Crown weighs options at Crown Jewel

Crown Resources (CRRS-Q) is considering underground mining as an alternative to open-pit methods at the troubled Crown Jewel gold deposit in northeastern Washington state.

Crown has a 46% interest in the project. Its partner, Battle Mountain Gold (BMG-N), which holds the remaining 54%, is appealing a January court ruling that reversed water rights and vacated the water quality permit for the project.

As a result of this latest delay in the 8-year permitting process, Battle Mountain wrote down the carrying value of its investment in the property, totalling US$35.9 million, and reclassified Crown Jewel reserves under the resource category.

Crown, in its year-end financials, chose not to write down its US$14-million investment in the property. Instead, the company has retooled the development plan for underground mining, with only a small open-pit component.

Capital costs for an underground mine would be about US$90 million, slightly more than for an open pit.

The plan would decrease the overall life of the mine to six years, down from eight. No hoisting would be necessary because the flat-lying deposit could be mined via an adit.

Crown envisions using blasthole stoping for most of the ore, though room-and-pillar and drift mining would also be employed.

Underground mining would result in a decreased milling rate of 1,850 tons per day, down from 3,000 tons per day in an open-pit scenario. However, cash operating costs would fall to US$134 per oz. from US$160 per oz. In the end, cashflow is expected to stay the same.

Proven, probable and possible reserves under the new mining plan would drop by 15% to 1.4 million oz. within 3.8 million tons grading 0.36 oz. per ton.

For 1999, Crown posted a net loss of US$2.7 million (or 18 per share), compared with a loss in 1998 of US$1.9 million (13 per share).

At of the beginning of 2000, the company had US$4.9 million in working capital, plus cash and cash equivalents of US$5.2 million.