Canyon considers suit against Montana — Prohibition on cyanide use deemed unconstitutional

Canyon Resources (CAU-X) is considering challenging a controversial new law in Montana that prohibits the use of cyanide in new mining projects.

The fifth amendment of the U.S. constitution provides that private property cannot be taken for public use without payment of just compensation, and Canyon, which owns the multi-million-ounce McDonald gold project near Lincoln, says the state has done just that.

The new law came into effect when Initiative 137 was passed in last November’s state elections. As a result, Canyon says it has lost all economic use of the property and is entitled to compensation. The suit would hinge on whether Canyon can prove in court that using cyanide is the only way to extract gold from the deposit at a profit.

The mine contains a resource of 6.8 million oz. gold within 187 million tons grading 0.036 oz. per ton. Canyon estimates that, at an initial capital cost of US$210 million, it can build an open-pit heap-leach operation capable of producing 300,000 oz. gold annually at cash costs as low as US$170 per oz.

The Denver-based junior expects to file its complaint sometime after the Montana legislative session finishes in late April. It says its claim could be as high as US$600 million, before litigation expenses and depending on the gold price.

Initiative 137 passed by a narrow margin, winning just 53% of the vote. Among the new law’s other victims is a planned heap-leach expansion at the Golden Sunlight mine near Whitehall.

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