Q3 Nevada Gold Mining Results: Junior E&D Companies Becoming Safer Investment

by: Troy Bayer

Third-quarter mining results have been released from a number of junior exploration and development (E&D) companies in Nevada, which further validates the fact that Nevada has become the global epicenter for gold production. Many of these mines will enter full rate production within the next two years, adding to Nevada's already enormous production capability.

While there is typically moderate-to-high risk in investing in junior E&D companies, the global economic downturn has altered the investing landscape. The falling value of the U.S. dollar, along with unsustainable American debt, has forced investors to turn to gold. In turn, gold prices are on the rise again, and E&D companies are riding the coattails of gold's upswing.

A perfect example of this is Comstock Mining Inc. (NYSEMKT:LODE), which is trading near its 52-week high of $3.42 per share, over a 100% increase over the past year. Comstock reopened the historic Comstock Lode mine near Gold Hill, Nevada, and is on target to produce 20,000 gold ounces by the end of the calendar year. Measured and indicated reserves at the Comstock Lode mine are in excess of 3 million gold ounces, explaining the stock price rally. This type of success is repeatable for any junior E&D company in Nevada, that has solid mining results and possessing the technical and capital resources to move into production. Another E&D company with similar success is Allied Nevada Gold (NYSEMKT:ANV), which refurbished an existing heap leach facility and reactivated the Hycroft Mine in 2008. The company is now trading near its 52-week high of $40 per share and has a market capitalization of $3.51 billion.

The following companies released mining results in the third quarter and are moving closer to production:

  • Gold Standard Ventures Corporation (NYSEMKT:GSV) - Drilled four more core holes into the North Bullion Fault Zone (NBFZ) at its Railroad Project in the Carlin Trend of Elko, Nevada. The results included a 407 foot interval of gold averaging 4.05 grams of gold per ton (g Au/t), 537 feet grading 3.38 g Au/t, and 185 feet grading 4.26 g Au/t. These three separate holes each contained significant intervals above 7 g Au/t. The Railroad Project represents the last underexplored territory on the Carlin Trend, and Gold Standard Ventures is the only non-major to control a district in this famous gold mining region.
  • Pershing Gold Corporation (NASDAQ:PGLC) - By the end of the third quarter 2012, Pershing Gold expects to drill more than 100 holes at its Relief Canyon Mine and estimates entering production in early 2014. The company has discovered gold intercepts as wide as 309 feet and grading up to 2.9 g Au/t. Indicated and inferred resources at the mine are 600,000 - 750,000 ounces of gold. The company has already constructed its heap leach processing facility, which will enable accelerated production, with less capital resources required. Successful drilling results, as well as Pershing Gold's positioning to enter production, have led to a $3.5 million investment from Coeur d'Alene (NYSE:CDE) and a 19% investment stake by the Frost Gamma Investment Trust, led by billionaire investor Dr. Phillip Frost.
  • Premier Gold Mines Ltd (OTCPK:PIRGF) - In August, the company released drilling results for the Helen Zone of its Cove Gold Project, located in the Eureka Battle Mountain Trend in Nevada. After drilling nine reverse circulation holes and four core holes, Premier Gold discovered high grade gold in multiple holes, at intervals as large as 20.42 and 24.38 meters. These holes contained 11.75 g Au/t and 7.09 g Au/t respectively. Premier also has active projects in Canada and Mexico.
  • Scorpio Gold Corporation (OTCPK:SRCRF) - Last week, the company announced drilling results for the Mary LC Zone of its 70% owned Mineral Ridge project in Nevada. Highlights included intersecting 7.62 meters grading 3.15 g Au/t.

The key to successful investing in the Nevada gold mining industry, particularly non-majors, is to find companies with positive drilling results, specifically wide intervals containing high grade gold. Furthermore, the investor should ensure the company has an achievable, timely, and low-cost plan to bring the mine up to production. Along these lines, raising the necessary capital to build production facilities and underachieving results are just a few of the risks that exist for investors. Ultimately, the gold industry can be a safe investment in a downtrodden global economy, which is more than enough reason to consider investing in the Nevada gold-rush and its many E&D companies.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The writer is not a licensed broker or investment adviser and therefore cannot recommend that you buy, sell, or hold any security. While every attempt was made to verify the information in this report, much has been derived from public sources and cannot be guaranteed for accuracy.