Canyon Resources expansion hinges on Addwest acquisition

With financing yet to be arranged, Canyon has executed an option to purchase the assets of Ad dwest Gold for $33 million(US) plus certain royalty payments.

Addwest Gold’s assets include properties in California and Montana, but it also owns 60% of the producing Kendall gold mine near Lewistown, Mont.

The open pit, heap leach mining operation is currently owned and operated jointly with Canyon which has a 40% interest. But if the acquisition proceeds as planned, Canyon will substantially increase its ownership (70-100%) and become its sole operator.

In order to complete the transaction, Canyon retained Bankers Trust to act as its exclusive financial adviser in the Addwest Gold acquisition. The New York merchant banking firm is evaluating a number of financing alternatives for the acquisition, including equity and/or debt financing, or the potential involvement of other mining companies.

With mine permitting and development of the Addwest properties, Canyon expects that its gold production could increase from 13,000 oz in 1989 to more than 150,000 oz by 1992 or 1993.

Part of this will involve a mine expansion at Kendall. The operating joint venture has already received a permit amendment to proceed with the expansion from the Montana Department of State Lands and the Bureau of Land Management. The permit approved construction of a 9-million-ton pad for heap leaching of gold and silver ores to be mined from several open pits within the expanded permit boundary.

“The issuance of the permit for the mine expansion is an important step in securing the 8- to 10-year mine life of the Kendall mine,” stated Richard De Voto, president of Canyon Resources.

The partners are heap leaching ore on a 1.7-million-ton pad. Since the start of mining operations in August, 1988, 1.2 million tons of ore (containing 55,000 oz gold) have been crushed and loaded on to the existing pad. With the need for additional space looming by mid- 1990, construction of the new pad has already started and is scheduled for completion next spring.

The Kendall mine is expected to produce about 39,000 oz in 1990 and 45,000 oz in 1991 and annually thereafter through the life of the mine. It produced about 32,000 oz in 1989.

Assuming the acquisition is completed, Canyon intends to conduct mining operations with leased equipment in order to reduce operating costs. Currently, mining is conducted on a contract basis.

Other assets in the Addwest acquisition are 100% ownership of the Briggs property and gold deposit in California and an option to earn 50% of the several mineral properties in Montana. These include the Seven-Up Pete gold deposit near Lincoln, the Chartram gold deposit near Winston, and some 900,000 acres of mineral rights throughout the state.

According to Canyon Resources, the reserves and resources of the three principal deposits — Briggs, Seven-Up Pete and Kendall — are expected to grow with additional drilling. Both the Briggs and Seven-Up deposits will also require environmental study and mine permitting.

On its own, Canyon Resources owns 100% of a diatomite (an industrial mineral) plant and mine in Fernley, Nev. But the company’s interest in the Beartrack gold project will no doubt be the most closely watched of all Canyon’s projects in the years ahead.

Meridian Minerals, the operator, is under way with a feasibility study for Beartrack project. The favorable completion of this study in March, 1990, is expected to provide for a decision to place the deposit into production.

At last report, Beartrack contained a geological mineral resource (oxides and sulphides), totalling 36.9 million tons grading 0.055 oz gold per ton.

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