Casey Files: Understanding Nevada's Emerging Gold Plays
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If Nevada was a separate country, it would rank as the world's #3
gold producer, with most of that production coming from the Carlin
trend where over 50,000,000 ounces of gold have already been
produced. There are, however, an increasing number of savvy
explorers coming to the conclusion that the Cortez trend, which runs
roughly parallel to and 50 miles southwest of the Carlin Trend, may
host a resource as large, or even larger.
The following article by Louis James, senior editor of the
International Speculator, provides a very useful overview of Nevada,
the past, present and, more importantly for us as investors, the
future.
The article is especially timely given legitimate concerns about
governments in Latin America and elsewhere committing economic
hari-kari by electing governments with clear socialist,
anti-business leanings. By contrast, Nevada consistently ranks as
one of the most geologically prospective and pro-mining
jurisdictions in the world today. And it is only to the good that,
being situated in the United States, Nevada gives us extra leverage
to a falling U.S. dollar.
You'll want to stash this article in some corner of your computer
for further reference.
Doug Casey
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Carlin Trend
The Carlin Trend is North America's most prolific gold-producing
area and hosts the second-largest known gold resources in the world,
after the Witwatersrand in South Africa. More than 107 million
ounces of known proven and probable reserves occur on the Carlin
Trend. And there may be up to 180 million ounces of resources,
depending on what you include in the number.
The trend is a 40-mile-long, northwest to southeast zone of
low-grade, epithermal deposits, discovered in 1961 by John Livermore
and Alan Cope, geologists then working for Newmont. The
mineralization was near surface (only 25 meters down), but so finely
disseminated that all traces were microscopic. In the areas that
proved economic, assays averaged 6.2 g/t gold. Newmont opened the
original Carlin open pit mine in 1965, before the introduction of
heap leaching. When that technology matured in the 1980s, production
ramped up to where the Carlin Trend now accounts for over 35% of all
U.S. gold output.
In 1994, mining companies began moving underground to exploit the
higher-grade ore down dip from existing open pits. These deeper
deposits have been discovered at Rossi, Dee, Meikle, Gold Bug,
Rodeo, Deep Post, Deep Star, Turf, Four Corners, West Leeville,
Hardie Footwall, Deep Carlin, Mike, Rain, Tess and Rain Extension.
Taken together, these recent underground discoveries contain a total
of 42 million ounces of announced gold reserves, at an average grade
of 10.8 g/t. Large quantities of additional unannounced gold
resources are now drill indicated on the Carlin Trend.
Cortez Trend
The Cortez Trend is in the same area of Nevada and is similar in
size to the Carlin Trend, but is displaced about 50 miles southwest.
It includes the Pipeline Mine Complex (12 million ounces) to the
north and the Gold Bar Mine (1 million ounces) to the south.
At a meeting of the Geological Society of Nevada in mid-2004, a
representative of the CJV--the Placer Dome/Kennecott Cortez Joint
Venture--announced that they had intercepted 1.5 ounces of gold per
ton (over 46 g/t) over an interval of 400+ feet. Some reports have
it at almost 2 ounces per tonne--a staggeringly rich intercept.
Current Proven and Probable reserves at Cortez/Cortez Hills, as
announced by joint venture operator Placer Dome (now part of Barrick
Gold, ABX) stand at 10 million ounces, with another 10.1 million
ounces in resources). The CJV has now approved mine construction.
Since the much-discussed CJV announcement at the Geological Society
of Nevada meeting, the Cortez Trend has become one of the most
active prospecting areas in Nevada. The expectation--or hope--that the
Cortez Trend is now an opportunity like the Carlin Trend was in the
1960s is clearly the driving force in the area.
But is this hope realistic?
Comparison
The Eureka-Battle Mountain region of Nevada has two layers of
sedimentary rock: the "Upper Plate" and "Lower Plate". The Upper
Plate does not typically host higher-grade gold mineralization, but
can contain indications of higher grades in Lower Plate rocks that
have "leaked" upwards. Lower Plate mineralization (Silurian-age
Roberts Mountains formation) correlates with the major gold deposits
of the Carlin Trend, where a great deal of surface erosion and other
geological activity has brought Lower Plate blocks ("horst blocks")
within range of open pit mining in some places. "Carlin-style"
deposits contain disseminated gold mineralization, usually
structurally controlled (meaning, along fault lines, etc.).
Mineralization may be predominantly oxides, sulphides, refractory or
carbonaceous sulphides.
Cortez Trend deposits are replacements or disseminations in
calcareous sediments and limestone strata, also in Lower Plate rock.
As on the Carlin Trend, one of the keys to discovery is finding
Lower Plate rocks that have been exposed in or through "windows"
where the Upper Plate has been eroded.
The largest and highest-grade discoveries along the Carlin Trend are
associated with major faults. These are very old faults, as are the
Cortez faults, though there is considerable disagreement among
geologists on numerous issues relating to these faults. Consulting
geophysicist Hans Rasmussen, who once worked with Newmont on the
Carlin Trend, believes there is a strong possibility that the Cortez
Structural corridor system may be both older and bigger than the
Carlin fault system. Being older is good: that allows more time for
more geological events to occur. The reasoning is long and
technical, but the bottom line is that if Rasmussen is right, the
Cortez Trend could prove to be not only as big as Carlin, but
bigger.
If Cortez is so big, why wasn't it discovered earlier? Well, one
consequence of the geological events that formed the trend is that
they also buried it, making it harder to find and more difficult to
prove. But that is exactly what numerous majors and juniors are
working on, so time will tell soon enough.
How to Play
In the latter half of 2005, Rob McEwen, former CEO of Goldcorp, has
made a lot of waves in the area by buying major positions in a
number of Cortez Trend junior explorers. This included U.S. Gold
(OTC:USGL), White Knight Resources (V.WKR), Tone Resources (V.TNS),
Nevada Pacific Gold (V.NPG) and Coral Gold (V.CGR). These companies
have all seen substantial increases in share price in the months
since then, partly because, as he revealed to us when we interviewed
him for the January edition of our International Speculator
newsletter, McEwen hopes to amalgamate these companies into a single
company with a land package and an exploration budget like that of a
major, but with the fast-moving exploration culture of a junior.
If you are looking to play the Cortez, one could speculate on any
one or all of these stocks heading higher if McEwen is successful.
Or one could look for companies with land near those McEwen already
has an interest in, hoping he'll buy in and send the stocks higher.
Or, one could just do the homework necessary to determine which
companies have the most prospective projects in the region and buy
them on the hope of "getting rich on process." Buying any junior
mining stock is always a risky proposition, of course, but when you
pick an area like the Cortez Trend, where you know a lot of
investment is going to take place in the current cycle, and focus on
quality companies with the right management teams, you stack the
odds in your favor.
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Doug Casey, the author of Crisis Investing, which was #1 on the New
York Times Best-Seller list for 26 weeks, and the editor and
publisher of the International Speculator, one of the nation's most
established and highly respected publications on gold, silver and
other natural resource investments, has made himself and his
subscribers millions with his in-depth research, right-on
perceptions and contrarian attitude. Click here to learn more about
subscribing to the International Speculator:
investorsinsight.com
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