FREE ARTICLE PREVIEW: You are enjoying a free sample of
exclusive subscriber content. There is a limit of one free article per week.

TABLE OF CONTENTS Dec 14 - 20, 2009 Volume 95 Number 43 - 0 comments

Entering A New Fronteer

LONG CANYON GOLD JV WITH AUEX SPEEDS AHEAD

TEXT SIZE bigger text smaller text
By: Kip Keen
2009-12-14

SITE VISIT

ELKO, NEV.--At Fronteer Development Group (FRG-T, FRG-X) and AuEx Ventures' (XAU-T) Long Canyon property in northeastern Nevada, Fronteer's chief operating officer, Troy Fierro, emphasizes that the reason he joined the company in April this year was to build a mine.

"As a mine engineer, I like to build mines and put them into production," Fierro says.

About a year ago, Fierro recounts, Fronteer chairman Oliver Lennox-King asked him to take a look at Fronteer's assets, which included properties spanning from Nevada to Turkey. Lennox- King tapped on Fierro's shoulder because he liked what Fierro had done at Metallica Minerals and its Cerro San Pedro gold mine (now under New Gold [NGD-T, NGD-X]), where Fierro had spearheaded the drive to production. Fierro's several years at Coeur d'Alene Mines (CDM-T, CDE-N) didn't hurt either.

In Fronteer, Fierro saw a company in transition where he would have an opportunity to put his mine-building expertise to work. Fronteer, Fierro explains, is at a tipping point with not only a rich pipeline of assets but one, Long Canyon, at the cusp of mine development.

"That is why (Long Canyon) is the most rewarding," Fierro says. He boils down what he likes about Long Canyon to two things: place and quality.

The place, 120 km east of Elko, Nev., is an emerging gold district in a mine-friendly state and politically stable country. And the quality is in a growing deposit that has so far reached 4.8 million indicated tonnes grading 2.35 grams gold per tonne and 8.8 million inferred tonnes grading 1.63 grams gold, and which Fierro believes is getting ripe enough to be pulled from the ground. "It's challenging to find a producing property," Fierro says. And in Long Canyon, he believes that challenge could very well be met.

If Long Canyon is to produce, here is the initial plan as laid out in Fronteer's scoping study of the project (Fronteer owns a 51% stake in the project with the other 49% in the hands of AuEx. Fronteer also has a 3% net smelter return royalty [NSR] on most of the resources it has so far defined.) First, Long Canyon would be an open-pit, heap-leach operation with a mine life of six years. Average grade over that mine life would run 2.15 grams gold and overall gold production would hit 565,000 oz. Years two and five would see mining hit the highest production numbers, with Fronteer respectively forecasting yearly gold production at 132,000 oz. and 135,000 oz. Gold recovery would be about 87%. Given the project's simple design as a heap-leach operation, the scoping study forecasts construction would take about a year.

Second, from an economic point of view, the scoping study proposes a compelling case based on a gold price of US$800 per oz. Capital costs as outlined in the study would be a modest US$66 million and direct cash costs per oz. gold would be US$351. With those kinds of numbers on Fronteer's side, payback would come after 1.3 years, the pretax internal rate of return would be 64%, and the net present value comes in at US$145 million.

The scoping study, which was in the works at the time of The Northern Miner's site visit in September, was well received. Canaccord Adams boosted its target price on Fronteer's stock to $6.05 per share from $5.75. In a research note to clients, Wendell Zerb and Adam Melnyk noted that due to Long Canyon's exploration "expansion potential," they believe that the mine life will surpass the six years estimated in the study and reach eight years, producing an average of 90,000 oz. gold annually at an average cash cost of US$373 per oz. Canaccord also noted that with Fronteer's "strong balance sheet," the company "could pursue a single or several acquisition opportunities over the next twelve months." Indeed, as of Sept. 30, Fronteer had just shy of $160 million in cash.

With that kind of excitement following Fronteer's scoping study, it's not hard to see why Fierro simply said: "The priority is Long Canyon."

For Moira Smith, Fronteer's senior geoscientist, that focus has come with a more specific request for Long Canyon's resource estimate. "Troy (Fierro) has told me I have to double it in size," she says.

Smith admits that after a long summer of drilling in which she not only added to Long Canyon's resource definition and the extent of mineralization but further crystallized the geological model at the project, she is "really burnt out."

But her self-prescribed remedy sounds like an odd one: more drilling.

"I'll get a second wind when we start drilling to the north," she said at the time of the site visit. To an infill-drilling weary Smith, the north represents untested ground --every exploration geologist and prospector's favoured stimulant.

And in a recent press release outlining drill-hole results to the north, her excitement manages to come through even in the plastic language of an official statement. "We are now transitioning from primarily infill and incremental stepout drilling in the footprint of the existing deposit to aggressive exploration beyond the limit of the resource area," Smith said in the release. "Four drill rigs will be dedicated to testing the north, northeast and east sides of the deposit, with a focus on areas where high-grade mineralization is open-ended and we have every expectation of discovering more."

Results from that expansion drilling include as much as 13 metres grading 7.39 grams gold per tonne in hole 285, starting 94 metres down-hole, and 25 metres in hole 320 grading 6.57 grams gold, starting at 155 metres.

The latter hole was a 100-metre stepout north of the Shadow zone, the most northwesterly of five oblong mineralized areas that comprise the Long Canyon deposit. Mineralization is still open at depth and in all directions.

The mine-builder in Fierro sees in these kinds of high-grade results the chance to add an underground component to the open-pit concept at Long Canyon.

Though Fierro says he is focused on the open-pit scenario, he also has an eye to the higher grades at depth as well. "I think the grades in some areas support going underground," he says.

The drill results expanding the extent of mineralization will also help Smith in her quest to double Long Canyon's resources. How far she is towards that goal will become apparent in the first quarter of 2010, when Fronteer expects to release an updated resource estimate.



© 1915 - 2014 The Northern Miner. All Rights Reserved.


Photos

Drilling at the Long Canyon gold property, a joint venture of Fronteer Development Group and AuEx Ventures, located 120 km east of Elko, Nev.
Drilling at the Long Canyon gold property, a joint vent...

Monitor These Topics
More Topics »


Horizontal ruler
Horizontal Ruler

Post A Comment

Disclaimer
Note: By submitting your comments you acknowledge that Northern Miner has the right to reproduce, broadcast and publicize those comments or any part thereof in any manner whatsoever. Please note that due to the volume of e-mails we receive, not all comments will be published and those that are published will not be edited. However, all will be carefully read, considered and appreciated.

Your Name (this will appear with your post) *

Email Address (will not be published) *

Comments *



* mandatory fields