Phelps Dodge, Canyon report find

Partners Phelps Dodge (NYSE) and Canyon Resources (NASDAQ) recently initiated metallurgical, engineering and environmental studies to evaluate the economic potential of a significant gold discovery made at their jointly owned McDonald property near Lincoln, Mont.

Phelps Dodge — the world’s second largest producer of copper — holds an undivided 72.4% interest in the Seven-Up Pete joint venture and is operator. Colorado-based Canyon holds the remaining 27.6% interest. The partners plan to spend US$8.7 million on McDonald in 1992, with US$2.4 million to be provided by Canyon.

The partners began exploring the 44-square-mile land package in 1989, with expenditures since then through most of 1991 financed totally by Phelps Dodge. To date, 260 holes totalling more than 175,000 ft. of drilling have been completed to delineate the McDonald deposit.

Phelps Dodge estimates that the deposit contains preliminary reserves of about 185 million tons grading an average of 0.028 oz. gold per ton at a cutoff grade of 0.016 oz. gold. Significant additional tonnages of lower-grade mineralization are also reported to occur within the deposit. Canyon said a major portion of the deposit is amenable to open pit mining, and low cost heap leach processing. Results so far suggest the potential for recovery of 80% of the gold with heap leaching.

Most of the McDonald deposit has been drilled on a 400-ft. drill-hole spacing, with some areas on a 200-ft. spacing. This drilling defined a mineralized zone about 7,500 ft. long by 600-2,400 ft. wide, covering an area of 250 acres. The mineralization averages more than 450 ft. in thickness within a 1,350-ft.-thick sequence of oxidized and silicified volcanic rocks. More exploration is planned for other areas of the property with known potential to host gold deposits. For example, Canyon reports that initial drilling at the Keep Cool area is providing “encouraging” results. Canyon previously reported the discovery of a small portion of the McDonald deposit, as well as progress on the Seven-Up Pete deposit which is estimated to contain preliminary reserves of 10 million tons averaging 0.06 oz. gold per ton at a cutoff grade of 0.02 oz. gold.

Canyon is active on other exploration projects in the western U.S., and also owns and operates the Kendall gold mine near Lewistown, Mont. This operation is expected to produce about 57,000 oz. in 1991, an upward revision of earlier estimates.

Canyon also owns a 15% interest in the Beartrack gold deposit in Idaho. FMC Gold (NYSE), the operator, recently decided not to begin construction of a mine this fall and winter. Canyon is considering selling or forfeiting its ownership in Beartrack in order to repay a US$1.75-million debt due to FMC by the end of 1991.