VALE – The dead hot springs lured the two Montana prospectors to Malheur County, but it was minerals resting inside chunks of rock that confirmed a hunch there was money under the sagebrush south of Vale.
Richard Sherry and Skip Yates arrived at Grassy Mountain during a wet and windy spring in 1984, searching for gold.
“There had been several gold deposits developed under old hot springs,” Yates recalled recently from his home in Montana.
They brought to the hunt a methodical, scientific approach focusing on rocks and soil, a contrast to the grit and luck that drove miners in the past.
The two didn’t know their search eventually would uncover one of the biggest gold and silver lodes in Oregon.
The story of the Grassy Mountain mine now spans more than three decades. If the mine develops as forecast, Malheur County will gain 112 well-paying jobs.
Back in 1984, Yates and Sherry thought an area south of Vale held potential for gold. They were familiar with the county because several years earlier the two geologists had bid on a contract to do a federal mineral study in the same area.
They didn’t get the job.
“That was fortuitous,” said Yates.
Instead, for a week that spring, they poked around Grassy Mountain, a long flat bluff at 4,300 feet west of the Owyhee River. Each morning, Yates and Sherry huddled over a camp stove, drinking coffee inside a camper on the back of an old truck. Once caffeinated, they walked across the high desert watching for clues.
They didn’t have to walk far.
“There was an old hot springs apron, and that was the first place we saw sulfides in the rock and that got us really excited. Then we got on top of the deposit. We started seeing a lot of opal veins and silica, like quartz,” said Yates.
They collected samples, placed them in plastic bags, and trucked them east to Montana.
They sent the samples to be analyzed at a lab in Vancouver, B.C.
The results for gold were not “earth shattering,” said Yates.
But the data revealed something that caught their attention – mercury and arsenic. Both are indicators – or pathfinder elements – that gold is near.
Modern-day prospecting is like detective work, said Yates, and now the two felt they had built a convincing case. The dead hot springs, the quartz and silica deposits, and then the lab results with high levels of mercury and arsenic all signified gold might be under under Grassy Mountain.
“We started staking claims,” he said.
There are two types of claims – unpatented and patented. In an unpatented mining claim, a specific piece of federal land is designated as valuable for certain mineral deposits. An individual staking the claim gets possession but not ownership. Instead, they hold the right to mine.
Under a patented mining claim, ownership passes from the federal government to the individual.
Yates and Sherry staked out 38 unpatented claims and eventually ended up with three patented claims. Yates said he and Sherry still owned the remainder of the unpatented claims.
The claims eventually proved to be worth millions.
Michael McGinnis, the chief geologist for Paramount Gold Nevada’s Grassy Mountain project, uses a spray bottle to bring out the flecks of gold inside a rock sample. (The Enterprise/Pat Caldwell)
Fast-forward some 30 years and Glen Van Treek, the chief executive officer of Paramount Gold, was in his Reno hotel room in January 2017.
His cell phone rang. The caller was Michael McGinnis, the chief geologist for Paramount Gold’s Grassy Mountain project.
It was good news.
“Did you see the email I just sent to you?” McGinnis asked.
The email contained an Excel file with the results of the company’s first drill holes from Grassy Mountain.
The data from ALS Lab in Elko, Nev., analyzed 84 samples from a core at Grassy Mountain. It showed up to 30 ounces of gold per ton. That penciled out to $40,000 per ton at the site, surprisingly good in the eyes of company officials.
“We were extremely happy with the findings,” said Van Treek.
The two scenes – Van Treek in his Reno hotel room and Yates and Sherry wandering the high desert in 1984 – bookend a story punctuated with ambitious ventures by five mining firms, false starts and lost opportunities on a secluded piece of high desert 22 miles south of Vale.
From 1986 until 2012, companies started and then gave up the hunt for gold in Malheur County’s outback.
Sherry and Yates leased their claims to Atlas Precious Metals in 1986, retaining an interest in any gold mined. By 2011, the claims were under the control of Calico Resources USA Corp. Meantime, gold prices started climbing.
Van Treek considered Grassy Mountain for his company, as it put the finishing touches on a merger – valued over $200 million – with an American mining firm for a gold and silver venture in Mexico. Paramount Gold reaped $10 million in cash profit from the merger and had money to invest elsewhere.
Van Treek was acquainted with Rudi Fronk, another gold explorer who was chairman of Calico. Frank thought the Oregon operation might fit with Van Treek’s company, and the two, along with Paramount Chief Financial Officer Carlo Buffone, talked.
“Grassy Mountain was a small but high-rate deposit but we saw it as undervalued,” said Van Treek. “It was a great deposit.”
He realized the potential mine site didn’t host much vegetation and wasn’t near rivers or other water bodies. And recovery of the gold appeared comparatively easy and safe.
So Paramount Gold Nevada acquired Calico and its Malheur County stake.
A state of regulation
Photo of Glen Van Treek, CEO of Paramount Gold. (The Enterprise/Pat Caldwell)
Then, the hoop jumping started.
For nearly two years, officials from Paramount Gold Nevada plowed through Oregon’s regulations for mining operations. Several state agencies have a say about how a mine in the desert could operate, with the Oregon Department of Geology and Mineral Industries taking the lead.
Technical study after technical study had to be done, evaluating everything from water quality to wildlife.
Ian Madin, chief scientist and deputy director of the state geology agency, said the preliminary steps to start a project like Grassy Mountain take time. Firms like Paramount Gold must do their homework, he said.
“You have to collect enough information about the mine to be able to determine if you can mine profitably,” said Madin.
Paramount so far has spent millions to answer that question.
The company has told regulators that it appears Grassy Mountain will be profitable, producing gold and returns for investors for years.
Mining, though, could still be two years away.
The company’s work now leads to filing a mining application with the state. Then, agencies involved will evaluate what the company says it will do about the environment, safety, and operations. Public meetings are likely, and a mine like Grassy Mountain can draw controversy.
Randy Jones, the state’s project manager at the geology agency, said the drawn-out process is purposeful.
“Oregonians expect us to do what we do carefully and well. I want to make sure we do our work well,” said Jones.
Van Treek has no complaints.
“In truth, it is actually good because the state wants to do it right. The state regulations are clear and the timing on the process is well established,” said Van Treek.
Proving the value
Michael McGinnis, the chief geologist for Paramount Gold Nevada’s Grassy Mountain project, talks about the process his firm uses to determine if a mine site is viable for exploration. (The Enterprise/Pat Caldwell)
In the past two years, Paramount has punched 200 holes into the rangeland at Grassy Mountain.
Those holes, methodically laid down, are the modern equivalent of gold panning – looking for signs of where the gold is.
A good share of those holes validated the data Van Treek viewed in his hotel room last year.
“It is a high-grade zone,” said McGinnis. “And it is exceptional.”
McGinnis said the drilling and analysis process is at once simple and complicated.
And, he said, it takes time.
Knowing where to drill is part science, part art.
Geologists use aerial photographs and information on the rock features to create a detailed geologic map. In combination, the information directs where exploration begins in earnest.
Every five feet or so, a diamond-tipped hollow bit was sliced into the Grassy Mountain terrain, sometimes going down 700 feet.
“As the bit cuts, a solid tube of rock feeds into the drill rod,” said McGinnis.
The tubes of soil and rock, ranging from two to five feet long, are packed in a box as they come out of the ground.
Trucked to Vale, the samples are sliced apart with a diamond saw by company rock cutters. Half of the rock is kept in Vale while the other part is shipped in 15-pound bags to a lab in Elko.
There the rocks are analyzed for gold content.
Rock samples about the size of a fist are crushed into a fine powder. Metals such as lead, soda or silica are inserted into the powdered rock and the mixture is heated to 2,000 degrees.
The heating fuses the metals together and the resulting liquid is poured into cone-shaped molds to cool.
The resulting slag is tapped with a hammer until only a lead button remains.
That is then heated to 2,000 degrees, the lead separates and, after cooling, a gold bead about the size of a BB remains.
From that one small gold ball, technicians calculate how much gold can be recovered from every ton of ore mined from the ground.
The results for Grassy Mountain show a small fortune in gold is to be had – up to $60 million a year when the mine is operating.
Years to go
(Graphic by Candace Johnson/The Enterprise)
To get at that profit, Paramount Gold plans to build an underground mine on three patented lode claims at Grassy Mountain.
Plans now call for mineshafts about 13 feet tall and up to 15 feet wide, zigzagging down 35 levels more than 700 feet below the surface.
Miners will drill holes in the hard rock walls and blast free the ore – up to 1,400 tons a day.
Special trucks will haul the ore to the surface and to new plants to be built, where the rock will be crushed and processed.
Paramount will use a leaching process to separate the silver and gold from the ore. In this process cyanide solutions dissolve the gold and silver from the rock.
The company said the leaching process would be done inside tanks in an enclosed processing plant.
The operation on 300 acres would run 24 hours a day, seven-days a week.
If the state issues the permit, construction could begin in 2020 or 2021, Van Treek said.
While Paramount estimates a seven- to nine-year lifespan for the mine, Van Treek said there is a potential to operate longer.
A history of mining
Rock samples from the Grassy Mountain site are sliced apart by a diamond saw for testing. (The Enterprise/Pat Caldwell)
Van Treek knows other mining firms sought to cultivate Grassy Mountain. He believes, though, Paramount Gold will succeed.
“A lot of companies, I think they were just trying to develop the project but they were not serious about it,” said Van Treek.
Van Treek, who is a geologist and lives in Chile, managed mine ventures in South and Central America, Africa and the U.S. for more than 20 years.
He estimated it will cost Paramount Gold $70 to $100 million to build the mine.
The return, though, will reward company shareholders. For mining operations, a return of 20 percent is considered good. From Grassy Mountain, Paramount expects to earn a return of investment of 28 percent.
Prospector cashes in
Tiny flecks of gold can be seen scattered across this sample of rock from Grassy Mountain. (The Enterprise/Pat Caldwell)
Back in Montana, Skip Yates still prospects though he admits he doesn’t spend a lot of time living in a camper.
“I use hotels now,” he said.
The Grassy Mountain hunch Yates and Sherry acted on has – after 35 years – paid off.
Paramount Gold this year bought the claims from Yates and Sherry’s estate for $2.4 million. Sherry’s portion was distributed to his family. He died in 2008. Yates said the fact three decades passed before the claims paid off isn’t a surprise. Mining, he said, can be a slow business.
“But, you know, I think it was worth it,” said Yates.
Yates said much of modern prospecting involves painstaking appraisals of areas that do not typically reveal obvious gold deposits.
“You have to look for these clues. That’s because most are buried now. Most of the really obvious deposits have long since been mined,” he said.
Yates said he and Sherry spent a lifetime traveling throughout the West searching for a big payoff.
“One of the things in geology is you have to kiss a lot of toads before you kiss a prince,” said Yates.
Reporter Pat Caldwell: [email protected] or 541-473-3377.
Once rock samples are sliced apart in Vale, they are placed into bags and shipped to a lab for further testing. (The Enterprise/Pat Caldwell)