Vancouver — Exploration spending in the U.S. has been in sharp decline for most of the past decade, falling 66% to below US$150 million in 2002 from 1997 levels, with a 77% drop in new claims over the same period. Weak metal prices and relentless industry consolidation helped shrink the ranks of would-be explorers, as did an increasingly expensive, arduous, and sometimes fruitless, permitting process. Even Nevada, the jewel in the crown of U.S. mining, saw a sharp drop in exploration spending, with most of the funds directed at producing mine sites and known deposits.
Hundreds of companies scoured Nevada’s hills for gold in the giddy years following major discoveries in the Carlin and Battle Mountain trends, with mid-tier producers such as Santa Fe Pacific Gold, Echo Bay Mines, FMC, Getchell Resources, Rayrock Resources, FirstMiss Gold, Independence Mining, and Battle Mountain Gold Co. among the active players. But most were swallowed up by majors and, by the end of 2002, three companies —
Surging gold prices have since breathed some new life into Nevada’s exploration sector, and this year the Nevada Mining Association (NMA) is trumpeting an upswing in industry activity and investment. Mining claims in the state are up 13% after five years of decline, and notices of intent to explore federal lands more than doubled between 2002 and 2003. Plans of operation filed for new mining projects also more than doubled over that 1-year period.
Despite this dramatic increase in activity, the bulk of exploration spending continues to be focused on properties near producing mines, or at dormant mines and development projects that were not attractive at low metal prices. Of these two growth strategies, mine site exploration seems to offer the best bang for the exploration buck, albeit for the fortunate few with producing mines.
At the end of 2003, proven and probable reserves in Nevada stood at 77 million gold-equivalent ounces, sufficient for about 10 more years. At the end of 2002, the figure was lower, at 69 million ounces. Led by the “Big Three,” Nevada producers not only replaced the 7.3 million oz. mined over the course of that year; they discovered 8 million more ounces, either in the ground or on the books (recalculating reserves at higher gold prices). The finding costs were a fraction of what these majors typically pay to acquire ounces in the ground.
While both Barrick and Newmont reported good exploration success at their respective Nevada holdings in recent years, the big newsmaker of late has been Placer Dome, at its 60%-owned Cortez Hills discovery in Lander Cty. A unit of Kennecott owns the remaining 40%.
Cortez Hills was found by closely spaced drilling between the Pediment deposit and the original Cortez pit, mined by the joint venture from the 1950s through 1970s. It is considered one of the most important gold discoveries in the U.S. in recent years, and reflects Placer’s ongoing commitment to mine site exploration.
Since 1996, Placer Dome has produced 23 million oz. from its global roster of mines. Over that same period, 22.4 million oz. were found at existing mine properties, for a mere US$20 per oz. Cortez Hills, situated near Placer’s Pipeline-South Pipeline deposits, added 3.2 million high-grade ounces to the company’s reserves. Reserves at the entire mine complex jumped to 9 million oz. from 7.6 million oz.
The major plans to continue to delineate the Cortez Hills resource, as well as test areas around the Pipeline-South Pipeline and Pediment deposits and explore new targets in the joint-venture area.
While aggressive exploration also enabled Placer Dome to reopen the Turquoise Ridge mine in nearby Humboldt Cty., the results were less impressive and the costs far higher.
Placer acquired the mine through its May 1999 merger with Getchell Gold, valued at almost US$1 billion. A few months later, the company suspended operations, owing to reserve uncertainties, and wrote down its investment the following year.
Placer reopened the mine in the spring of 2003 after developing a low-tonnage, high-grade underground mining plan. Prospects at Turquoise Ridge improved even more later that year when Newmont agreed to process metallurgically complex ores at its nearby Twin Creek mill in return for a 25% share of the venture.
Even so, the geologically complex mine remains a challenge for its operators. By the end of 2004, Turquoise Ridge is supposed to reach full production of 300,000 oz., with total costs forecast at US$235 per oz. over the 12-year mine life. But owing to various technical problems and delays in gaining access to higher-grade zones, Placer projects that its 75% share of 2004 production will be lower than originally anticipated, at 125,000 oz., with total costs of US$310 per oz.
Not far away, exploration efforts by
Shortly after taking over the mine from Rayrock in 1999, Glamis suspended milling operations in favour of a heap-leach operation. The subsequent discovery of additional oxide zones allowed the partners to proceed with the Millennium expansion project. All necessary permits were received early this year.
Marigold produced 55,550 oz. to the company’s account in 2002. The expansion is expected to boost this to an average of 110,000 oz. annually at a total cash cost of $150 per oz. Exploration is ongoing and the partners are optimistic that additional oxide resources will be found.
Two developments
Elsewhere in Nevada, state mining officials are heartened by two recent developments that suggest a trend toward greater industry diversification. One was the acquisition of the Jerritt Canyon mine by
Quadra paid about US$14.2 million for the Robinson mine, near the town of Ely. The open-pit mine had been dormant since 1999, when a previous operator suspended operations because of weak metal prices.
Under Quadra’s management, total proven and probable reserves increased 27% over the initial estimate of 104.6 million tonnes of 0.72% copper and 0.29 gram gold per tonne.
Milling resumed in August, and reached the targeted 38,000 tonnes per day in early fall. Concentrate grades of between 24% and 30% copper were achieved, with recoveries in the range of 60-86% for copper and 35% for gold, in the startup period. A newly installed gravity circuit to enhance gold recovery is expected to be operational by year-end.
In nearby Elko Cty., Queenstake is busy with a substantial exploration program at Jerritt Canyon. The mine is now operational, with 73,070 oz. produced in the third quarter of this year, from 358,600 tons averaging 0.224 oz. per ton. Cash operating costs were US$303 per oz., resulting in a net loss of US$5.4 million for the quarter.
Queenstake notes that efforts are ongoing to optimize operations and realize the full potential of the property. Meanwhile, exploration continues to delineate known zones and develop new areas within the 100-sq.-mile mine property.
Queenstake plans to spend almost US$10 million on exploration by year-end, with US$5.9 million earmarked for district-scale exploration. Positive results have already been reported from the Starvation Canyon target, including 0.51 oz. gold over 50 ft., 0.34 oz. gold over 10 ft., and 0.46 oz. gold over 15 ft.
OTC-listed
Jun
iors blaze trails
Improved metal prices combined with Placer Dome’s success at Cortez Hills have lured more juniors to Nevada than were evident even a few years ago. Those that slogged through the tough times are reaping the benefits now, in the form of joint-venture deals with gold-producing majors.
Romarco believes its newly acquired ground has potential for discoveries similar to those found in the Cortez Hills of the Battle Mountain-Eureka trend and the Rain area of the Carlin trend.
Newcrest can eran a 65% interest in Miranda’s Redlich property, the Walker Lane structural trend, near Tonopah. The target is bonanza-grade gold and silver.
High-grade gold is also the target of interest at Miranda’s Troy project, near Tonopah. The property covers the Locke mine, which operated in the late 1940s, with historic head grades of 0.34-0.57 oz. gold, yet has seen little drilling.
Miranda recently granted Placer Dome the right to earn up to 70% of its 79-claim Red Hill project in Eureka Cty. These claims are reported to cover a large percentage of the JD window, which exposes lower-plate carbonate rocks, which are the host rocks for disseminated gold deposits elsewhere in the Cortez region. Miranda’s claims are surrounded by claims controlled by Placer.
To earn a 60% interest, Placer must make payments totalling US$549,000 and spend US$2 million on exploration over four years. It can acquire another 10% by completing a bankable feasibility study within five years, plus a further 5% by arranging Miranda’s share of project financing.
Red Canyon
Newmont meanwhile can earn up to a 70% stake in Miranda’s Red Canyon property, 20 miles from the Cortez Hills discovery. Newmont must spend US$2.5 million to earn 60%, and fund a feasibility study to acquire a further 10% interest.
On the northern end of the Battle Mountain trend,
The company plans to advance the project to the feasibility stage, with a scoping study as the first step in the process. More exploration drilling will attempt to define the limits and structural trends of the deposit, along with metallurgical testing to boost recoveries.
Metallic Ventures controls several other projects in the state, including the Goldfields property, 270 miles southeast of Reno, and the Esmeralda property (formerly known as Aurora), 100 miles southeast of Reno.
On the copper front,
The companies hope to revive the project using a vat-leaching process, with MBMI responsible for all costs (estimated to be US$1.5 million).
Previous operators discovered and delineated a small, high-grade copper sulphide deposit, which was subsequently mined by open-pit methods and shipped to a smelter for processing. The property hosts an existing resource (not yet measured to NI 43-101 standards), as well as newly identified targets that will be explored in detail.
— The author is a former editor of The Northern Miner and currently works as a freelance reporter and scriptwriter. She resides in Vancouver.
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