While the phrase “there they go again” has pejorative connotations in the U.S. political sphere, in the junior mining space it can mean very good things.
Richard Bedell and Ron Parratt smacked a home run with their founding and eventual sale of AuEx Ventures and the pair is at it again in familiar geological territory with their latest venture: Renaissance Gold (REN-T).
The success of AuEx was built on the Long Canyon property, a property that hosted a deposit in what was a newly emerging gold district in Nevada’s Pequop Mountains.
Fronteer Gold wanted to consolidate its ownership of Long Canyon and in late 2010 it closed a deal to buy AuEx for shares and cash that valued AuEX at $280.8 million — a 50% premium to its share price at the time.
But that wasn’t the end of the gains for AuEx shareholders. Those that were wise enough to hold on to their new position in Fronteer didn’t have to wait long to reap yet another windfall. With the ink barely dry on the AuEx acquisition, Fronteer turned from acquirer to target and was snatched up by Newmont for $2.3 billion in cash in February of 2011. Newmont said at the time that it viewed Long Canyon as being part of a trend that was reminiscent of the famed Carlin trend also in Nevada.
The sequence of acquisitions meant that from the time of its IPO in 2005, AuEx shareholders enjoyed a return that was 98 times their original investment.
And so it is little wonder that the men behind the former company’s success story are looking to generate more wealth for investors by making another significant bet on Nevada’s rocks.
Bedell now serves as Renaissance Gold’s president and chief executive, while Parratt is on board as the company’s chairman. This time around the former co-founders of AuEx have cast the net wide in search of the next big find, as they have built a portfolio that includes 23 projects in Nevada and Utah as well as others in Argentina and Spain.
Making the management of such a large stable of assets feasible is Bedell and Parratt’s decision to use a prospect generator and joint venture model this time around.
At a presentation in Toronto on Oct. 11, Bedell explained that the model allows Renaissance to leverage out exploration risk to its partners while minimizing its on equity dilution.
“We can go for two more years without any dilution to our shareholders,” he says.
Renaissance Gold’s formula is to find desirable properties, then form joint-ventures (JVs) where the earn-in company makes a one time upfront payment and then funds the project through a bankable feasibility study, at which time it earns a 70% interest, with Renaissance retaining the 30% stake. Bedell emphasized the benefits of the one time upfront payment as it frees the earn-in company up to spend its capital where it should be spending it: on drilling.
Renaissance has formed JVs on 16 properties and in 2011 a total of $6.8 million was spent and over 41,000 metres were drilled. This year, Bedell says he expects that close to $10 million will be spent on exploration and over 65,000 metres drilled.
“With that amount of drilling we expect total resources at our projects to more than double by the end of the year,” he says.
Not surprisingly, the company still has a significant stake in the Pequop area of Nevada with stakes in over 404 sq. km of property in the district. One of the most promising properties is Wood Hills South, where NuLegacy Gold (NUG-V) has committed to spend at least $300,000 this year. NuLegacy’s first hole on the property showed promise with an assay of 10.7 metres grading 0.4 grams gold.
Wood Hills sits roughly 20-km west of Long Canyon on the western side of the Pequop Mountains and to the south of the range lies another prospective project: Spruce Mountain.
At Spruce Sumitomo Corp. has an earn-in agreement on the property which hosts multiple Carlin type gold targets that Bedell says are similar to Alligator Ridge and Long Canyon.
But much of Sumitomo’s interest has to do with base metal targets, especially a prospective porphyry with molybdenum mineralization. Sumitomo is planning a second phase of drilling with a budget of $1.7 million at the site.
The Japanese conglomerate’s satisfaction with Spruce Mountain led to another agreement between the two firms, as Sumitomo plans to spend $500,000 at the Big Gossan copper play, which is also in Nevada.
Closer to production is the Trinity Silver project — a past oxide heap leach silver producer that turned out over 5 million oz of the metal in its day. Liberty Silver (LSL-T) owns the earn-in option at Trinity and while the company’s shares are currently halted due to an SEC investigation, it managed to make strides at the site over the last year.
One if its biggest achievements was to acquire the land adjacent to Trinity — the Hi-Ho claim. The past operator, U.S. Borax, claimed that Hi-Ho held half of the oxide resources at the project. The claims are in Renaissance’s name and if Liberty is unable to continue at the project the property would fall back to Renaissance.
Trinity currently has inferred oxide resources of 1.72 million tonnes grading 38.8 grams silver for 2.6 million oz. of silver and inferred sulphide resources of 4.8 million tonnes grading 47.9 grams silver for 9 million oz. of silver.
Elsewhere in the state Renaissance has a JV with Eldorado Gold (ELD-T) on the Buffalo Canyon property. The claims are described as hosting an intrusion related gold and silver system and Eldorado has drilled 14 reverse circulation holes and 4 core holes with highlight assays of 15.2 metres grading 0.4 grams gold and 4.6 metres grading 1.89 grams gold.
One other key property to keep an eye on is across the Nevada border in Utah where Renaissance has an agreement with Newmont Mining (NMC-T, NEM-N) that gives the senior the right to earn into the Wildcat property. While only geologic mapping, soil and rock chip sampling and airborne geophysics have been completed to date, Newmont began a 9,500 metre reverse circulation program in August and results should be forthcoming soon.
So while some juniors may think getting the big boys at Newmont and Eldorado to fund exploration on their projects seems too good to be true, Bedell says it’s simply part of a strategy to mitigate the inherent risks of the business.
“It’s a very risky business,” he says, “but we are taking many swings of the bat.”
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