GLOBAL SEARCH FOR GOLD — Amax options

California gold prospect

Amax Gold (AU-N) has acquired an option from Royal Gold (RGLD-Q) for that company’s Long Valley gold project in California.

Due diligence to be conducted by Amax will include about US$1 million in exploration on the property, which is situated in eastern California near the town of Mammoth. After Jan. 31, 1998, Amax can retain its option by making annual payments of US$250,000 to Royal.

Should Amax decide to develop the project, it must pay all costs, including those associated with permitting and construction.

The project contains proven and probable reserves of 35.7 million tons grading 0.019 oz. gold per ton. The reserves are contained within a resource of 51 million tons of 0.019 oz. Those figures are based on a cutoff grade of 0.01 oz. per ton and a gold price of US$350 per oz.

An additional 35,000 ft. of drilling completed by Royal identified further mineralization on the property. The company hopes to have a revised grade and tonnage estimate soon.

Should the deposit enter production, Amax would receive 90% of the cash flow until it has recouped its costs. At that point, Royal would receive either a net operating cash flow of 22% or a sliding net smelter return royalty, which would be capped at 5.5%.

Amax Gold is 57.5%-owned by Cyprus Amax Minerals (CYM-N), a Denver-based company.