Faced with high rig demand, miners lock up unit for year

Four small gold exploration companies operating in Nevada, each of them uncertain they could find drilling rigs available when they needed them, have decided to lock up the use of a rig for all of 2007.

While exploration companies in the past have reached handshake agreements to share a drilling rig, formal contracts are unusual.

The four companies include Reno-based Piedmont Mining Co., where Vice President of Exploration Lew Gustafson said the deal was driven by a simple truth: "There's been a huge shortage of drills and drillers."

Piedmont joined with Golden Odyssey Exploration Inc. of Calgary and Bravo Alaska Inc. and Rio Fortuna Exploration Inc., both of Vancouver, to commit to the use of a track-mounted rig operated by Drift Exploration Drilling Inc. from its Elko facility.

The four companies will divvy up the use of the track-mounted rig and its operators through the 2007 exploration season.

If they find they don't need the unit for a few days, Gustafson said the companies are confident they can subcontract it to another mining company equally hungry to get exploration holes into the ground.

The deal will allow Piedmont, a publicly held company with a small portfolio of mineral claims around the state, to get drilling data on two or three of its properties during 2007.

And even though the contract guarantees Drift Exploration that its rig will be earning revenue throughout the year, the four mining companies didn't get much of a price break. Drift set a basic rate of $325 an hour for a three-person crew working a 12-hour shift.

With the demand for rigs and experienced crews, Gustafson said exploration companies can't expect to have much leverage over prices charged by rig operators.