Crown’s next mine could transform town

About 50 miles northeast of Republic, Wash., the up-and-coming mining town of Chesaw looks like the suitable backdrop for a wild west movie. The town is likely to change, however, as Crown Resources (NASDAQ) develops its 100% owned Crown Jewel deposit into what could be the area’s next mine. The deposit, three miles east of Chesaw and about three miles from the Canada-U.S. border, has geologic reserves of 8.3 million tons grading 0.10 oz. gold per ton. It is easily accessible by forest service roads over gently rolling terrain.

The reserve figures were compiled by independent mining consultants James Askew Associates and included the calculation of a cut, minable reserve.

A statistical analysis of the drill results concluded that all drill core intervals of greater than 0.40 oz. should be cut to 0.40 oz. and that a minimum mining width of 15 ft. be used.

The deposit was modelled as an open pit with the following criteria used in defining ore blocks; a commodity price of US$400 per oz., a metallurgical recovery of 90%, 15-ft. benches, a minimum 100-ft. working area, a pit slope of 50 degrees , mining losses and dilution of 7.5%, operating costs of US$10.15 per ton, and a cutoff grade of 0.035 oz.

The result was a proven-probable mining reserve of 5.6 million tons grading 0.087 oz. with the pit having a stripping ratio of 6-to-1.

The majority of the reserve, 4.8 million tons, is in the proven category.

The deposit has been defined to contain two main zones, the Gold Bowl and Gold Axe, separated by a steeply dipping myolite fault zone.

Crown geologists believe that the faulting acted as a conduit for mineral-bearing solutions since the gold mineralization is, in general, associated with the fault zones.

Each of the two zones contains distinct sub-zones. The Gold Bowl contains four structurally controlled sub-zones which tend to be tabular and are associated with distinct stratigraphic horizons as well as the main myolite fault.

The Gold Axe zone contains three stratigraphically controlled sub-zones. Zoning of mineralization is evident throughout the deposit with gold mineralization cutting across differing skarn assemblages.

Gold mineralization, generally associated with bismuth, is free, located on grain boundaries. Since the gold is also associated with cobalt, both bismuth and cobalt are potential byproducts although assays have been obtained for neither.

The two zones have been traced in a north-south direction for about 1,700 ft., ranging from 200 ft. to 500 ft. in width and extend to a depth of about 400 ft.

Each of the sub-zones varies in thickness from 15 ft. to in excess of 100 ft.

The study by James Askew Associates calls for the two zones to be mined from a single pit.

Because of the success of the initial drilling programs on the property (over 60% of the drill holes intersected gold mineralization), a very small portion of the property has been investigated. Of the 2,000 acres of what has been defined as highly prospective skarn geology, only 50 acres have been drill tested.

This season’s program, to start in early March, will concentrate on drilling 100-ft. stepout holes in order to determine the ultimate size of the deposit, which remains open to the west and the south.

About one-quarter of the drilling will be infill, designed to bring drill spacing down to 50-ft. centres in order to increase the confidence level in certain areas.

Drilling will concentrate to the south along the main myolite fault as well as to the west in the Gold Axe zone where mineralization tends to occur around more horizontal fault plains.

The program, budgeted at about US$1.5 million, will include 100,000 ft. of drilling as well as preliminary environmental studies and detailed metallurgical work. Initial tests have indicated recoveries in excess of 90% are achievable.

Mark Jones, chief executive officer of Crown Resources, noted that work is ongoing in an effort to bring the deposit to final feasibility by the winter of 1991. This would allow for construction startup in the spring of 1991.

Jones is quite confident that the deposit will be a mine and notes that all that remains to be determined is its size. He expects the Crown Jewel to support at least a 3,000-tons-per-day operation which could increase, depending on the results of the upcoming drilling program.

Asked if Crown will develop the deposit on its own, Jones replied he would prefer developing the mine without a partner but a joint venture was still a possibility. He noted that Crown would at the least take the project to final feasibility before entertaining joint venture ideas. Much will depend on the results of this year’s drilling program.

Crown Resources is strong financially with more than US$2 million in the bank and cash flow being generated by the 30% owned Kettle River gold mine, a joint venture with Echo Bay Mines (TSE).

Kettle River is expected to net the company US$3.5 million per year after debt payments.

Crown has project debt of US$19 million secured by their interest in the Kettle River and has about 11.4 million shares outstanding.