NEVADA AND THE WESTERN STATES — X-Cal completes negotiations for Sleeper gold project — Amax-Kinross merger won’t affect joint-venture terms

Partners Amax Gold (AU-N) and X-Cal Resources (XCL-T) have signed an operating agreement for the exploration and development of the Sleeper gold project in northern Nevada.

X-Cal, the operator of the 50-50 joint venture, can earn an additional 10% interest by funding US$5 million worth of exploration work over three years.

The Vancouver-based company also has a 3-year option to buy the balance of Amax’s interest. The purchase price will escalate each year, stepping up from US$10 million in year one to US$15 million in year two, and then to US$20 million in year three. Amax will retain a 1% net smelter return royalty on the project if the buyout option is exercised.

As of late March, X-Cal had made direct payments to Amax totalling US$1.7 million, plus 1.6 million shares.

The recent merger of Amax with Kinross Gold (K-T) will have no effect of the terms of the Sleeper agreement, the joint venture reports.

“The agreement is a breakthrough step forward, as it secures our mineral rights and allows X-Cal to operate the ongoing exploration with a clear option to purchase for the next three years,” says X-Cal President Shawn Kennedy.

The Sleeper project covers 22,000 acres on the northern extension of the Battle Mountain trend. The project is divided into six parts, each with its own budget and work recommendations. X-Cal estimates the total budget to be US$8.5 million.

At the centre of the Sleeper project is the Sleeper open pit, where mining began in 1986, only to be halted 10 years later.

The Sleeper gold deposit was formed by a series of epithermal events at the intersection of a range-front fault and a normal fault. The deposit is covered by up to 150 ft. of alluvium.

Gold is found in four settings, all hosted in brittle rhyolite: high-grade veins, medium-grade breccias, low-grade stockworks and alluvial gravels. The deposit is further characterized by high gold-to-silver ratios.

Extensive minor faulting following gold mineralization has crushed much of the breccia and stockwork structures, resulting in oxidation to depths of 600 ft. The unoxidized mineralization in the non-fractured zones is refractory.

“It is apparent that the property contains a large gold system,” X-Cal states in its 1997 annual report, noting that 200-ft. drill intercepts averaging 0.34 oz. gold per ton at the West Wood target and the 1-million-oz.-plus gold resource in the pit area are both indicators of the property’s strong potential.

Year-old resource estimates include: 104 million tons grading 0.01 oz. gold in the Facilities (Silica Cap) target; 386,000 tons of 0.68 oz. gold in the West Wood zone; and 1.6 million tons of 0.03 oz. gold in the Ready Line area.

“The basis of the Sleeper gold project has been to identify the true orientation of the Sleeper gold system through geological mapping, extensive soil sampling, rock-chip sampling, high-quality geophysics and drilling,” Kennedy states in a press release. “The premise of the project is that multi-million-ounce gold deposits in Nevada are not known to exist alone, but occur as clusters of several deposits in close proximity …. X-Cal’s work has demonstrated that the Sleeper deposit, originally described as a 3-million-oz. deposit, is certainly in excess of 5 million oz. when what has been mined to date is combined with the existing resource. In addition to the potential for new high-grade Sleeper-type deposits in the volcanics, the property hosts bulk-minable ores and is prospective for sediment-hosted gold deposits.”

Assay results from 8,000 soil samples, 1,000 rock samples, 140 drill holes, geological mapping and airborne surveys are being used to plan the 1998 drill program.