Canyon, Phelps Dodge buy Montana gold properties

Colorado-based Canyon Resources (NASDAQ) and a unit of Phelps Dodge (NYSE) have jointly purchased a number of Montana gold properties from Western Energy, a subsidiary of Montana Power.

The propetry package includes the Seven-Up Pete gold project and McDonald exploration prospect near Lincoln, and about 900,000 acres of mineral rights in Western Montana.

The total purchase price was US$11 million, of which US$3 million was previously paid in a series of option payments. The US$8-million balance is to be paid US$7.25 million by Phelps Dodge and US$750,000 by Canyon.

The property package was split into two joint ventures, both operated by Phelps Dodge. The Seven-Up Pete venture includes the Seven-Up Pete gold deposit (currenty estimated to contain 14 million tons of preliminar reserves averaging 0.06 oz. gold per ton) and the nearby McDonald gold prospect.

Detailed geologic, engineering, environmental baseline and feasibility studies are planned for this year to determine the economic viability of developing a gold mine at Seven-Up Pete. At the same time, further exploration is planned at McDonald to assess the potential of the project.

Although Phelps Dodge will hold a greater interest (72.4%) in the Seven-Up Pete venture, it must find a total of US$2.5 million of expenditures on the 900,000-acre land package in Western Montana in order to maintain its 50% interest in the venture.

Canyon currently produces gold and silvr from the Kendall mine in Montana which is expected to produce about 43,000 oz. gold this year. It also holds an interest in the Beartrack gold project in Idaho which is in the final feasibility and permitting stage. Caynon reports that FMC Gold (NYSE), the operator and majority owner, is aiming to start construction in July of this year for initial gold production in mid-1992.