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Our Explaining Exploration series is embarking on a world tour over the next few weeks to look at some of the ‘juicy’ exploration and mining jurisdictions across the globe. Often, these jurisdictions correspond with states or provinces, but they can also be entire countries, or several countries where a geological zone extends across borders.
We are starting in Nevada, the real golden state. In its 150-year gold mining history, Nevada has produced much more gold than its neighbor, California, that claims the official ‘golden state’ title in the USA.
For the investor inside scoop, we spoke to local geologist Chad Peters, Founder, President and CEO of Ridgeline Minerals who are actively exploring in Nevada. He is an experienced geologist who has been working in the state for almost a decade. He previously played a lead role as Exploration Manager at Premier Gold Mines in developing a new structural model at the McCoy-Cove project that led to the discovery of the CSD Gap deposit in 2016, and a high-grade 1.6-million-ounce resource estimate the following year.
Nevada is a premier jurisdiction for a unique combination of reasons, but two stand out for Chad: low geopolitical risk and huge Carlin-Type deposits.
Above the ground: Low geopolitical risk
Nevada consistently ranks in the top five jurisdictions named in the Fraser Institute Annual Survey of Mining Companies. The survey ranks jurisdictions according to their ‘investment attractiveness’ and mineral potential. Investment attractiveness considers regulations, taxation, infrastructure quality, and other policy attributes. 7 “In Nevada, there is a clear permitting pathway for both exploration and mining that doesn’t break the bank,” said Chad. The permitting process is transparent, straightforward, and reliable. Some 80% of the state is public land overseen by the US Bureau of Land Management (BLM). The BLM approves exploration and mining work programs and companies pay an environmental bond that is held by the state for the duration of the work.
“This helps companies make realistic predictions about timelines and budgets that they can follow through on and that investors can rely on,” said Chad.
In addition, Nevada has a climate and topography that allows for exploration and mining all yearround and a skilled mining workforce, with thousands of workers between the towns of Reno and Elko who are specialists at mining in Nevada.
Below the ground: Carlin type deposits
“Carlin-Type deposits are unique to Nevada,” said Chad, noting that similar deposits occur in China and Canada’s Yukon, but none at a similar scale to the production in Nevada.
Carlin-Type deposits are typically hosted in carbonate rocks, i.e. limestone or dolomite. These carbonate rocks underlie the entire state of Nevada and extend into Utah and Idaho. Hot, acidic (hydrothermal) fluids come in from depth, flood the host rocks, and replace the carbonate minerals with sulphide minerals that host the gold. The gold is microscopic (refractory) gold within these carbonate rocks.
If the rock is oxidized – altered by chemical processes near the surface – the gold is then liberated from the sulphides and becomes easier to extract from the rock with conventional heap-leach methods. But if it is not, it is more of a challenge to extract. More on that later.
“Carlin-Type deposits can be huge,” said Chad, “Other than the giant copper-gold porphyries, there’s very few gold deposit types in the world that can rival a Carlin-Type deposit in sheer scale.”
The gold deposits in Nevada occur in three primary trends: Carlin, Battle Mountain-Eureka, and Walker Lane. The majority of the gold produced in Nevada comes from the Carlin and Battle Mountain-Eureka Trends, said Chad, but some world-class mines occur in the Walker Lane Trend as well.
What’s the buzz about Walker Lane?
The Walker Lane trend runs along the Nevada-California border. The rocks here transition to hosting a different type of mineralization. While there are a few smaller Carlin-type deposits, it is mostly low sulphidation epithermal veins that host the gold.
The 8.6 million-ounce Comstock Lode was hosted in the Walker Lane trend and mined in the late 1800s.
Chad admits that he has a bias toward the Carlin and Battle Mountain-Eureka trends. “The Walker Lane vein systems are typically highly discontinuous and expensive to drill. You might drill 300 m to hit a vein 2m wide at 10 g/t. A company can go out and drill that same hole in the Carlin trend and potentially hit 20 m at 10g/t and so from a risk-reward perspective your discovery cost per ounce is significantly lower [in the other trends].”
He admits there is a chance of finding another world class deposit like the Comstock or Round Mountain, but typically the deposits in Walker Lane are much smaller. Companies may strike it lucky and drill a rich pod, but chances are it will be isolated and discontinuous.
“I’m heavily biased but, based on what I see, I don’t believe the next big gold deposit in Nevada will be in the Walker Lane trend,” said Chad.
How to find (more) gold in Nevada
There are a lot people looking for gold in Nevada, from individual prospectors and microcaps through to mid-tier and larger miners, including Kinross, SSR, and Nevada Gold Mines (NGM), a joint venture between Barrick and Newmont to combine their assets in Nevada.
“It’s certainly a hot jurisdiction,” said Chad, “So, it can be difficult to pick up ground in key trends, especially in a bull market.” Chad’s company, Ridgeline Minerals, for example, knew where they wanted to explore, and it took two years to secure the land package they have today. “Local experience is incredibly valuable,” he said.
“All the low hanging fruit, the shallow, multi-million-ounce oxide deposits, have been discovered and mined out now,” added Chad, “The new discoveries in Nevada are coming from deeper high-grade deposits.”
There is no magical exploration technique or new “great leaps in technology” that have made finding new deposits or extensions of deposits in Nevada easier. In the last 10 years, the discoveries made have relied on “good teams, layering the data together, and testing concepts,” said Chad.
One key asset in Nevada is a good structural geologist. You don’t have to be a Nevada expert to do well in Nevada, but you do need someone on your team who understands structural geology.
New discoveries, like NGM’s huge 15 million-ounce Goldrush deposit, tend to result from teams rethinking the geology of previously mined areas and drilling underneath the near surface mineralization, particularly in the “old” trends, Carlin and Battle Mountain-Eureka, and to a lesser extent, the Walker Lane Trend.
“The future of exploration in Nevada is going deeper to find high-grade deposits,” said Chad, “They’ll be refractory – it’s not a bad word! You just need to find enough ounces at a high enough grade to make it worthwhile.”
Some downsides: Refractory gold and the NGM mill-opoly
“Metallurgy is the Achilles Heel of Carlin-Type deposits,” said Chad.
The cost of mining and processing refractory ore varies by deposit and can be an order of magnitude higher per tonne than a typical oxide deposit, but if the refractory deposit has the grade and size, this should not be an issue.
Toll-milling fees are also a challenge when defining project economics. Any new refractory mine in Nevada will likely set up a milling agreement with Nevada Gold Mines, who own and operate all but one mill in Nevada. Chad acknowledges that, since consolidating, “NGM is really the only game in town when it comes to milling facilities in Nevada” and that they are the only producer at the present time with the infrastructure and expertise to economically process refractory ore.
On the plus side, any significant deposit discovered in Nevada would appear on the NGM radar and have a good chance of being acquired.
Two pros and a con
To conclude, we asked Chad for the two things he suggests retail investors should look for before they invest, and one red flag.
First, management: “Ideally, you want to see a Nevada-based management team that has had success in Nevada,” said Chad, the company should have a good share structure and management better have “skin in the game”.
Second, a good property: “It doesn’t have to be on-trend, but it has to have all the ingredients, the right host rocks, evidence of a mineralized system, and potential for scale.
Third, look carefully at the history of the property: “Be wary of the old ‘lipstick on a pig’ analogy. Watch out for projects that have been picked up every bull market, the company does a song and dance, twin a couple of existing drill holes with good results, and then go bankrupt. Watch out for high ownership turnover – if a project has been ‘flipped’ 10 times, and renamed, re-marketed and subsequently dropped, be wary.”