Evolving Gold asks: where does the Carlin go? (February 18, 2008)

The corporate vision of junior explorer Evolving Gold (EVG-V, EVOGF-O) is hinted at right in its name.

The company, which obtained a TSX Venture Exchange listing last June, was founded several years ago on the premise that most big gold deposits that crop out at surface have probably been located, and to find anything substantial in the years ahead, exploration strategies must evolve into a search for continuations of mineralized trends under cover in mature mining districts.

“We know that there has to be as many huge deposits buried under the alluvium in the Earth’s crust as there are that have been discovered on the surface,” says Evolving Gold president Lawrence Dick. “They have to be there, and that’s the future of exploration.”

If companies are not willing to take that risk, to drill holes through unaltered rock for the buried prize, Dick asks where are the metals going to come from in the future, because we’re fast depleting what’s exposed at surface.

“As time goes on, deposits are going to be found by doing the kinds of things we’re doing in Nevada, drilling through a thousand feet of overburden,” says Dick. “It’s higher risk, because our targets are buried.”

In addition to being focused exclusively on gold exploration, Evolving has also narrowed its sights to the southwest U.S., with a special emphasis on Nevada.

Dick says he’s a “firm believer” in Nevada for many reasons: it’s the third-largest gold producer in the world; its gold deposits are the largest in the world, and amongst the highest grade; it’s in a politically stable environment; it’s mining- friendly; and there’s almost year-round access.

“Why would you want to look anywhere else, if you have limited funds?” Dick asks.

He describes Evolving’s ground

in north-central Nevada as being in an incredibly tectonically active district where there’s been perhaps 200% extension since the region’s gold mineralization was deposited.

“To think of everything still being in a nice, little line is probably not the way it really is,” says Dick, explaining that Evolving is looking for the extension of trends where they’ve been bifurcated, extended by regional, extensional tectonics, which is what has happened in the Basin and Range province.

“Just because something’s not on the trend, doesn’t mean there’s not another trend, that a piece of the trend hasn’t been shifted or rotated to some another place,” he says.

Evolving has already had strong technical success during its first round of drilling at its key Sheep Creeks property, acquired mostly by staking some 38,000 acres of open land between Nevada’s gold-rich Carlin and Getchell trends, north of the town of Battle Mountain.

The conventional wisdom has been, if you’re off-trend, you don’t have a chance, but Evolving has looked in detail at the tectonics of this whole area to try to answer the question, what happened to the Carlin trend? Where does it go?

In choosing drill targets, Evolving has been guided by gravity data that it purchased and then built upon by completing its own, much higher-resolution gravity studies.

With this data, Evolving came up with an extensional tectonic model for the area between the Getchell and Carlin trends, highlighted by blocks of gravity highs that Evolving believes reflect Paleozoic sedimentary sequences at relatively shallow depth.

Furthermore, you can mentally rejoin the edges of the gravity highs right across the area of interest, while ignoring the areas of gravity lows, which are probably thousands of feet of gold-barren alluvial fill and young volcanic rocks.

Evolving’s first hole drilled at Sheep Creeks — which was terminated before it hit the target Evolving was aiming for, the Wispy member part of the Popovich Formation — was the first significant hole ever drilled in this area between the two trends. The nearest drill hole is 8 miles away, at Hollister.

The conventional wisdom was that this area was filled with Miocene volcanics, but Evolving hit what appears to be Paleozoic sedimentary strata at 1,000 ft.

“Our first hole went through a thousand feet of overlying unaltered Miocene volcanics, just fresh as a daisy, and then bang, we hit this stuff. At the contact, it’s just amazing,” says Dick, showing photos of a heavily silicified, brecciated, pyritized rock, which Evolving drilled through for another 400 ft. It appears to be Popovich formation rock.

“We have all of the trace element geochemical signature that one expects around a Carlin-style mineralization, plus the whole thing runs about 0.2 gram gold per tonne with pops up to 1.7 grams gold,” Dick says. “Not bad for a first hole in the middle of nowhere.”

By stratigraphic reconstruction, Evolving thinks the hole ends several hundred feet above the Wispy member, which is a thinly bedded, bioturbated dirty limestone that hosts the very high-grade underground material — such as at Leeville, for example — in the Carlin.

Dick says that the hole has provided Evolving’s exploration team with greater confidence that the model it’s using, which is a structural- tectonic model of how the blocks are pulled apart during extension, may have some legs to it.

“I don’t think the average person reading the press release of this hole would see much joy in it, because really we don’t have huge numbers to report,” he says.

But with Evolving’s stock shooting up by 80% to $1.80 after the drill results were released, clearly there are some individuals out there who are in the know about north-central Nevada geology and who see the results as significant.

Furthermore, Dick says Evolving considered these results to be good enough that the company began to be concerned that, should it have a lot of success on this particular block, there could be a takeout at a low price and Evolving would never get a chance to reward its shareholders with the upside of all its other projects.

So, Evolving is now proposing to spin out what it calls its “North Carlin properties” into a separate exploration company, leaving in Evolving other properties in Nevada, such as Siesta south of the Sleeper mine and Fisher Canyon, as well as the Malone property in New Mexico and the wholly owned Rattlesnake Hills property in Wyoming.

“The reason that we decided to put this into a separate company is that this is going to be a huge project for us and we think that it has the earmarks of something that could be very significant,” Dick says.

Some of the North Carlin properties — Carlin, Cottonwood Creek and Boulder — are blocks that belong to Newmont Mining (NMC-T, NEM-N), and in which Evolving has the right to earn a 100% stake by spending US$3.5 million on the property. Newmont, in turn, has the right to earn back 70% by spending 350% of Evolving’s expenditures.

Dick says the significance of Evolving’s Newmont connection is “huge,” especially considering that Evolving’s vice-president of exploration, Quinton Hennigh, was a former high-level exploration geologist at Newmont for many years.

Says Dick: “If we do find something significant, I believe that they would be the obvious partner in these projects because they have their infrastructure so close at hand.”

Evolving recently raised about $22 million, adding to the $5 million the company already had in the bank. On top of that, the spinout will force the conversion of all the outstanding warrants and options in the company, which will bring in another $12 million.

“Most of our money goes into drilling, into the ground,” Dick says. “We don’t have onerous payments to third parties and most of our ground we staked ourselves.”

There is an $8-million budget for drilling for the rest of this year, so the $39-million war chest should keep Evolving going for a couple of years at an aggressive pace.

“It will also allow us the opportunity to look at new types of investments,” Dick says. “They may be more advanced projects, for example, scenarios that are closer to production. But we
have our hands full.” Continued exploration of Sheep Creeks will be a drill-intensive program, augmented by deep induced- polarization (IP) surveying. Evolving has already pre-collared several holes down to 800 ft. with reverse circulation to get through the Miocene volcanics, and now the company is finishing these holes off with diamond drilling. “We can see if we have success here, we’ll be drilling here all year long, plus the projects that we have along the Carlin trend,” Dick says.

Overall, Evolving has four drill rigs now contracted. It finished drilling at Malone, where it has assay results, and just wrapped up a short reconnaissance drill program at Fisher Canyon in Nevada’s Humboldt Range.

Reverse-circulation drilling is also under way at the Boulder Valley project, which is adjacent to the Post-Betze mine in Nevada.

Evolving’s third drill is busy over at its Siesta project, which is an 11- mile-long property south of the Sleeper mine.

Evolving has used gravity, IP and magnetics to generate about 30 targets in areas of shallow overburden cover, especially areas of extreme de-magnetization of the Miocene volcanics, which is the footprint of a “Sleeper-style” gold target.

“The time is right to take the leap and test what could become an entirely new play,” Dick comments. “We are developing a drill program to determine where cover is indeed acceptably thin and the location of favourable host rocks.”

In Wyoming, Evolving’s Rattlesnake Hills target is an alkalichosted system, much like the famed Cripple Creek deposit in Colorado in its geology, though it was only recognized a couple of decades ago as an alkalic complex.

Just one part of Rattlesnake Hills was drilled in the early 1990s by Newmont, which came up with some significant intercepts including 150 metres of 1.6 grams gold per tonne, from surface.

Evolving plans on carrying out a first phase of 5,000 metres of core drilling right across the deposit with the objective of developing an open-pit resource.

“I like to look at Evolving as an incubator of new projects,” concludes Dick. “The idea of looking for monster deposits in areas of monster deposits, but in areas that haven’t been looked at very closely in the past, appeals to investors, because we’re not looking for small things here, we’re looking for multimillion- ounce deposits.

“We’re pretty excited and I think we’ll be making a lot of news in the next year.”