Rare legal filing to protect discovery

A Canadian mining company took an unusual step in its efforts to secure certain surface and water rights in its search for gold at Long Canyon on the eastern slope of the Pequot Mountains, some 30 miles southeast of Wells in Elko County.

The Fronteer Development Group of Vancouver sought to invoke the power of eminent domain in order to secure access to acreage on which it already owns mineral rights on a small portion of the sprawling 38,000 Big Springs Ranch, which rests immediately east of the Pequot Mountains. The legal action came after lengthy negotiations between Fronteer and owners of the ranch broke down.

While a subsequent court hearing before Elko District Court Judge Andrew Puccinelli resulted in a settlement agreement between the two parties, several Nevada officials voiced surprise that a little-known provision in the 1875 law governing mining companies was used. Among them were Assemblywoman Sheila Leslie and former state archivist Guy Rocha, who was quoted as saying, "Why this law is still on the books is questionable."

Leslie, a Democrat from Reno who is running for the State Senate, said she will introduce legislation in the next session to eliminate the provision that says mining is of "paramount interest" to the state and therefore the power of eminent domain may be used by private mining company.

Several people familiar with the case suggested Fronteer likely used the antiquated provision of the 1875 mining law to reboot negotiations. One was Alan Coyner, administrator of the Nevada Division of Minerals. "The eminent domain portion of that law has probably outlived its usefulness," he says. "I don't think too many mining companies would disagree with her (Sheila Leslie) on that."

But Coyner quickly pointed as to why a settlement was so important to Fronteer, which owns 51 percent of the joint venture, and to AuEx Ventures of Reno which owns 49 percent.

"A lot of people think the gold prospects at Long Canyon could pay off big for the owners," he says. "Fronteer is a new player in Nevada, and Long Canyon is a brand new area. As far as I know, there is no historic mining in the Pequops. There might have been a few diggings decades ago, but, certainly in modern times, it is a brand new area for exploration and development."

Connie Parratt, who handles investor relations for AuEx, says a couple of geologists took samples for several years during the mid to late 1990s.

"None of the bigger companies were that interested in Long Canyon then because it was a virgin area," she says. "There were no old workings, no old mines. It was off the beaten path and it was far away from the Carlin trend. Ron (her husband who is also chief executive officer of AuEx) was able to purchase some land and claims that went with it. We did some drilling and decided to split it into two properties. One was the West Pequop, the other was Long Canyon."

AuEx entered into a joint venture with Aginco-Eagle to do feasibility on West Pequop, and the eastern piece went into joint venture with NewWest Gold which subsequently was purchased by Fronteer.

Fronteer spokesman Glen Edwards says his company "is very excited about the prospects for Long Canyon." He cites several reasons:

* Drilling has proven out high grade, oxide material at or near the surface. This will lend the property to heap leaching.

* Long Canyon, the company's executives believe, is definitely a new Nevada gold trend.

* The potential could result in multimillion ounces of gold extracted.

* Metallurgical results confirm high recovery in the range of 85 to 90 percent.

Edwards says the fact gold is at or near the surface and is of high quality "almost insures us against fluctuations in gold prices. It (Long Canyon) has all the attributes and characteristics of an open pit deposit. The economics are extremely favorable."

Fronteer also has two other substantial gold plays in Nevada, joint venturing with Newmont Mines on the Sandman project near Winnemucca, which both companies consider to be an underexplored area adjacent to where gold deposits have been found in the past. The Bureau of Land Management recently gave the green light for further exploration, expanding the permitted area from two square miles to 39 square miles. The other is Northumberland, a large Carlin-type gold deposit located on private lands owned by Fronteer near Round Mountain north of Tonopah.

"At $1,200 an ounce in current gold prices, all three properties are quite attractive for Fronteer," says minerals administrator Coyner. "I particularly think Long Canyon is the pick of the litter because it's near the surface, it's oxidized and it's heap leachable. Given Nevada's history with gaming, if you looked at alternative bets, whether to put your money on red, black or on mining, in this case, I would put it on Long Canyon."

Coyner has heard comparisons of Long Canyon to the Carlin trend, the latter having created an economic boom in and around Elko. "I don't know if Long Canyon will turn out to be another Carlin," he says. "But Fronteer is very high on it. It is a brand new area being opened up and there is the potential of creation of lots of jobs, taxes and so forth."

Fronteer's Edwards says his company has already committed $19 million to the project. The feasibility phase will occur between 2011 and 2012 with actual startup of mining operations commencing in 2014.