Vancouver — Banking that a 1998 anti-mining initiative will eventually be stricken from the books,
The Colorado-based miner was in the permitting phase of developing the 9.3-million-oz resource when Initiative I-137 was passed by only 52% of the vote in November 1998. The ruling bans the development or expansion of gold and silver mines in Montana that use open-pit mining and cyanide in the treatment and recovery process.
“This election was about our kids and their future, changing the way that the gold-mining industry does business,” says James Jensen, executive director of the Montana Environmental Information Center (MEIC), which tabled the citizens’ initiative. “Cyanide leach mining using open pits is enormously destructive to the landscape and water resources. We have had enough history with it and its failures to make the right choice, which is to phase it out, and that’s what Initiative I-137 does.”
Not surprisingly, the mining industry sees things differently: “This is a blow to Montana’s economy; this is a blow to jobs in Montana; this is a blow to Montana’s future,” argues Michael Collins, former president of the Independent Montana Miners Association.
Canyon responded to the vote by filing legal action in both federal and state court seeking to have I-137 declared unconstitutional or, alternatively, seeking a damage award for the lost value of the properties, which include McDonald, Seven-Up Pete and Keep Cool.
In March 2001, the lessor of a portion of the property, Sieben Ranch Co., joined the legal parade and filed another lawsuit against the state of Montana requesting that the court overturn I-137 or grant a damage award for the loss of property value resulting from the initiative.
The MEIC plans to fight the pending lawsuits and has been joined by the Mineral Policy Center, Trout Unlimited, The Blackfoot Legacy, and Women’s Voices for the Earth. Collectively, they are asking both courts for permission to intervene in the lawsuits in order to ensure that a vigorous defense is mounted against the challenges tabled by Canyon Resources.
Document reviews and depositions for the lawsuits are expected shortly, and both parties will file briefs in May and June. Oral arguments in the District Court are slated for July, with a judicial ruling possible by the end of 2002.
No options
A study by Canyon determined that the proposed open-pit mining and cyanide heap-leaching process is the only economical option for the property. The report was submitted to the Montana Department of Natural Resources and Conservation in support of the company’s efforts to protect the value of its state mineral leases.
“Upon favourable resolution of I-137, Canyon Resources plans to pursue permitting and development of the McDonald gold project with the environmentally sensitive modified design so that its shareholders and the residents of Montana can achieve the substantial economic benefits from this world-class gold deposit,” states company president Richard De Voto.
The new design includes several environmental advantages over the original 1993 mine plan. These include the decision not to build facilities on the alluvial valley of the Blackfoot River and the absence of open ponds. Also, mine buildings and facilities would be located out of sight, away from the state highway, and waste rock dumps would be lined for containment of any seepage.
The company envisions a run-of-mine leaching operation capable of producing 4.7 million oz. gold and 10.8 million oz. silver over an 11-year period, with cash operating costs hitting US$140 per oz. gold-equivalent. Under this design, using an external cutoff grade of 0.013 oz gold per ton, 313.5 million tons of run-of-mine ore, with an average grade of 0.0224 oz. gold and 0.124 oz. silver, would be loaded directly on to the leach pad. Yearly production is pegged at 430,000 oz. gold and 980,000 oz. silver. Total waste tonnage over the mine life is estimated to be 453.2 million tons for a stripping ratio of 1.45-to-1.
Contract mining
The redesigned mine plan anticipates contract mining during the startup period of mine operations, no crushing, and the use of larger trucks and shovels than originally planned. As a result, the initial capital for mine startup is expected to be US$80 million, down from the US$225 million pegged in an earlier study. Total cash costs, including royalty, severance and local taxes, will be about US$162 per oz. gold-equivalent, whereas total costs, including initial and sustaining capital and reclamation costs, are projected at US$210 per oz.
The McDonald deposit has been defined by 609 drill holes and covers an area of 8,000 by 5,000 ft. The property hosts a mineral inventory of 514.5 million tons grading 0.02 oz. gold and 0.1 oz. silver at a cutoff grade of 0.006 oz. gold per tonne. When the cutoff is reduced to 0.1 oz gold, the resource changes to 7 million tons grading 0.09 oz. gold and 0.33 oz. silver.
In February, Canyon initiated an auction strategy to sell its other mineral rights and fee lands in Montana. The nearly 1 million acres lie in 14 counties west of the Continental Divide, and most of the lands are located within 50 miles east and west of Missoula, extending to the Idaho state line, and within 60 miles west of Kalispell in northwestern Montana.
Last year, Canyon posted a net loss of US$5.7 million (or 42 per share) on revenue of US$28.1 million. The company’s sole operation, the Briggs mine in southeastern California, produced 96,141 oz. gold and 28,177 oz. silver in 2001. Cash operating costs hit US$231 per oz., down from the US$267 per oz. tallied in 2000.
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