently, there is one drill rig on the property.

This year, West Pequop has returned 22 metres of 12.6 grams gold from 162 metres depth in hole 139; 19 metres of 8.7 grams gold from 70 metres in hole 135; and 7.3 metres of 13.9 grams gold from 32 metres in hole 133.

The two projects are about 7 km apart. The intersection on interstate Highway 80 which is nearest the Long Canyon project is about 45 km west of Wendover on the Nevada-Utah border, and about 40 km east of Wells. There is no exploration camp, since staff commute daily from the two towns. Long Canyon is located about 13 km from the highway, most of the distance being covered by an unpaved road, with the balance covered by a dirt road. West Pequop is about 27 km from the highway, mostly via an unpaved road.

There is a power transmission corridor about 15 km east of Long Canyon, but at present it is unclear whether it could support a potential mine. The valley at West Pequop has groundwater, and Parratt believes the company can obtain approval to use the water for mining. On the Long Canyon side, there is more competition for water use, since the town of Wendover, as well as ranchers, pump water from the basin. Nevertheless, Parratt believes that when the time comes, approval for water use can be negotiated.

The Long Canyon project covers about 40 sq. km, while the West Pequop project consists of about 90 sq. km. At West Pequop, an area of about 9 sq. km, which is leased, is subject to a 3% net smelter return (NSR) royalty, but so far no mineralization has been found there. At Long Canyon, AuEx holds a 3% NSR royalty on about 70% of the property, while Fronteer holds a 3% NSR royalty on the balance.

Along with every other U. S. explorer, AuEx may find that its projects could be subject to a new federal royalty under the Hardrock Mining and Reclamation Act of 2007, which has been passed by the House of Representatives and

is currently before the Senate. If the bill is enacted into law, mining claims on federal lands will be subject to an 8% royalty, while existing mines will pay a 4% royalty.

After recently closing a $4.4-million private placement to advance Long Canyon, AuEx has about 35 million shares fully diluted and about $6 million in working capital. Aside from Long Canyon and West Pequop, AuEx has nine other Nevada projects under option agreements with several partners.

Parratt believes the two projects represent the most significant new discovery in Nevada outside of the established gold camps. “Hands down, this is the most exciting new thing going on in Nevada.”