Engineering studies under way for Meridian Beartrack deposit

“This will ultimately dictate how we do our in-fill drilling.”

Meridian, a wholly-owned subsidiary of Burlington Resources (NYSE), is operator on the project with a 71% interest. Canyon Resources (NASDAQ) has a 15% working interest and its Minex partners hold the balance.

The spring program will include about 100,000 ft of in-fill drilling on the north and south deposits which are about 3,000 ft apart. Drill hole spacing will be halved to about 100 ft centres and the depth potential of the deposits will be assessed “because it has some bearing on the ultimate stripping ratio and ultimate facility location.”

Threlkeld said the company’s earlier announcement was “a good geological reserve” and he emphasized that Meridian has a lot of confidence in the geological continuity of the discovery. “What we have seen so far is very good and the majority of the holes bottomed in mineralization,” he pointed out.

The deepest hole completed to date reached about 909 ft and he confirmed “it’s mineralized to that depth.” Whether it’s open pitable to that horizon will be determined by the engineering studies which are presently under way.

At the end of the program, the company should have enough information to begin permitting for production which at the earliest would be 1990, The Northern Miner gathers. Assuming the in-fill drilling program is successful (and the company sees no reason why it shouldn’t) Threlkeld confirmed that the existing geologic reserve of 36.9 million tons averaging 0.055 oz gold would be sufficient to justify production.

The metallurgical aspects of the discovery are being addressed but it’s “still at a very early stage,” he said. Mineralization in both deposits includes disseminated pyrite and arsenopyrite associated with stockwork quartz veining. Each deposit contains native gold which would be a plus for a conventional milling operation.

Threlkeld said that Beartrack is a somewhat unique deposit, noting that texturally “it’s a little bit different and behaves much like a porphyry copper system.” (The company’s exploration program got off to an auspicious start, hitting on the first 18 holes which is probably a good indication of how large the system is. Porphyry systems tend to be very large tonnage).

Canyon Resources recently concluded a financing arrangement with Meridian allowing it to participate in the project through exploration to production. Meridian has agreed to loan Canyon all the funds for full scale mine development in exchange for an additional 1% ownership in the Beartrack property.

“This agreement provides an estimated $18-$20 million of financing of Canyon’s working capital requirements for the establishment of economic feasibility and development of the Beartrack deposit into a full-scale operating gold mine,” said Canyon president, Richard De Voto.

The loan will be repaid only out of production revenues over a 6-year period, he noted. Under the agreement, Meridian loaned Canyon $1.75 million for a 3-year period for general corporate purposes. Both loan obligations are no- recourse and are secured by Canyon’s interests in the Beartrack property and production.

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