Mining firms in Arizona seek riches – by Ryan Randazzo (The Arizona Republic – December 24, 2011)

Investors face long odds in quest for mineral profits

Arizona is the top copper producer in the U.S., but several small-time geologists and entrepreneurs combing the rocky desert in hopes of finding the next bonanza don’t produce any minerals at all.

Many exploration companies prospecting in Arizona hope to raise money through the stock markets to take investors along on their risky hunt for mineral profits.

They might have historical maps of their mines, ore samples, assay reports and other data, but almost none have a shovel in the ground.

Exploration companies face extremely long odds of finding minerals that big firms have overlooked and raising the money to dig for them, but they persist on the small chance they could strike it rich.

“It is definitely a risky form of investment,” said Daniel Bleak of Mesa, who has been involved in several exploration ventures, most recently Silver Horn Mining Ltd., which has stock traded on the over-the-counter market. “It is a long shot. It is just like the old oil fields.”

The exploration companies make up a niche somewhere between the weekend gold panners and the global miners such as Freeport-McMoRan Copper & Gold and Asarco, which run the state’s big mines.

Some are run from home offices, and most trade on the over-the-counter or Canadian stock markets.

Most of them are trying to restart mines that have been closed for decades in hopes the prior operators left some metal in the ground or simply stopped mining because of a lull in metals prices and that the ore might be valuable in today’s market.

Many of these exploration companies spend millions of dollars in investor money trying to develop a project, only to sell it to another small exploration company or drop it altogether when it’s deemed uneconomical.

It takes tens of millions of dollars to drill sample holes, conduct geological mapping and other background work before millions of dollars more in equipment can be purchased to begin digging a mine. And that is assuming that environmental permitting and entitlements to the land go smoothly.

But every now and again, one of the junior companies will make good. One recent example is American Bonanza Gold Corp. of Canada, which after several years of preliminary work and millions of dollars spent on mining equipment, has restarted the Copperstone Mine in La Paz County between Quartzsite and Parker.

A ways to go
Silver Horn, like many of the Stage I companies, hasn’t gotten much further than finding historical mines and trying to raise money to drill them to test for minerals.

It has burned through about $5 million since April, when the owners of a publicly traded company called Eclips Media Technologies Inc. used that operation as a shell to acquire Silver Horn, hire Bleak and redirect the company’s focus to mining.

Since then, Bleak has been trying to develop claims northwest of Phoenix known as the 76 and Tip Top mines, which produced silver in the late 1800s but are a ghost town today. The area was briefly mined in the 1930s for tungsten, and another mining company explored there in the 1980s but abandoned the project.

Now Bleak is trying to find out whether the project could be economical again.

“We know it was rich, but is it big enough?” he said. “The Tip Top and 76 still show some potential, but now we wouldn’t say there is an economic mine there.”

Bleak said he also got close to raising the investment needed to drill additional exploratory holes at a project known as the C.O.D. mine near Chloride in Mohave County but is tied up in a legal dispute regarding who first staked the claim.

Bleak said his goal is to find a viable mine and raise the capital to develop it.

“Is it possible? Yes,” he said. “Does it take a lot of money? Yes. Are there people willing to risk that? There are.”

Investors warned

Many of the people willing to risk their investments on exploration mining in Arizona contact Nyal Niemuth, the Phoenix branch manager for the Arizona Geological Survey.

The agency keeps a large collection of maps, some of them hand-drawn and more than 100 years old, for the major mineral districts in Arizona.

These maps show the tunnels dug for mines such as the Tip Top and 76 that historically produced minerals, which is why so many exploration companies are focused on these operations rather than entirely new mines.

It also has a variety of ore-sampling reports or drill-hole locations to indicate where people have found minerals, or a lack of them, in the past. Exploration companies rely heavily on the data kept by the Geological Survey, formerly the Department of Mines and Mineral Resources.

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