U.S. REPORT (October 21, 1991)

Despite its success with the Crown Jewel and Kettle River projects in northeastern Washington state, Crown Resources (VSE) does not appear willing to rest on its laurels.

Crown is actively searching for its next big find, and the company’s Kings Canyon project is just one example of its commitment to grassroots exploration.

Crown is earning a 60% interest in the project from Centurion Mines (NASDAQ) by spending a total of US$4 million, of which about US$2.6 million had been spent by the end of August.

Situated in Utah, about 60 miles west-southwest of Delta, and a 1.5-hour drive by paved highway from here, the Kings Canyon project is described as an early-stage exploration play although some areas are advanced by delineation drilling.

Since acquiring the initial option from Centurion in early 1990, Crown has quadrupled the original landholding through additional staking to about 110,000 acres.

Luck played a large part in Crown’s discovery hole on the property. Originally, the company had planned to drill only one hole in order to meet assessment requirements.

The work had been planned for another part of the property but since the rig could not reach it at the time, the hole was drilled on a 16-part-per-billion gold anomaly, and returned a 20-ft. interval grading 0.024 oz. gold per ton. Further drilling on the Main discovery area outlined a 2,500-ft.-long deposit averaging about 350 ft. in width and measuring up to 100 ft. in thickness. The top of the deposit is generally about 200 ft. below surface. The mineralization is cut off along strike to the west and trends on to a block of ground owned by Battle Mountain Gold to the southeast. Preliminary estimates of reserves for the Main zone total about 6 million tons grading 0.032 oz. gold.

Christopher Herald, president of Crown, noted that although no pit modelling has been done, the strip ratio on the deposit would probably be over 3-to-1. With gold at US$350 per oz., Herald said the deposit is not likely economic, although he estimated the price would not have to increase much to make it feasible.

An examination of the data from the Main zone as well as from outlying areas has led Crown to conclude that there is a strong west-northwest structural control to the mineralization.

The mineralization appears to have a strataform component where the gold-bearing solutions moved laterally away from fault structures into select horizons. The primary host of gold mineralization appears to be the contact between the Guilmette limestone and Simonson dolomite.

Crown plans to do further drilling on the Main zone to test for extensions to the north as well as to the east. In addition to drilling, further geologic mapping and geophysics are being done to identify new drill targets. Pathfinder elements associated with gold mineralization in the Main discovery zone include mercury, antimony, manganese and barium.

Altogether 17 holes have been drilled on eight outlying targets. Four of the targets returned anomalous to ore-grade concentrations of gold and will require follow-up work.

At the time of the site visit by The Northern Miner, Crown was drilling on the King Conger area, about four miles northeast of the Main discovery area. Three holes had been drilled on the King Conger earlier this year to follow up some geochemical anomalies, but they failed to intersect any significant mineralization.

Subsequent mapping identified a major structure which the company is now drill-testing.

Jim Shannon, chief geologist, noted that the structures, which may have acted as conduits for gold deposition, can be very subtle and difficult to identify. He added that the company is still on a very steep part of the learning curve in its understanding of the area’s geology.

About 40% of the Kings Canyon property is designated as a wilderness study area making drill-permitting in that ground difficult.

Herald said the company plans to concentrate on the remaining 60% of the property. He added that the presence of minerals in the area will likely pressure a change in the designation. Although inherently difficult to predict, Herald said he thought the wilderness-study-area designation will be removed within the next two years.

Although no specific budget has been set, Crown expects to spend up to US$2 million for exploration on the Kings Canyon property next year. The company is well financed with more than US$5.4 million in working capital as at June 30, plus a subsequent debenture financing which added a further US$15 million to the company’s coffers.

A recent drill program has enabled Minerex Resources (TSE) to increase the mine life at its Aurora Partnership mine in Nevada by about a year.

This would extend the life of the open pit, heap leach mine into the second quarter of 1993, with heap leaching continuing into 1994.

The company said the 17,000-ft. drill program completed in June increased minable reserves to 659,000 tons grading 0.117 oz. gold per ton as of Sept. 1. The overall strip ratio of this reserve is 4.6-to-1.

The increase in minable reserves is attributed to the continuation of a land acquisition program and ore reserve expansion in the area of the Aurora Partnership mine, 28 miles southwest of Hawthorne.

The recently completed drill program mentioned above was focused on the western extension of the deposit. An 11,000-ft. drill program will begin shortly to test the eastern extension of the deposit, which may contribute to a further increase in reserves.

Minerex operates and owns 50% of the project, with the remaining interest held by Electra North West Resources (VSE).

Minerex, a Vancouver-based junior owned 50.3% by Canada Tungsten Mining (TSE), also reports strong earnings for its second quarter ended Aug. 31. During this period, the company recorded net earnings of $575,000 or five cents per share, as compared with restated earnings of $615,000 in the corresponding 1990 period.

For the 6-month period, net earnings were $666,000 or six cents per share, compared with restated earnings of $942,000 in 1990. A total of 15,300 oz. gold was sold during this period at an average price of US$384 per oz., compared with 16,500 oz. sold at an average price of US$399 in the corresponding 1990 period. Minerex notes that cash operating costs in the second quarter were reduced to US$255 per oz.

Minerex anticipates that gold production will increase in its third quarter when heap leach production will be supplemented with about 30,000 tons of stockpiled higher-grade ore (about 0.4 oz. gold per ton) to be processed at a neighboring mill during the last four months of 1991.

With more than $2 million in cash, Minerex is primarily seeking open pit gold deposits in the Western U.S. that would be amenable to low-cost, heap leach processing methods.

A labor dispute has resulted in mining operations being temporarily suspended at Breakwater Resources’ (TSE) El Mochito base metal mine in Honduras.

Operations were suspended on Oct. 9, but the company said it is currently involved in discussions with government authorities and the local union executive aimed at resolving the issue.

Breakwater acquired the El Mochito mine as a result of a merger with American Pacific Mining in early 1990.