U.S. REPORT (November 18, 1991)

After 22 years of operation, Phelps Dodge (NYSE) will be closing its Tyrone mine concentrator in New Mexico.

Sulphide ore reserves are expected to be exhausted by the end of 1991 but mining of low-grade ores and operation of the solvent

extraction-electrowinning plant will continue for the next 10 years or more. The mill started production in 1969 and reached its current capacity of 45,000 tons per day in 1972.

Closure of the mill will affect 175-200 of the 700 employees. Phelps Dodge is the world’s second largest producer of copper.

Gold production at the Kendall mine in Montana achieved a quarterly record of 24,021 oz. for the three months ended Sept. 30, an increase of 299% over the 6,022 oz. produced in the 1990 third quarter.

The mine’s improved performance enabled 100% owner Canyon Resources (NASDAQ) to report net earnings of US$1.48 million for the quarter, compared to a net loss of US$1.95 million for the same period of 1990. “The Kendall mine has been performing superbly,” stated President Richard De Voto. “The record third-quarter results of gold production, revenues, and earnings place Canyon Resources on track to achieve its first year of operating profitability in 1991.”

The Kendall mine produced 46,579 oz. gold during the first nine months of this year, an increase of 170% over the 17,262 oz. produced in the same 9-month period of 1990.

“The current estimate for projected 1991 gold production at the Kendall mine is now more than 58,000 oz.,” added De Voto.

A company spokesman said the improved performance at Kendall reflects improved recoveries and the ability to place more ore on pads for leaching. In 1990, the company was still constructing leach pads at the open pit mine north of Lewistown.

A phase-three drill program on Noble Peak Resources’ (ASE) Crypto project near Salt Lake City has boosted reserves to six million tons grading 8.68% zinc.

Focusing on deeper mineralization at the site, Cyprus Metals, a division of Cyprus Minerals (NYSE), intersected several high-grade intervals including 56 ft. grading 10.3% zinc and 10 ft. grading 14.32% zinc at depths of more than 1,500 ft.

Cyprus is earning a 100% interest in the deposit by spending US$2.7 million, making cash payments totalling US$300,000 and completing a positive feasibility study by April 30, 1994. If Cyprus brings Crypto into production, Noble Peak will receive royalty payments of 2-6%, depending on metal prices and ore grades.

Under an agreement with Mitsui of Japan, Cyprus is looking for a zinc mine in North America to supply feed for Mitsui’s concentrate-hungry smelter. “Their indication to me is that they (Cyprus) are going to put the accelerator on this project,” Noble Peak President Maureen Jensen told shareholders at a recent annual meeting. “This is their highest level zinc project in North America.”

One objective of the deeper drilling is to establish a sulphide reserve base of 10 million tons, she said. Oxide reserves of 3.5 million tons grading 8% zinc have been outlined to a depth of 600 ft.

The zinc-skarn mineralization at Crypto occurs as a series of stacked zones within strongly altered limestones. Oxide mineralization is found along late fractures and faults.

The chief executive officers of 12 North American gold-mining companies registered a 9.5% gain in total cash compensation (salary and bonus) for 1990, says a survey undertaken by American Precious Metals Advisors of Boca Raton, Fla.

The average cash compensation received totalled US$280,000. Counting non-cash benefits (including options and stock grants), compensation averaged US$518,000.

Executives of small-to-large gold producers (not identified) participated in the survey. Total 1990 revenues for the group were US$1.2 billion, with group gold production totalling 3.9 million oz.

Despite the release of additional high-grade drill intersections from the Gibbs mine property in Mariposa Cty., Calif., investors appear to be unwilling to bid up the share price of Dessir Resources (VSE) which is earning a 50% property interest.

The issue slipped marginally to the $2.30 level on light volume following the release of four high-grade intersections in two holes. The latest results include 113 ft. grading 0.60 oz. gold per ton, 12.5 ft. grading 1.64 oz. gold, 76.5 ft. grading 0.95 oz. gold and 69 ft. grading 0.47 oz. gold. A number of mining companies are reported to have examined the Gibbs mine property in recent years, but they backed away for a variety of reasons, including not being able to negotiate the right to operatorship with the property owner.

But the claims are also adjacent to Yosemite Park, which may explain the hesitance of some companies given California’s stringent environmental climate and the possibility of opposition by preservationist groups to any proposed mining.

Local analysts are reserving judgment on the project, and note that only a limited amount of detailed technical data has been made available. Concerns primarily relate to the statistical significance of assay results given the apparent coarse nature of gold mineralization within the deposit which may contribute to “nugget effect.”

Assaying is now being conducted by Bondar-Clegg following a switch from Chemex Labs. Assays on the first few holes by Chemex returned sub-ore-grade results which the operator, A.T.&E., found curious after seeing visible gold in the core.

Marshall Smith, a consultant for A.T.&E., said he switched to Bondar-Clegg because the company could handle the large pulp samples needed to get accurate assays.

A.T.&E. Mining, the owner, is a private company which is currently the operator on the project. Dessir can earn the 50% interest by providing US$1.4 million and issuing A.T.&E. three million treasury shares. This would give A.T.&E. a possible, if not certain, control position in Dessir, a change that would be of interest to officials of the Vancouver Stock Exchange. Robert Foo, president of Dessir and a former insurance executive, said the full US$1.4 million is expected to be spent by the Nov. 18 deadline. Dessir is completing a 300,000-unit private placement at $2 per unit to meet its final payment. Foo said he has received commitments for the entire placement although the funds have not yet been received.

During a recent presentation to brokers, questions arose relating to the amount of expenditures to date, relative to the amount of exploration work that was to have been done on the two claims under the option agreement. Barry Whelan, Dessir’s consultant, estimated that expenditures on the Gibbs 1 & 2 claims were less than US$250,000 out of the US$1.4 million being made available for exploration. He noted that A.T.&E. also operates a logging operation on its wholly owned ground and said some of the funds were spent there.

Diamond drilling to date has outlined a horizontal pod of gold mineralization measuring about 450 ft. long in an east-west direction, varying in width from 200 ft. in the east to more than 300 ft. in the west and ranging in thickness from 18 ft. in the east to over 100 ft. toward the west. The mineralization remains open to the west and southwest.

Smith sees the potential to outline over one million tons grading in excess of one oz. gold per ton.

Drilling results to date are as follows;

Hole Interval Width Gold

(ft.) (ft.) (oz./ton)

01 78.5-109.5 31.0 0.35

02 65.8-102.8 37.0 0.37

03 61.5-79.5 18.0 0.025

04 73.0-98.0 25.0 0.87

05 92.5-112.5 20.0 0.14

138.0-204.0 66.0 0.14

06 54.0-106.5 52.5 0.22

164.0-172.0 8.0 0.95

183.0-191.5 8.5 0.56

07 5.0-58.0 53.0 0.31

88.0-101.5 13.5 1.00

120.5-180.0 59.5 0.50

08 63.5-201.0 137.5 0.40

09 16.0-40.0 24.0 3.54

150.0-226.0 76.0 2.01

10 drilled outside of vein system

11 34.5-72.0 37.5 1.96

99.5-130.0 30.5 1.34

12 40.0-55.0 15.0 1.41

61.0-77.0 16.0 1.35

104.0-108.5 4.5 1.62

112.0-180.0 68.0 1.72

*13 64.0-177.0 113.0 0.60

*14 55.5-68.0 12.5 1.64

85.0-161.5 76.5 0.95

169.5-238.5 69.0 0.47

*15 drilled outside of vein system

*newly released drill holes

Toronto-based Euro-Nevada Mining (TSE) recently added to its portfolio of royalty interests by agreeing to purchase a 2% net smelter return royalty on FirstMiss Gold’s (NASDAQ) Getchell gold mine in Nevada.

Under an arrangement set to close Nov. 15, Euro-Nevada is paying Northern Goldfield Investments US$7 million for the asset.

Euro-Nevada President Pierre Lassonde said the real attraction in this deal was the size of the Getchell property and its proximity to other gold mines in the Getchell trend including the South Pinson.

As FirstMiss expects to produce about 200,000 oz. this year, compared with 185,540 oz. in 1990, the transaction also gives Euro-Nevada access to immediate cash flow. Proven reserves on the 20,000-acre property stand at 8.2 million tons grading 0.16 oz. gold per ton, while an additional 18.8 million tons are listed in the preliminary category.

The Getchell deal gives Euro-Nevada royalties on eight producing properties with two more to come on stream in the next eight months. With about $16 million in the bank, Euro-Nevada has the funds to increase its royalty holdings as more opportunities come up.

Net earnings of US$30.4 million on revenues of US$441.9 million are reported by Cyprus Minerals (NYSE) for its 1991 third quarter ended Sept. 30.

This represents a 50% improvement over the 1991 second quarter, and a slight decrease from the 1990 third quarter when earnings were US$44.4 million on revenues of US$493.1 million.

Earnings reached US$71.6 million in the first nine months of this year, compared with US$102.6 million in the comparable period in 1990. “Cyprus’s year-to-date earnings are essentially as expected even though some of our businesses have been impacted by the slower-than-expected recovery from the recession,” stated Chester Stone, president. “During the third quarter, demand for coal, molybdenum and iron ore continued to be weak while demand for copper and talc improved. The outlook for copper prices remains good, while near-term coal spot market prices remain depressed.”

Gold output during the first nine months of 1991 slipped for Newmont Gold (NYSE), with North America’s largest producer turning out 1.18 million oz. compared with 1.27 million oz. for the same period last year.

The cash cost during the 9-month period declined to US$204 per oz. from US$212 last year. The price received for gold averaged US$364 per oz. during the period, down by US$21 from last year.

During the third quarter ended Sept. 30, Newmont Gold’s five mills treated 3.3 million tons of material which yielded 277,800 oz. gold. Heap leaching of 6.8 million tons produced an additional 105,800 oz.

Newmont Gold, 90% owned by Newmont Mining (NYSE), recorded net earnings during the nine months of US$92.5 million, down from US$116.3 million for the same period last year.

Newmont Gold and its parent recently announced staff reductions to take place during the next 12 months which the companies say will save about US$6.5 million annually.

The New York Mercantile Exchange (Nymex) recently received approval to add Comptoir Lyon-Alemand Louyot, a French refiner and fabricator, as an assayer-refiner for delivery of Nymex’s platinum and palladium futures contracts.

Another New York trading facility, the Commodity Exchange (Comex), says it will launch its new 5-day options on silver contract Dec. 10. The new short-dated, cash-settled contract is modelled after Comex’s 5-day options on gold contract.

Comex recently narrowed the increments for copper option strike prices between US$1 and $1.20 per lb. to 2 from 5. (That is, prices of 102, 104, etc. will be posted.)

Existing options maturing in 1992 will trade in 2 and 5 increments; the new September, 1992, copper option will be listed at 2 increments only between $1 and $1.20. Copper strike price increments will remain at 2s below $1 and at 5 above $1.20.