New techniques can open up vast prospective areas for exploration, like fracking did for oil and gas
Gwen Preston | June 7, 2018 | SmallCapPower: In stories about the Klondike gold rush or the California gold craze, a few of the men who flooded to these hotspots returned rich…but most did not. They arrived too late, got poor ground, didn’t have the tools, lacked the expertise, or simply spent their money on travel, supplies, and booze before getting to the gold fields.
There was a reliable way to get rich in a gold rush, though: by servicing the flood. Those who ran hotels, sold supplies, operated boats, and sold liquor profited nicely. Heck, Levi Jeans got its start in the California gold rush!
That suggests one way of positioning for a bull market in mining: by investing in the supply side. It’s a long-time tactic in the energy sector, where oil-field services stocks get really popular as oil prices rise. The services sector usually returns the favour, providing outsize gains when activity ramps up and demand for drills or sand or water services outstrips supply.
But reliable plays are still a bit boring. They lack the potential for big excitement, the kind you get from discovering a new oil field or gold deposit.
What if you could combine those attributes?
It sounds too good to be true but hear me out. Every now and then a new ‘service’ develops in a sector that changes explorers’ ability to find what they seek. Fracking is a great example. Tight hydrocarbon formations were a no-go zone for decades; geologists knew they contained immense amounts of oil and gas but didn’t have a way to get the energy out.
Then along came fracking, a new kind of drilling that created pathways to let the oil and gas flow, and the entire paradigm changed. With the ability to recover their hydrocarbons, tight shale formations suddenly became prospective. An entirely new geology opened up for exploration.
Fracking as we know it today didn’t come from a single company. It evolved over time, starting in the 1940s, developing some in the 1960s, and then taking off in the late 1990s with the idea to combine fracking and horizontal drilling. As such no single person or company gets credit – or got paid by the market for figuring this important puzzle out.
Imagine if that had been the case, if you could have invested in the idea of horizontal fracking early on. Imagine the returns as a new technology took root and fundamentally changed the oil and gas exploration game.
While that opportunity has passed by, it makes sense to think about similarly novel approaches to mineral exploration. If someone can figure out a new approach, one that looks underground with greater accuracy or releases metals from a mineral matrix previously thought impenetrable or guides the search where gravels or water or cover rocks obscure the target completely – the market would swoon for that kind of new ability.
And it would be a double win: to show that it works the technology would have to discover a new deposit and then the technology itself would get the attention. The deposit would be Win #1, a classic short-term rise in value on unlocking a rich new asset, while the technology would be Win #2, a long-term asset that others would clamber to use.
And they would pay to use it because exploring for new mineral deposits is a very low-odds game. Really, the odds for explorers today are not much better than for all those who rushed up to the Klondike or over to California in hopes of striking it rich!
At the end of the day, despite all our geophysical advances and leaps forward in geologic understanding, there are still lots of big challenges in the hunt for new deposits. It’s very difficult to see what lies beneath thick gravels or young rock layers. Certain metals are near impossible to separate from other metals. Refractory ore remains expensive to process. Bodies of water conceal what lies beneath. Social license to explore is impossible in many places. And exploration is expensive and funded by investors who need to see returns in reasonable timeframes, so companies can hardly ever take the time and money to assess large tracts of terrain in the hopes of seeing something no one else saw before.
Reduce any one of those challenges significantly and you would unlock big new opportunity. The as-yet unproven example I’ll give here: Nevada Exploration Inc. (TSXV:NGE) is using groundwater to target covered gold deposits in one of the best gold jurisdictions in the world.
Nevada is the richest area in the world in terms of gold production per square kilometer. That’s amazing in itself, but it’s more amazing when you consider that HALF of the state is essentially unexplored.
Essentially all of Nevada’s gold has been found in and near to range fronts, where the bedrock rises up in ridges. All that exposed bedrock meant prospectors could pick and hammer their way into discoveries. Later, when those easy discoveries were done, explorers studied the rocks and figured out which stratigraphies hosted gold; they could then chase those rock types under other rocks or across faults to find the next deposit.
That all worked great, but there aren’t many places left to look. Nevada’s exposed rocks have been inspected time and again.
The catch is that gravels conceal Nevada’s bedrock across more than half the state. Where the gravels are really thin or run right up against known deposits, people have done their best to look through the cover. But it’s really, really hard to see through gravel. Soils geochemistry doesn’t work; geophysics is of limited use.
As a result, half of the world’s most prospective state remains unexplored.
Nevada Exploration looked at that as an opportunity and has spent the last 12 years figuring out how to work with the gravels to find gold lying beneath.
Key to their approach: the gravels aren’t dry. Water runs through the rocks, flowing downhill according to the underlying topography. And water picks up traces of the things it passes.
So, Nevada Exploration is figuring out how to find big new gold deposits by sampling Nevada’s groundwater.
It’s been a long process. They had to collect groundwater records from dusty offices around the state. They had to drill their own water testing holes to gather data on areas lacking it. They had to understand what groundwater signatures are indicative of Nevada’s monster deposits, to know what they should be looking for. They had to figure out how to drill through gravels, which are notoriously difficult, in an inexpensive way.
All that is behind them. NGE is about to start testing targets. If it works, their groundwater technology will be like horizontal fracking for shales – it will unlock a vast rich terrain to exploration.
Investors and major miners love Nevada because it’s rich and functional. Big market moves from companies like NV Gold Corporation (TSXV:NVX) and Gold Standard Ventures Corp. (TSX:GSV) prove it. But even these Nevada market darlings remain very limited: they need their particular project to work.
By developing a completely new way of looking for what everyone else seeks, NGE’s chances of success are far higher. Yes, it took a long time to get here but the company now has a long list of targets to test, most of which are available for staking because no one else no one else cares about covered areas.
All it will take is for one to work. Then NGE will have not only a discovery – and likely a big one, since that’s the signature they’re tracking – but also a technique that explorers in all of the world’s prospective covered terrains, from Australia to Canada, will want.
We all love projects. Each has its own story and good stories make you want to believe – that the ideas make sense, that the gold is there. But at the end of the day, exploration rarely works.
To get around that, especially today when all the easy deposits have already been found, requires two things. You have to approach the problem in a new way. And you need multiple targets, to increase your odds of success.
Nevada Exploration is a rare junior explorer that actually offers both.
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