Canyon aims to boost economics of McDonald project with new mine plan

Now that Canyon Resources (CAU-X) has 100% control of the McDonald gold property in Montana, it is updating the economics of the project in light of additional data and a lower gold price.

The company has calculated that newly defined ounces at McDonald should outweigh the effect of the lower gold price, resulting in an operation that would produce more ounces at a lower cost.

With a complete redesign of the mine plan, the company believes it can still recover 4.7 million oz. gold from the large, low-grade deposit at competitive costs.

The last public report for reserves at the property showed 205 million tons at an average grade of 0.025 oz. gold per ton, based upon a 1993 feasibility study. The company has since produced an internal analysis incorporating much of the new data, including 168 holes completed since the feasibility study.

The interim results of this last analysis, prepared by MRDI Canada, boost the reserves up to 251.7 million tonnes, while leaving the grade untouched at 0.025 oz. gold. The analysis assumes a gold price

of between US$275 and US$300 per oz.

If the project were to come to fruition, Canyon would mine a selected, higher-grade portion of the deposit: 96 million tons at 0.046 oz. per ton (using a cutoff grade of 0.02 oz. per ton) and crush the material to minus one-half inch

in size.

Canyon would simultaneously mine the rest of the deposit, that is, 155.7 million tons grading 0.012 oz. gold (using a cutoff of 0.008 oz.), but send this material directly to the pads for leaching.

Gold recovery is projected at 83% for the higher-grade material and 55% for the lower-grade material. The overall recovery would stand at 75%, while the stripping ratio would be 1.7-to-1.

Under this scenario, annual production would be about 400,000 oz. of gold and 8-10 million oz. silver over a 12-year minelife.

The overall production would show an increase as head grades increase over time in both the crushed and uncrushed portions. Production could reach the 500,000 oz.-mark during the early years of operation, says John Danio, Canyon’s vice-president of operations.

The mine plan could be modified to suit new economic circumstances, the company said in a release.

Canyon expects cash operating costs under this new mine plan to run about US$150 per oz., which is down from the previous estimations. Capital costs for the project are also down to US$205 million from US$250 million.

In September, the company signed an agreement to buy out

its joint-venture partner on the McDonald project, Phelps Dodge (pd-n), for between US$100 million and US$150 million. Canyon made an initial payment of US$5 million, with the balance due when the mine reaches production.