Nevada Exploration Inc. (NGE:TSX.V; NVDEF:OTCQB) is hoping its new partnership with Drill NV Inc. at its South Grass Valley Carlin-type gold project will help it overcome challenges similar drilling programs have faced in the state.
Under the agreement, Drill NV is shouldering the risk of getting holes to target depth, giving Nevada Exploration cost and depth assurances. Other drilling programs in Nevada are currently experiencing low rates of hole completion, Nevada Exploration said.
"With Drill NV responsible for all aspects of drilling, our team will be focusing on where we add maximum value: on the geology," Nevada Exploration President James Buskard said.
Many drilling situations leave "explorers accepting widely variable and unpredictable drilling costs, plus even worse, paying for drill holes that are abandoned before they reach their target depth.... These risks and resulting cost increases are compounded at projects like South Grass Valley due to the industry wide shortage of drillers with the experience needed to routinely complete deep holes to their target depths in challenging Carlin-type drilling conditions."
—Nevada Exploration President James Buskard
Nevada Exploration said last week that the companies have resumed the Phase 3 drilling program at South Grass Valley to test for gold mineralization at East Golden Gorge.
Nevada Exploration is giving Drill NV $1.4 million for special tooling to improve penetration rates and will pay Drill NV a fixed rate of $185 per foot of drilling, of which Nevada Exploration can pay up to 25% in the form of company common shares.
Many drilling contracts force explorers to assume all the technical and execution risks of a drilling program, Buskard said.
"This situation ultimately leaves explorers accepting widely variable and unpredictable drilling costs, plus even worse, paying for drill holes that are abandoned before they reach their target depth," Buskard said. "These risks and resulting cost increases are compounded at projects like South Grass Valley due to the industry wide shortage of drillers with the experience needed to routinely complete deep holes to their target depths in challenging Carlin-type drilling conditions."
Earlier this month, another company, Ridgeline Minerals Corp. (RDG:TSX.V; RDGMF:OTCQB), announced it had only completed one of three planned holes to target depth at its Carlin-East Gold Project. "Challenging drilling conditions" led to inadequate daily drilling production and a lost hole that made the program untenable for the company.
"Deep drilling is always a challenge in Nevada and demand for drilling services is the highest I've seen in my 10 years working in the state," Ridgeline President, Chief Executive Officer and Director Chad Peters said. "In the case of Carlin-East, it's not in the company or our shareholders' best interest to continue drilling 1,000-meter holes until we can secure a more equitable core drilling contract once the demand for drilling rigs has cooled."
Buskard said he believes Nevada Exploration has found such a contract with Drill NV and that it has "significantly derisked our program."
"By agreeing to pay up to 25% of the total cost of the program in NGE shares, we are aligning our interests and solidifying our partnership to advance what we believe is the most exciting Carlin-type project in Nevada outside of the Nevada Gold Mines portfolio," he said.
Drill NV has been drilling deep holes in challenging conditions for more than 10 years, helping to develop techniques that led to successes at Goldrush and Fourmile, Nevada Exploration said.
"Drill NV has agreed to take on all of the technical and execution risk of our drilling program by agreeing to a fixed, all-inclusive footage rate, and to only invoice us for holes that successfully reach their target depth," Buskard said.
During a pause in drilling, Nevada Exploration reviewed the logging of data from all its holes to update its understanding of the structural geology of the area.
“Having discovered this large new Carlin-type mineral system and having confirmed that it has hosted large volumes of gold-bearing Carlin-type hydrothermal fluids, with this current drill program we are tasked with targeting potential traps that could have forced the gold out of the fluids and into the surrounding favorable host rocks," Buskard said.
The company expects the new core to start arriving in the next couple of weeks and will give updates about every month on hole locations, meters drilled, and preliminary geologic observations.
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