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The Challenge

Gold Exploration in Nevada – Where are the Discoveries?

Nevada is a prolific, world class gold producing region, but in 2001, its annual gold production peaked.  Nevada’s annual production has fallen from third largest in the world, to fourth, and today, Nevada’s gold reserves are being mined faster than they are being replenished.  Nevada’s gold mining industry needs new resources.

Historically high gold prices, the need to replace dwindling reserves, and Nevada’s stable political climate have revived the investment community’s interest in Nevada’s exploration industry.  With strong financial support, Nevada’s explorers have increased their annual exploration expenditures twofold since 2000, and the number of active mining claims in the State has increased 50% during the same period.  However, despite the substantial increase in exploration expenditures and activities in Nevada, new discoveries have not been forthcoming.  Why hasn’t more money being spent by more explorers focused on more areas resulted in more discoveries?  The answer lies in the nature of Nevada’s geography.

Nevada is made up of mountains and valleys – roughly half of the State’s bedrock is exposed in the mountains, while the other half is hidden beneath the valleys.  Most of Nevada’s gold deposits were formed before major faulting shaped Nevada’s current mountains and valleys; thus the distribution of gold in Nevada is unrelated to today’s distribution of mountains and valleys (i.e. there should be as much gold in the valleys as in the mountains).  Traditional mineral exploration techniques work well in the mountains, where bedrock is exposed, but face challenges in the valleys, where bedrock is covered.  Consequently, Nevada’s mountains have seen intensive exploration, and the majority of Nevada's gold mines (+85%) have been found in exposed bedrock settings.  Now that prospectors have intensively explored Nevada’s exposed bedrock for over a century, continued exploration in these areas is not resulting in significant discoveries.  There is an equivalent amount of gold waiting to be discovered in Nevada’s valleys, but first, explorers need cost-effective tools to explore in covered bedrock environments.

Topographic relief map of North Central Nevada with historic and current mines shown as yellow, orange, and red dots.  Note: the majority of mines are located in the exposed mountain ranges, while the valleys have seen limited mining activity.  There are still many undiscovered covered resources waiting to be found beneath Nevada’s valleys.  (Scale: approximately 10km grid [6mi])

Without an effective tool to see through valley cover, exploration groups have had to rely on costly blind drilling programs to identify and evaluate specific exploration targets it valley areas.  Because drilling new covered targets not associated with known mineralization is both expensive and risky, exploration companies are faced with the difficult choice either to accept the risk or to stop exploring beyond the limits of direct visual observation.  Most Nevada exploration groups have chosen to ignore unexplored, covered areas, and concentrate their resources on targets with proven mineralization.  Unfortunately, most of Nevada’s areas of known mineralization have already been explored extensively, often several times by several groups, and the result is that today’s investor’s are funding exploration companies to work on the same outcrops and marginal resources that have been around for years.  This strategy is not working.  Nevada’s reserves continue to shrink and production continues to fall.

The investment community has recognized the futility of continuing to spend more money on the same properties.  Drill intercepts through already well-defined, but uneconomic resources no longer move the market.  Market valuations of junior exploration companies relying on this strategy are being valued accordingly, and capital to fund them is drying up.  But gold prices are still high; Nevada’s miners still need new reserves; and Nevada is still a good mining jurisdiction.  Gold exploration in Nevada remains a worthwhile endeavour and an investment opportunity, but to be successful, Nevada’s exploration companies must change their approach and shift their focus from the over-explored mountains to the underexplored valleys.  The next round of gold discoveries in Nevada will come from exploration groups that can develop methods to quickly, accurately, and inexpensively evaluate the rocks and geology beneath Nevada’s covered valleys.