AuEx Ventures draws on Nevada expertise

There may be no shortage of mining and exploration companies active in precious metals-rich Nevada, but there are certain advantages to being a junior in “elephant country” for AuEx Ventures (XAU-V, AUXVF-O).

For one, the junior has had no trouble attracting joint-venture partners willing to shoulder the costs of exploration at its ever-growing portfolio of precious metals properties there.

AuEx holds 17 projects in the Silver State — 11 of which are joint ventures — and boasts eight different partners, including Agnico- Eagle Mines (AEM-T, AEM-N) and Fronteer Development Group (FRG-T, FRG-X).

“This past year, we drilled over 100,000 feet using other people’s money,” says Richard Bedell, the company’s executive vice-president and cofounder.

“What we do is we generate the projects, we acquire the land, we come up with the concept and then we find appropriate joint-venture partners to earn in.”

The ease with which AuEx finds those partners for its projects may have something to do with the multiple gold districts Nevada hosts, and the fact that the state holds “more million-ounce gold deposits per square mile than anywhere else in the world.”

But AuEx’s joint-venture approach — which serves to sharply curb dilution and minimizes risk, while maximizing drilling — couldn’t work if the company didn’t have properties with real potential.

Company president and cofounder Ron Paratt has a long history in Nevada with exploration experience at Santa Fe Pacific Gold and Homestake Mining — taken over bygold giants Newmont Mining (NMC-T, NEM-N) and Barrick Gold (ABX-T, ABX-N), respectively.

Paratt and Bedell, who met at Homestake, put together a promising land package based on Paratt’s knowledge of the area and Bedell’s exploration expertise — honed as leader of Homestake’s technical group worldwide.

“We went out at the bottom of the industry. . . and acquired a lot of land that we knew about,” Bedell says.

The company used the cash generated by its IPO in June 2005 to drill one of the 10 projects it went public with — Long Canyon. But the project proved so big that AuEx split it into two: Long Canyon and West Pequop, now joint ventured, respectively, with Fronteer and Agnico-Eagle.

“Now we have two projects with double the focus, double the work commitment, and both sides are drilling high-grade oxide,” Bedell enthuses.

Together, the two projects, in the Pequops Mountains, represent a new Carlin district of off-trend gold mineralization that AuEx controls, he says.

The closest analogue to the Pequops, in Elko Cty., is Barrick’s Bald Mountain mine, which, for years, “barely kept the ore in front of their production,” Bedell explains. Both are in the same part of the stratigraphy, Bedell says, lower than the classic Carlin deposits. Bald Mountain currently has more than 3 million oz. of gold reserves.

Both Pequops projects will keep AuEx and its partners busy for many years, Bedell says, as they seek to understand the geology and the potential there.

“We don’t know how big it’s going to be, but. . . there’s so many multi-gram rock-chip samples over miles and miles and the drills just keep getting stuck in one place because they can’t drill it out.”

Recent results from Long Canyon, the company’s JV with Fronteer, returned highlights of 75 ft. grading 0.391 oz. gold per ton (22.9 metres at 13.4 grams per tonne) in the Main zone. The interval extended mineralization in the zone another 200 ft. to a total of nearly 3,500 ft. Fronteer has an option to earn 51% on the property, plus another 14% if it completes a feasibility study. Results from four more of the six diamond-drill holes completed late last year are pending. The property saw more than 11,000 ft. of reverse-circulation (RC) drilling last year, plus more than 2,000 ft. of core drilling.

Agnico-Eagle also recently reported results from the Moutain Top target at West Pequop, highlighted by a 75-ft. interval that averaged 0.21 oz. gold per ton (22.9 metres of 7.2 grams gold per tonne). The company, which has a similar earn-in deal with AuEx, drilled 34 holes last year at the project comprising more than 27,000 ft. of RC drilling, and 6,300 ft. of diamond drilling.

While AuEx has been rewarded for its sound strategy and exploration savvy with a recent share price at around $2.50 (it went public at a price of 40 per share), Bedell says if he had to do it over again, he would have started out smaller.

“The (TSX Venture) Exchange actually condemns you for substance,” he says. “It’s far harder to go public with ten projects than it would be if you just went out and found a bunch of moose pasture with a geochemical anomaly.”

But now that the company has firmly established itself in Nevada, it has begun to branch out, acquiring projects in Argentina and Spain, and employing the same joint-venture strategy to move them forward.

And the future may bring more changes; while AuEx’s strength is exploration and it intends to stick to its joint-venture plan, Bedell says the company will evolve, based on what its partners turn up.

“We may consider altering the business model in future — certainly, when we get into production –which we are beginning to feel is a real possibility here in the Pequops on both sides of the mountain.”