ELKO DAILY FREE PRESS
This article was originally published in Elko Daily Free Press on August 6, 2018.
ELKO — Prospect. Claim. Explore.
The search for gold in Nevada keeps its allure long after the 1849ers panned gold flecks from the Carson River. A gold discovery can catapult the finder into wealth while helping sustain community economies.
“Big deposits start small,” said Rich Perry, Nevada Division of Minerals administrator. “They begin to unravel the geology of the district. Gold deposits are very geology intensive.”
Whether a prospector searches for gold in unexplored territory or an operator seeks to expand an existing mine, finding unseen riches remains a challenge, a necessity and a thrill.
“A vein is an elusive beast,” said Eric Saderholm, president of American Pacific Mining Corp. “Then bang! You hopefully you hit the vein, and it’s good.”
American Pacific Mining is a gold exploration company drilling near Tuscarora. The company is among a handful of junior companies conducting drill programs in the state.
“The junior market is somewhat dynamic. It’s tough. It’s risky,” said Saderholm, who previously worked as Newmont Mining Corp.’s exploration manager for the Western United States. “But there is a freedom associated with it, as well.”
In Nevada, junior companies and major operators seek to find color in the desert. The search becomes more earnest, with activity ramping up, when certain factors work in favor of exploration.
Advantageous federal permitting, high enough gold prices, financial backing and a stable regulatory environment in about the past year have combined to produce what industry professionals are calling a slight uptick in gold exploration.
“And that’s good for us here,” Perry said.
Global spending on the search for metals other than iron and steel rose between 2016 and 2017 for the first time in four years, according to the S&P Global Market Intelligence’s World Market Exploration Trends 2018 report. Budgets increased from $7.3 billion to $8.4 billion over that period.
Compared to less than a decade ago, however, exploration is still down in Nevada and around the globe.
“I think it’s slightly improved,” said John Muntean, an economic geologist with the Nevada Bureau of Mines and Geology, who co-authored the mineral industry report. “It bottomed out a couple years ago. I think it’s starting to climb. The activity seems to be increasing. It’s not booming in my sense of it.”
The world peak exploration budget was $22 billion in 2012, according to the Nevada Bureau of Mines and Geology 2016 Mineral Industry report. In 2016, worldwide exploration activity budgets fell below $8 million for the first time since 2006.
In the U.S., exploration budgets decreased 30 percent from 2015 to 2016, the bureau found. In Nevada, exploration expenditures more than halved between 2011 and 2016, from $675 million to $325 million.
Yet exploration activity in Nevada increased in 2017, according to the 2016 mineral industry report, by about 15 percent with a total of 19,040 new claims — half of which were for lithium.
Shaun Fleming, operations manager for Major Drilling International Inc., said the drilling and mine services company had booked all of its reverse circulation drills early for 2018 and the core drills are being reserved rapidly.
“It’s starting to pick up,” he said. “2018, we’re in a boom. It’s here.”
The company reported a revenue increase for the first time since fiscal year 2012 in its 2017 annual results, “which indicates that the industry has started recovering from a prolonged downturn,” said Denis Larocque, president and CEO of Major Drilling. “We continue to see a gradual increase in activity month by month … . Global exploration spending improved as most senior and intermediate companies have increased their exploration budgets for calendar 2018.”
The Bureau of Land Management tracks notices of drill exploration projects on public lands. Elko-based BLM geologist Tom Schmidt remembers the effect that the discovery of microscopic gold in the 1960s had on the industry.
“We had over 110 or 115 notices per year. They were just coming in the door nonstop. Now I don’t think we get more than five a year,” he said. “Back when Carlin Trend was just getting started, we’d have a hundred different projects going on.”
In slow times, operators cut exploration spending faster than declining revenue because it is seen as surplus, according to the S&P Global Intelligence Market report.
“Despite improving conditions since early 2016,” the report states, “we expect that producers will maintain relatively low [exploration-spending-to-revenue] ratios over the coming years, at levels well below that of 2012 ….”
On the ground
Large mining companies tend to focus exploration efforts near existing operations.
“Big companies, they’ve got all the gold and ore that they can handle for the useful lifetime of the equipment and the plant that they’ve got in place,” said John Dobra, a retired University of Nevada, Reno, professor of economics, specializing in resource and mineral economics. “Most of the discoveries are nearby existing operations where they can extend the life of their current operations.”
Newmont Mining Corp.’s exploration efforts are focused on discovery of mineralization at brown- and greenfield projects, the company announced in its 2017 annual report. Brownfield projects benefit from nearby existing operations, while greenfield projects require capital investments and a span of years before production can begin.
Exploration spending at Newmont companywide was up in 2017 at $179 million, compared to $148 million in 2016, and $156 million in 2015, according to Newmont’s 2017 annual report.
From the exploration budget as a whole, Saderholm said the allotment for greenfield projects had decreased during his tenure with the company. Newmont already mines on the Carlin and Battle Mountain-Eureka trends, which the mining industry report deems as projects with promise.
The Battle Mountain area could be the next big discovery, Saderholm said: “If Newmont believes in itself.”
Barrick Gold Corp. announced in its 2017 annual report that exploration and evaluation expenses totaled $173 million last year. Guidance for 2018 estimates a budget of between $185 million and $225 million, with 80 percent slated for the Americas.
“Our exploration programs balance high-quality brownfields projects, greenfield operations and emerging discoveries that we believe have the potential to become profitable mines,” the annual report states.
The company continues to advance existing infrastructure and growth projects in Barrick Nevada with Goldrush at its Cortez operations being “one of the largest and most exciting new discoveries in the past decade,” the annual report continues.
Barrick expects permitting to start this year and construction for underground to begin as early as 2021.
Kinross Gold Corp. considers exploration within the footprint of operating mines as part of the cost to sustain production, while brown- and greenfield exploration are nonsustaining costs, according to its 2017 annual report.
Kinross’ exploration and business development budget was $106 million in 2017, up from $94.3 million the previous year.
While the top three gold producers in the state focus much on exploration within existing operations, the junior companies take a stab at new frontier, sinking millions of dollars into searching for the next profitable deposits.
“Juniors have an incentive to go find it because they don’t have that fixed capital,” Dobra said.
Besides America Pacific Gold’s work in Tuscarora, gold drill programs noted by the Nevada Bureau of Mines and Geology in 2016 were Gold Standard Ventures Corp.’s Railroad Pinion project, Columbus Gold Corp.’s Eastside project and Premier Gold Mine Ltd.’s Cove project, which continues to advance.
In addition to exploration for gold, the state has seen an increase in interest in other minerals such as copper, lithium and cobalt.
The state’s fairly steady mining history —which spans three major gold production-eras, including the California Gold Rush, Comstock Lode and Carlin Trend — leaves behind only the deposits that are more challenging to find, permit and mine.
“In Nevada — and everyone agrees on this — that most things that are easily mineable have been found, meaning that things that have been sticking out of the ground on the surface have been found or explored or developed heavily,” Muntean said.
Thirty percent of the state’s production has come from underground operations, Perry said, citing a recent Nevada Division of Minerals survey.
“It’s going to be more expensive to find those deposits because it’s going to take a lot more drilling and deeper drilling and deeper mining, and those are really difficult to find, so we are going to have to find better tools,” Muntean said, adding that investors tend to be skittish about risky drill programs.
To make a project economical, the underground vein must be high grade. Those finds tend to be smaller projects or “boutique mines,” as Muntean called them. An example is the Fire Creek Mine, previously owned by Klondex Mines Ltd., recently purchased by Hecla Mining Co.
“That could be a little of the future of Nevada,” he said, admitting that the results could make a company wealthy, but there is no promise of becoming the next Barrick or Newmont.
Saderholm holds out hope for a profitable discovery that his company or a project buyer will eventually mine.
“I’m high on this project out here,” he said of the Tuscarora project. “Once you lock into one, they can pay a lot of money,” he said.
Other than the hope of high-grade underground veins, gold remaining in Nevada appears to be low-grade refractory ore, which means it must go through extensive extraction processes.
“For the gold industry, that is the nut that needs to be cracked,” Muntean said. “That’s more of a technology thing than a geology thing.”
To an industry that has evolved from rock quarrying to gold panning to heap leaching to smelting, scientists and miners might very well be up for the challenge.
“We can safely say that the industry continues to look for innovation and continues to advance technology to make mines safer, and more productive with a smaller footprint,” said Dana Bennett, Nevada Mining Association president and historian.