Canyon nixes Hycroft acquisition

Vancouver Based on a due-diligence review, Canyon Resources (CAU-X) has elected not to purchase the past-producing Hycroft gold mine near Winnemucca, Nevada, from Vista Gold (VGZ-T).

Early this year, Canyon inked an option agreement to acquire the mine from Vista for US$4 million cash, plus another US$6-million of its shares and warrants. The deal required Canyon to spend at least US$500,000 during the due-diligence period.

Canyon President James Hesketh says the project review, combined with the cost of acquisition, did not meet the company’s investment criteria "at this time." He notes that the increased cost of fuel, tires, supplies, and shortages of mining equipment were contributing factors to the decision.

Based on a recent independent study, Vista reports that Hycroft has measured and indicated resources totaling 52.7 million tons grading 0.019 oz. gold per ton, or about 978,000 contained oz. The project also has additional inferred resources of 8.7 million tons grading 0.015 oz. gold, or about 127,000 contained oz.

The upgraded resource estimate is based on 587 drill holes covering 267,280 feet, and is compliant with National Instrument 43-101 reporting standards. Vista intends to hold the Hycroft mine "until an appropriately valued opportunity arises."

Canyon, meanwhile, reported a loss of US$11 million on revenue of US$1.1 million for the latest quarter ended June 30. This compares to a net loss of US$2.4 million on revenue of US$5.8 million a year earlier.

Canyon operates the Briggs open-pit mine in California, which is in the final stages of its life. The heap-leach mine produced 4,968 oz. gold and 1,608 oz. silver in the first six months of this year, down from 20,233 oz. gold and 2,200 oz. silver a year earlier.

Canyon’s latest results reflect a US$9.2-million write-down of the McDonald gold-silver property in Montana. The company had hoped to develop an open-pit, heap-leach mine on the property, but those efforts were stymied when the state legislated a ban on the use of cyanide.

Canyon subsequently launched a compensation claim against the state, however that case was denied earlier this summer. The company now intends to pursue the matter in the federal courts.