Has AuEx discovered Nevada’s next gold district?

Nevada is well-known for prolific gold districts such as Comstock, the Carlin Trend and Cortez Trend. Many exploration companies have tried to find the next gold district in the state. Now, Ron Parratt, president and CEO of Reno, Nv.-based AuEx Ventures (XAU-T), believes that the company’s Long Canyon and West Pequop projects could be sitting on a new gold district.

 

And 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 projects are located roughly halfway between the towns of Wells and Wendover in northeastern Nevada, south of interstate highway 80. AuEx is raising $4.4 million in a private placement to explore the Long Canyon project further, while a joint venture partner is exploring the West Pequop project.

 

“This area comprises the new mineral district. We can’t call it a mining district today because there was never any mining in this area. But there is outcropping ore-grade mineralization,” Parratt says.

 

Parratt adds that the projects were discovered in 1994 by a mineral exploration company owned by Australian shareholders, which found a geochemical soil anomaly. “What we are seeing, I think, overall, is the emergence, now, of this area, of a new mineral district in Nevada. I have worked in Nevada since 1978, and it’s amazing that something like this remained undiscovered until 1994. I wish I could take credit for the discovery in total – I can’t. I give credit to the Australians who found that.” He credits AuEx for advancing the properties and achieving the recognition that the district warrants.

 

Parratt says that mineralization here is Carlin-type. “I have worked in Nevada for a long time and I am very familiar with Carlin-type 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 a Carlin-type mineralization). First of all the (high) gold-to-silver ratio… usually about 10 to 1. Associated arsenic, antimony, and mercury — classic indicators, and those are here. No base metals to speak of — no copper, no lead, no zinc of any appreciable amount. Decalcification of the limestones; formation of jasperoids; karst-like features; cave-development-like features with collapsed breccias.”

 

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 (silicified limestone). 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.

 

“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.

 

Talking about Long Canyon, he says “I am very optimistic this will become a mine.” And he sees a good possibility that the same will happen at West Pequop. “We are excited about the future for the projects.”

 

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 groben. The rocks are preserved and explorable. We see this whole area as being prospective going forward for the long term for exploration.” He believes that exploration in this district will continue for the next decade.

 

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

 

AuEx explores the projects with two joint venture partners. Long Canyon is being explored by a joint venture with Fronteer Development (FRG-T, FRG-X), where Fronteer holds 51% and AuEx 49%, so AuEx pays 49% of the exploration expenses. West Pequop is being explored by a joint venture with Agnico-Eagle Mines (AEM-T, AEM-N), where Agnico holds 51% and AuEx 49%. Agnico has the option to increase their stake to 70% if it carries the project through to the feasibility study stage, and currently Agnico is footing the entire exploration bill.

 

There are four drill rigs on Long Canyon, two of which being diamond drills and the other two reverse circulation drills, and holes have been generally drilled to a maximum depth of 185 metres. At presstime drilling on Long Canyon is wrapping up, and AuEx anticipates 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 since the mineralized zone is about 30 metres thick, AuEx believes that the property would be suitable for open pit mining should an economic deposit be found.

 

Drill holes highlighted by the company from Long Canyon include hole 149, which returned 24 metres of 3.1 grams gold per tonne from a depth of 111 metres; hole 147, which returned 7.6 metres of 3 grams gold from 113 metres; and hole 132, which cut 59 metres of 3.2 grams gold from 87 metres.

 

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.

 

The company highlights a number of drill holes from West Pequop, including hole 139, which intersected 22 metres of 12.6 grams gold per tonne from a depth of 162 metres; hole 135, which cut 19 metres of 8.7 grams gold from 70 metres; and hole 133, which returned 7.3 metres of 13.9 grams gold from 32 metres.

 

The two projects are about 7 km apart. The intersection on the 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 commutes daily from the two towns. The project is located about 13 km from the highway, and most of the distance is covered by an unpaved road, with the balance covered by a dirt road. West Pequop is about 27 km from the highway, most of which is covered by an unpaved road. Cell phone coverage to the interstate 80 corridor is available from hill tops, although it can be erratic.

 

There is a power transmission corridor about 15 km east of Long Canyon, but at present it is unclear whether it can support a potential mine. The valley at West Pequop has groundwater, and Parratt believes that 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 area 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 covers 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 in addition to its overall 49% stake, while joint venture partner Fronteer Development holds a 3% NSR royalty on the balance of the property in addition to its overall 51% stake.

 

As 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 as HR 2262 and is currently before the Senate. If made into law, the Bill stipulates that mining claims on federal lands will be subject to an 8% royalty, while existing mining operations will pay a 4% royalty.

 

Besides the two Nevada projects under joint venture, AuEx has nine other projects under option agreements with several partners.

 

AuEx has 25 million shares outstanding and 29 million shares fully diluted, with $2 million in working capital. The private placement currently underway, which is brokered by Haywood Securities, consists of between 3-4 million units, comprising one share and half a warrant each, at $1.10 per unit. If the private placement is fully subscribed, the company will have 35 million shares fully diluted and about $6 million in the treasury.

 

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