The Carlin Trend Moves to China
By Matt Badiali
February 7, 2007

I was a third of a mile underground, wearing about 30 pounds of headlamp, helmet, and self-rescue gear, when my guide pointed out the object of our mission...

As I bent down in the hot, stale air of the mine, my headlamp lit up several ordinary-looking lumps of rough rock. I picked one up, and it crumbled in my hand, leaving a silty black residue that I wiped off on my pant leg. Pretty crappy stuff as rocks go – not my idea of gold ore.

Those sooty rocks were part of the Carlin Trend, a stretch of land 50 miles long and 5 miles wide in Northern Nevada. Home to 35% of U.S. gold production, the Carlin Trend is one of largest deposits known to man… According to the U.S. Geological Survey, the Carlin Trend holds more than 5,000 tons of gold. 

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That's 160 million ounces, or approximately $102.4 billion worth of gold at today's prices. To give you an idea of how large the find is, most small- to mid-sized gold producers have just 2 million to 5 million ounces of reserves.

A little company (at the time) called Newmont made the Carlin discovery in the early 1960s. It found so much gold that Newmont is still mining it today, 47 years later… and now ranks as the world's second-largest gold producer.

Newmont geologists discovered disseminated gold (invisible to the naked eye) in 1962 after a year of exploring the Carlin Trend. Their first discovery was a 3 million-ounce deposit, which was economic even though gold sold for only $35 per ounce.

The Carlin Trend holds some true "elephants" – deposits with more than 2 million ounces of gold. Two such deposits, equaling almost 50 million ounces of gold, belong to Barrick Gold. I visited Barrick's 39 million-ounce Betze-Post pit last year.

What's really interesting about the ore of the Carlin Trend is its distinct signature. It contains up to 100,000 times the normal amounts of arsenic. Gold concentrations can reach 80,000 to 90,000 times normal amounts. However, metals like lead, copper, zinc, and molybdenum appear at lower-than-normal levels.

Many of these deposits are relatively easy to mine. Rather than tunneling deep into the Earth, miners operate giant open pits. They simply scoop up the earth and load it into dump trucks. The trucks then dump the dirt into huge piles for "heap leaching" – a process that dissolves the gold out of the ore. 

For gold explorers – and investors like us – the Carlin Trend is a mature, well-explored region. But the experience, the new geological models, and the ideas developed over half a century there are helping the industry explore the next great gold-mining frontier: China.

China is fertile ground for trying new ideas and geologic models. Some smart geologists, who understood the richness of the Carlin, went looking for similar terrains in China. They discovered two Carlin-style deposits at Dian-Qian-Gui and Qinling. 

These finds are smaller than the Carlin trend, with total estimated gold reserves of 500 tons. However, the fact that geologists found them at all excites me for the future of gold exploration in China. It's a huge country with little exposure to modern exploration techniques… and I expect more discoveries like Dian-Qian-Gui and Qinling over the next few years.

In fact, if gold prices remain in the $650 range, we'll see a rush of western companies moving into China. And, as they've done in petroleum, we'll see several Chinese companies take their place among the largest mining firms in the world. For the investors who invest alongside the winners, the future could hold the next Carlin Trend.

Good Investing, Matt