Canyon aims to revive Hycroft mine

Vancouver — Colorado-based Canyon Resources (CAU-X) has launched an exploration and development program aimed at reviving the dormant Hycroft gold-silver mine, near Winnemucca, Nev.

Under an option agreement with mine owner Vista Gold (VGZ-X), Canyon must spend at least US$500,000 on work programs over the next six months to determine the viability of resuming gold production. If the program is successful, Canyon has the right to buy the mine for US$4 million in cash and shares units.

A former open-pit, heap-leach mine, Hycroft produced more than 1 million oz. gold and 2 million oz. silver from 1983 to 2004. This includes gold produced from residual leaching after full-scale operations at the Brimstone pit were suspended in 1998, owing to low gold prices.

The mine site has two existing leach pads with capacity for 4 million additional tons (beyond the 82 million tons of spent ore already on the pads), as well as two recovery plants (Merrill Crowe and carbon) and various shops.

Remaining oxide resources at Hycroft total 56 million tons averaging 0.018 oz. gold per ton, or roughly 1 million oz. gold. Minable reserves stand at 37.7 million tons averaging 0.018 oz., or 713,050 oz. gold, at a stripping ratio of 1.44:1.

Canyon will carry out exploration and engineering work at the Brimstone pit, the largest deposit at Hycroft. This work is aimed at developing a heap-leach operation capable of producing 409,250 oz. gold and 1.6 million oz. silver over five years.

The Hycroft property is fully permitted and bonded. If Canyon assumes the existing bond, it would pay Vista the difference between the bond amount (about US$6.8 million) and the bonding company’s accepted costs of reclamation (about US$4.2 million), or about US$2.6 million.

Canyon notes that known oxide resources at Hycroft could potentially be expanded, and that the property is also prospective for sizable, low-grade, sulphide resources (which would still be minable by open-pit methods). Several deeper, higher-grade targets suitable for underground mining have also been identified.

Canyon President Richard De Voto says the Hycroft acquisition is part of a broader strategy to boost the company’s gold production, which at present comes only from the Briggs mine in California. Briggs turned out 5,234 oz. gold and 3,500 oz. silver in the third quarter of 2004, down from 8,676 oz. gold and 1,500 oz. silver in the comparable period of 2003.

Canyon also owns the McDonald bulk-tonnage gold project, in Montana; however, a state initiative banning the use of cyanide recovery has prevented its development. The company has filed suit against the state seeking compensation for the lost value of the property.

De Voto intends to step down as president of Canyon in March, though he will remain chairman and a director.