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Armed
with a degree in geology, in 2003 Silver Spartan LLC Founder Paul Dockweiler
got himself invited to explore in a mineral-rich area of southwestern Nevada
that was falling out of favor because the price of gold barely covered the
cost of production. As Paul explains in this exclusive interview with The
Gold Report, a lot of virgin ground with the same mineralogy as a
past-producing mine had never even been drilled and, of course, the gold
price has since marched up fivefold.
The Gold Report: Even though you've been in the field for only
about 10 years, you're running a geological consulting firm based in the
biggest gold-producing state in the U.S. Tell us a little about yourself and
how you became a geological guru in Nevada.
Paul Dockweiler: I am not a geological guru, just a
geologist working on a good project. While I was still in high school, my dad
showed me an article on Mr. Chuck Fipki, a geologist who was first to
discover diamond-bearing kimberlites in Canada. I remember the photo of the
group associated with the project who became millionaires.
TGR: So that inspired you?
PD: Yes. I went to Michigan State University, studied geology and
graduated in 2001. In 2003, Steve Craig, a geologist who's quite well known
in the mining industry, invited me to work at Mineral Ridge for Golden Phoenix Minerals, Inc. (OTCBB:GPXM),
about four hours northwest of Las Vegas. Part of my job was to find more gold
and silver but, unfortunately, the price of gold was not as high. Our way of
heap leaching wasn't the most effective way to process the ore, so the
operation didn't survive.
Afterward, with the backing of an independent group, I was able to go out and
claim all these areas that I had studied the previous two years, and that is
how Silver Spartan LLC, eventually, came to be. I've been utilizing the
skills and things I learned out on the hill ever since (Editor's Note: this
"hill" reaches an elevation of 5,600 feet).
TGR: Apparently, Golden Phoenix was on the verge of bankruptcy in
2008; but it has come back to life and now has a joint venture (JV) going on
Mineral Ridge. That's near Silver Peak, Nevada—a region where about
500,000 ounces (500 Koz.) of gold were mined between the mid-1800s and about
the 1940s. Do you recall the gold price when you started mapping that area?
PD: It was hovering at around $350/oz.
TGR: Did you even dream of anything like $1,500/oz. gold at that
point?
PD: No. We heard stories of when the price of gold hit $800/oz. in
1980, and we could not imagine the heyday that must have been. We hoped the
price of gold would climb up so that we would be profitable. It cost us so
much to produce an ounce of gold at the time that, when the gold price ranged
from $300–$350, the operation was not sustainable. Not many people
foresaw such a high rise in gold as that which actually happened.
TGR: But with this ongoing bull run in the price of gold, how was
Golden Phoenix able to claim almost an entire past-producing district?
PD: The company bought the Mineral Ridge mine in the late 1990s, when
it was essentially in foreclosure, so it already had the Mineral Ridge
package. Around 2006, we were able to start claiming some of the satellite
prospects around the mine. They were open; anyone could've picked them up.
The price of gold was still low, however, and nobody was really looking out
there at the time.
We were just kind of in the right place at the right time. We had a group of
guys, including Sheldon Davis and my dad, which eventually formed a private
company, Mhakari Gold Corp. They were the ones who were backing me while I
was out claiming these showings. We put claim anywhere I noticed a structure, trend or actual outcropping mineralization.
TGR: What catches your eye as a boots-on-the-ground geologist when
you're walking around such areas? What did you see that makes this area
prospective for gold and silver?
PD: Well, there are probably a lot of answers to that question.
Because of the geologic model there, you can walk around and find high-grade
intrusions of quartz, sometimes pretty small, and see the minerals associated
with a gold-and-quartz mineralized system. It's not too difficult when you
can key in on the specific structure and understand how the geologic model
works. When you see the model in one area, it opens your eyes to more
evidence of the model as you walk around. Once you start to see it here and
there, you notice things you might not ordinarily notice. Mineral Ridge is
full of that evidence.
TGR: So, you saw mineralized granite intrusions outcropping at the
surface?
PD: More specifically, the granitic intrusions brought with them these
mineralized quartz bodies. At one time, when that quartz was in solution in
the granite, it was going around as a heated solution, picking up metal,
similar to the way water picks up metal from plumbing in your home. When that
quartz found a hollow spot in a country rock or
maybe in a detachment fault space, it would stop, cool off and solidify. As a
result, metals, including gold and silver, would then precipitate out.
TGR: Fascinating. Have you taken some of those surface samples to have
them assayed?
PD: Yes, actually my father, and others who are not trained
geologists, took a majority of the samples as I was mapping and claiming the
area. From this effort, we were able determine where mineralization was
highest. This is important to note, as these samples were not high-graded but
were more or less randomly chosen along the surface workings and road cuts.
TGR: What were some grades that came back from some of those assays?
PD: Around the Vanderbilt Silver and Gold Project, in particular,
which is adjacent to Mineral Ridge property, the average assay value for the
Vanderbilt Project was at that time over 3 grams per ton (g/t) Au and more
than 70 g/t Ag. On two occasions, the assay value reached 2.4 oz. at 74 g/t
Au and 70 oz. 2,173 g/t Ag. This was encouraging as the samples were randomly
chosen at the surface.
TGR: Is the type of mineralization you've encountered more conducive
to open-pit or underground mining?
PD: For the most part, this particular model is quite amenable to
open-pit mining. A lot of the mineralization on the hill seems to be within
the first 200–300 feet of the surface. There are exceptions, of course,
some deeper deposits and maybe additional thrusting of other formations on
top of some of these deposits. But once you're in the metamorphic anticline,
usually there is only 200–300 feet until you hit the granitic dome
below.
TGR: That's obviously cheaper than an underground mine.
PD: Probably several times cheaper in average costs.
TGR: Are these mineralized systems big enough to support a large
open-pit operation?
PD: I don't know that we can say that yet, we're still in the
grassroots—prefeasibility—stage. The beauty of the Vanderbilt and
Coyote Fault is that we know there's mineralization because we see it at the
surface. It's never been drilled, however, so we're talking about completely
virgin ground. These two projects have the same model as a well-established
mine in Mineral Ridge, but have never had a drill intercept through them to
show what mineralization is present. An exciting part of the project will be
trying to prove underground what we see at the surface.
TGR: Another positive is the fact that you're in mining-friendly
Nevada, where roughly 80% of all U.S. gold mining is done. There's a trained
labor force and infrastructure.
PD: Absolutely.
TGR: So, Silver Spartan LLC, your consulting firm, works with a number
of companies. Let's go back for a moment to Golden Phoenix, where you started
out.
PD: Golden Phoenix now owns 30% of the Mineral Ridge project in a JV
with Scorpio Gold Corporation (TSX.V:SGN),
which owns the other 70%. Mineral Ridge is fully permitted, and Scorpio is
placing crushed ore on the leach pad to be in production in a few months.
TGR: But earlier you mentioned something about heap leaching not being
particularly effective there. What's the story?
PD: A lot of the gold and silver is encapsulated in other minerals,
especially in some of the metamorphic rocks. In other words, sulfides cover
up those gold and silver molecules within the rock. The rock itself is not
very porous in a heap-leach operation; you wash the surfaces of these rocks
but you do not get much permeation into this rock. In that regard, it comes
down to your grind size—how much surface area can you provide for that
rock? And how much of that will wash away with your leach? From my
understanding, Scorpio has further studied the ore and is focusing on the
grind size to adjust its recovery plant and, hopefully, realize a higher
yield. Smaller grind size is the key to higher recovery. Reportedly, the last
truly profitable operation to mine the deposit was milling the ore.
TGR: Who was that?
PD: I believe it was Sunshine Precious Metals—now a part of Formation Metals Inc. (TSX:FCO). I
think into the mid-1980s, it was taking ore from the top of the mountain over
to a silver operation called Sixteen-to-One, where it had a mill; reportedly,
it was realizing up to 95% recovery.
Steve Craig, my mentor who brought me to Nevada, said that the gold ores of
Mineral Ridge consist of quartz veins with submicron gold particles, which
are the small gold particles that really need a fine grind to liberate. Steve
wrote that the gold ores consist of quartz stock works cutting the
metamorphic rocks both above and below the main quartz vein and as minor
replacements of sheared rock. So, the quartz runs through the original
country rock, in this case limestone, where it filled in cracks, crevices and
open areas. Early operations extracted the gold by a combination of milling
and a process using cyanide, which was a
tried-and-true method of economically extracting gold into the early 1990s.
The last profitably extracted gold ore was trucked to the nearby Sunshine
Mill, which had earlier served the Sixteen-to-One silver mine.
TGR: What's Steve doing now?
PD: He's vice president of exploration for Gryphon Gold Corp. (TSX:GGN; OTCBB:GYPH).
He also spent 23 years with Kennecott, where he had been regional exploration
manager for Nevada and California. Steve has a lot of experience as a mineral
exploration geologist.
TGR: And he was your mentor at Golden Phoenix, which has emerged from
the ashes, as it were, metamorphosizing into somewhat of a mining royalty
play.
PD: The current management has done a good job of relieving some of
the debt and getting Golden Phoenix back on its feet.
TGR: With the idea of securing gold and silver properties throughout
the Americas and taking a percentage of any gold and silver mined?
PD: Yes. The royalty-mining model seems to be a good business model.
TGR: But until recently, there's been limited extraction from the
Mineral Ridge complex.
PD: Since then, three companies—including the original Golden
Phoenix— attempted heap leach with cyanide without milling. The most
they realized was around 60% recovery. At that rate, considering the low
price of gold then and the high cost of producing an ounce, it just didn't
work. It's a different story now that we're looking at $1,400 gold. If you
can produce it at $300/oz., you're probably okay. So, even though heap
leaching is not the most effective way to extract this ore, you can still
make a considerable profit based on the price of gold today; plus, Scorpio
CEO Peter Hawley has a record of taking a difficult operation and making it
profitable. It is my belief, once the operation is fully up and running, a milling operation will become part of the plan.
TGR: Scorpio is in the first phase of a drill program at Mineral Ridge
this year. Can you tell us a little bit about that program's goals?
PD: I don't know what Scorpio's plans include, but number one is to
find more gold and silver. Just last week, on April 12, Scorpio put out a
release on the latest drill results, which look good. It was about 9.15
meters of 2.28 g/t gold. From what the press release said, I think that was
even outside of the company's pit area. It appears Scorpio is discovering
mineralization throughout the property—not just within the area
identified in a previous open-pit feasibility study. As long as it keeps
drilling, I think Scorpio is going to keep finding more and more of this.
What its goal would probably include is developing some of the known
satellite deposits within the property. These local satellite gold deposits
just need more development and I think they're working on that, as well.
TGR: Any silver in the intercepts?
PD: There's always silver in with the gold at both Mineral Ridge and
in all of the other deposits on the mountain—anywhere from a 60/40 mix
around the Mineral Ridge Mine, down to maybe 90/10 with silver being primary.
TGR: Another part of the goal in drilling is always to get a greater understanding of the deposit, the mineralized
system and how it all works. Will you get a chance
to get a look at that core soon?
PD: I'd like to. It has certainly been a good working relationship
between Golden Phoenix and Scorpio, and I'd imagine some future data sharing
and mutual study to benefit all parties. I don't know that Scorpio's core
drilling, though. According to the latest press release, it has been
conducting reverse-circulation (RC) drilling mostly to fill in the data gaps.
The company knows it has mineralization at points A and C. It needs to put a
drill hole in between at point B. You don't need core for that; you can do it
more affordably with RC drilling.
TGR: In addition to Mineral Ridge, Golden Phoenix is earning an 80%
interest in the Coyote Fault Gold Project, which, essentially, is next to
Mineral Ridge; in fact, some believe that Coyote Fault is an extension of
Mineral Ridge's mineralized system. Having studied the geology there, what's
your view?
PD: I am a believer that Coyote Fault is a
major geologic structure on the mountain. A lot of the western-flanking
deposits at the Mineral Ridge Mine are associated with that fault structure.
It also could be related to the nearby Silver Peak Caldera as a conduit for
mineralization through epithermal veining. Coyote Fault was one of my areas
of interest when we were claiming because I recognized that it continued on
all the way through the entire mountain, and it was completely open from
about the midway point to its northernmost extent.
TGR: You've also studied the nearby Vanderbilt project, which was once
a producing mine, and where Golden Phoenix is also earning an 80% interest.
Tell us a bit about what's going on there and about its potential.
PD: Past producers are always great, high-value
targets—especially when those past producers quit sometime in the early
1900s. Combine that past-producer status with the mineral showings we've
found in outcroppings and some of the numbers we've gotten back from sampling
underground workings, and we see a lot of potential. By the way, Vanderbilt
likely still stands as the second-largest producer of silver and gold in the
district, behind only the Mary Drinkwater Mine, which is on Mineral Ridge.
TGR: So, what's next?
PD: Put a drill rig out there and start
proving a resource. The surface evidence certainly tells us something's going
on and we are planning to find out. The real attraction is that this property
has never been drilled.
TGR: When will drilling get underway?
PD: Golden Phoenix is planning to drill this summer. Right now, we're
putting all the data together with a pre-drilling study; that way, we know
when we do put a rig out there, we're testing effective targets. It is very
expensive to drill, and drilling can be the best thing or the worst thing for
any project. We want to take our best shot when we put that initial drill
hole in the ground; we want to hit gold and silver. Once we get the data
together and the maps in place, we'll be ready.
TGR: The potential of what's going on at Mineral Ridge and these
nearby properties has presumably drawn some interest from other companies.
Who's been exploring in the area?
PD: I'm sure a number of prospectors are out looking. Some claims in
the area have shown up and dropped within the same year. Right now, I think
Mhakari is probably the number-one company still looking and exploring.
TGR: That's the Nevada-based company that's vended the 80% interest to
Golden Phoenix. Who's involved in that?
PD: Mhakari Gold is a private Canadian-based company led by Sheldon
Davis with a U.S. arm. A number of us are involved
in Mhakari, including my father, Ron Dockweiler, and myself.
TGR: Your father explored in this area back in the 1990s, didn't he?
PD: No. He was always interested in the mining juniors, but I was the
first Dockweiler to step foot in the district. In the 1990s, he was talking
to different junior miners and trading their stocks. That's where I first
gained my interest in exploration geology. As a part
of Mhakari, he has come out and helped directly since I started claiming and
mapping.
TGR: One characteristic of the junior mining sector is that a number
of companies can rise together when they're involved in an area play. Could
this be the early stages of an area play near Silver Peak?
PD: I think it is becoming one, especially compared to my experience
in 2005 when no one had any interest in the area. Scorpio and Golden Phoenix
are doing a great job managing these properties and creating outside interest
as a result. They're coming out with positive news releases and increasing
their momentum. Scorpio is planning to produce soon. The fact that three
mining companies tried and failed in the past maybe gave the mountain a bit of a black eye, or made it a pariah in the eyes of
the mining industry. But that is only the history; recent developments have
changed that perception. From what we have discussed, you can see I am very
positive on the potential of the mountain. We now have an opportunity to take
it from good potential to a proven resource.
TGR: And $1,400 gold provides a bit more margin for error.
PD: Exactly.
TGR: Thank you so much, Paul.
Paul Dockweiler, who holds a geology degree from Michigan State
University, is the founder of consulting firm Silver Spartan LLC. He
previously worked with Geologist Steve Craig at Mineral Ridge..
DISCLOSURE:
1) Brian Sylvester of The Gold Report conducted this
interview. He personally and/or his family own shares of the following
companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors
of The Gold Report: Commerce, Great Panther and Kent.
3) Leonard Melman: I personally own shares of the
following companies mentioned in this interview: None. I personally am paid
by the following companies mentioned in this interview: None.
The Gold
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