U.S. REPORT — Phelps Dodge, Canyon to seek permits Positive

One of the largest new gold discoveries in the U.S. will be further evaluated as a proposed open pit mining and heap leach operation capable of producing about 300,000 oz. gold per year over the first 12 years of mine life.

Joint venture owners Phelps Dodge Mining (NYSE) and Canyon Resources (NASDAQ) recently completed a preliminary feasibility study, which demonstrated the potential viability of the McDonald gold property near Lincoln, Mont.

Canyon has a 27.6% interest in the joint venture which has been exploring for gold in the Lincoln area since 1989.

The deposit now contains about 380 million tons averaging 0.02 oz. gold per ton, most of which is amenable to open pit mining and heap leach processing. A minable reserve of 208 million tons averaging 0.025 oz. gold has been identified with acceptable stripping ratios.

The partners intend to begin efforts to obtain operating permits for the operation, and plan additional drilling to more fully delineate the potential reserves. Geotechnical and groundwater investigations and baseline environmental studies are ongoing, and this work is expected to support a comprehensive feasibility study and mine permit applications during 1993. The preliminary study indicates the project will have a capital cost of US$100-125 million and overall cash operating costs (including severance taxes, royalty and reclamation reserve) of under US$250 per oz. gold recovered.

The joint venture also owns the nearby Seven-Up Pete gold deposit last reported to host 11.6 million tons of potentially minable reserves averaging 0.057 oz. gold per ton. A number of other exploration targets have been identified on the joint venture property which encompasses 900,000 acres of mineral rights in western Montana.