Humboldt Gold: A Trend Waiting to Happen?

By Michelle Smith – Exclusive to Gold Investing News

Pershing County is a rural mass of land in Nevada. With a population shy of 7,000, every resident could have nearly a square mile of land to himself. There is little reason for most people to know or care about Pershing. That is unless they are or want to be gold investors. Then, this nugget of American terrain becomes quite notable. For now, it’s known mostly as a silver hotspot, but the diligent efforts of mining companies hoping to cash in on rising gold prices may change that.

Spring Valley

Although Pershing has a strong history of mining activity, R.J. Smith, Vice President of Administration at Midway Gold (AMEX:MDW), says  that over the past 10 years, the county has become quite an interesting place for discoveries. Midway is one of the junior mining companies engaged in this activity.

On the scene since 2004, Midway has the most significant unexploited project in the area, the Spring Valley deposit, where there is nearly 1 million ounces of gold in the measured category, over 1 million ounces indicated, and approximately 2 million ounces inferred. Midway’s project is one whose results other companies make note of.

This was confirmed by Todd Hilditch, President of Terraco Gold Corp. (PINK:TCEGF), a neighboring explorer. In 2007, Terraco obtained the rights to a nearby swatch of terrain now referred to as the Moonlight project.

Hilditch said that one of the company’s attractions to the area was Midway’s success. Moonlight appeared in many ways similar to Spring Valley, though Hilditch notes that it is premature to draw conclusions about the characteristics of the resources still hidden below the surface.

There were a number of other factors that encouraged Terraco to pursue a project in the area. For example, the Moonlight project area was staked by Andy Wallace and John Livermore who are both credited for notable gold discoveries in Nevada.

Hilditch, a strong believer that past discovery can be an important guiding tool, said “the best place to look for a mine is where there has been a mine in the past.”

Moonlight met that criteria since it shares the path of the Black Ridge Fault with Coeur d’Alene‘s (NYSE:CDE) Rochester mine which began operating in 1986. Rochester’s production record consists of 125 million ounces of silver and 1.2 million ounces of gold.

Progressing projects

Companies are making moves to try to capitalize on the current surge in gold prices by pressing forward with their projects in this area of Pershing.

April marked the beginning of another drilling program at Spring Valley, with Barrick Gold (NYSE:ABX) at the helm. In 2008, Midway entered into an earn-in agreement with Barrick whereby Barrick will receive a 60 percent interest in the project if they invest $30 million in work expenditures by 2013.

Teaming up with Barrick  not only put financial muscle into the project, it also shifted the goals at Spring Valley. Smith says the focus went from exploring to defining. The drilling conducted by Midway has made it clear that there are  resources at Spring Valley and that they are vast. Now, the question is how vast, which is what Barrick is currently working to ascertain.

Terraco recently initiated another round of mapping and geophysics programs at Moonlight which is a follow-up to past sampling and drilling which began back in 2007. The company is also currently in the midst of finalizing an agreement to purchase a significant amount of surface and mineral rights that strengthens its ownership of the Moonlight project area.

Meanwhile, Coeur is not just sitting idly by leaving the search for new supplies to junior miners. Wendy Yang, Vice President of Investor Relations, says that south of the Rochester mine, Coeur is drilling at  its own project site called Nevada Packard with the aim of adding to its existing reserves. If  this is successful, hopes are that it will increase the life of their mine.

Coeur has also been developing a new leach pad that it plans to use to add to the supply from its residual gold leaching. This new production will allow Coeur to supply the market with about 35,000 ounces more  annually for eight years beginning in the fourth quarter of this year.

That time frame is based on reserves,” Yang says, adding that “if gold prices keep going up, other resources may become economical.”

Defining the emerging mining zone

Interested parties may be wondering what this emerging hotspot in Pershing County is called. But that is a question for which one may get varying answers or no answer at all.

In a state where gold activities are often categorized by trends, there is an inclination to also consider this area a trend. And, due to its location in the the Humboldt Mountains, there is a natural tendency for some to refer to it as the Humboldt trend.

However, labeling the area is problematic. Not only does the name need to be universally accepted, but a determination needs to be made regarding which projects to include or exclude.

Furthermore, Smith says a trend is generally a group of projects that have similar characteristics. This presents a further challenge to the name game because, to date, Spring Valley is unique, according to Smith who says that there are no other properties with the exact geologic characteristics as Spring Valley.

Hilditch is more concerned about the potential than the title. “It doesn’t matter what you call it,” he says. “The whole area is growing and that’s what’s important.”