Beartrack mine will boost Canyon output to 50,000 oz

Since going public more than three years ago, the company has developed one mine, discovered the largest gold deposit in Idaho, and secured $35 million(US) in joint venture financing and another $6 million in corporate fin ancing.

Things might have been even better if the 1987 market crash hadn’t stymied Canyon’s $10-million public financing, one that would have enabled it to “develop the Kendall mine on a 100% company-owned basis and to maintain a larger share of the Beartrack gold discovery,” De Voto noted.

“The market crash forced Canyon to take an alternative path to asset growth and mine development. Canyon entered into contracts in 1988 with other mining companies which provide for approximately $35 million of financing for mine development and exploration activities on several projects,” he said.

Canyon’s 15% interest in the Beartrack deposit represents 80% of the company’s total gold reserve of 470,000 oz and the deposit hasn’t been fully delineated. Beartrack reserves have been estimated at 36.9 million tons averaging 0.055 oz gold in two separate deposits.

The South deposit, which is mineralized from surface to more than 500 ft, contains over 16.7 million tons averaging 0.068 oz gold. The North deposit hosts some 20.2 million tons grading 0.044 oz gold. “With additional drilling in 1989, the venture expects that the tonnage and gold content of these deposits will increase,” Canyon emphasized.

A $7.7 million work program is planned this year at Beartrack by Meridian Minerals, a subsidiary of Burlington Resources (NYSE). Besides more drilling, metallurgical test work, engineering studies, and mine permitting are scheduled. A feasibility study should be completed later this year, allowing mine construction to begin in 1990. Meridian has agreed to finance all of Canyon’s capital requirements for the development, estimated to be about $18-$20 million. This money will be paid out of production revenues over a 6-year period.

“The company expects to receive a substantial amount of cash flow from production of the Beartrack deposits from the first year of production expected to be in 1991,” De Voto emphasized.

Now in full production, the Kendall mine has a 7-year mine life based on existing reserves of 7.1 million tons averaging 0.055 oz gold. But Canyon and its joint venture partner, Addwest Gold, a subsidiary of Addington Resources (NASDAQ), plan an aggressive drill program this year to expand reserves.

De Voto predicted that Canyon’s production revenues could grow to $8.8 million in 1989 “and potentially to $27 million in 1992 as production and sales of gold, silver, and diatomite increase from the company’s operations.” Canyon purchased four diatomaceous earth mines and a processing facility at Fernely, Nev., from Cyprus Industrial Minerals two years ago. Diatomite, a light-colored, soft, siliceous, sedimentary rock is used in paints, plastics, fertilizers and catalysts.

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