Atna and Canyon to merge (November 26, 2007)

Vancouver — In a deal valued at $25.3 million, Atna Resources (ATN-T, ATNAF-O) and Canyon Resources (CAU-X) have decided to merge, creating a gold exploration and production company focused on the western United States.

The transaction, which enjoys the full support of both companies’ boards but still requires a Canyon shareholder vote and the requisite regulatory approvals, will see Atna buy all of Canyon’s issued and outstanding shares. Under the deal, Canyon shareholders will receive 0.32 Atna shares for each Canyon share. Based on Atna’s $1.68 closing share price on Nov. 16, the deal represents a 44.9% premium for Canyon, or a 42.1% premium based on the 20-day volume-weighted average share prices for both companies.

“We’re very excited to have consummated an agreement to carry forward with a merger plan that has approval from both boards,” says David Watkins, president and CEO of Atna. “We see quite a few positive benefits to the shareholders of both companies in the creation of a multimillion-ounce gold company, with good probability of near-term production and cash flow and a great synergy of management teams.”

Watkins will continue as chairman and CEO of the combined company, which will continue under Atna’s name and trade symbol on the Toronto Stock Exchange, while Canyon president and CEO Jim Hesketh will join Atna as president and chief operating officer. Watkins and Hesketh worked together for Cyprus Anvil for 14 years before moving to junior explorers, and Hesketh has been an Atna director for six years.

The new Atna will have some 82 million shares outstanding and hold a strong cash position, with $16 million in cash on hand and $825,000 in convertible debentures as the only form of debt.

“This combination pulls together an impressive suite of development properties,” Hesketh says. “We will hold over four million potential ounces of gold defined, as well as a plethora of gold exploration properties — many opportunities for the future.”

Atna’s primary project is the high-grade Pinson gold deposit in Nevada, which is being developed by Pinson Mining, a wholly owned subsidiary of Barrick Gold (ABX-T, ABX-N). Atna currently holds 70% of the project; Barrick has the right to increase its 30% interest to 70% by spending US$30 million before April 2009. To date, Barrick has spent roughly $1 million.

In July, Atna released an updated resource estimate for Pinson. The revised estimate not only increased the total gold resource, but also moved more mineralization to the measured and indicated category from inferred. Measured and indicated resources increased to 1.06 million oz. gold from 712,600 oz., with an average grade of 14.4 grams gold per tonne. Inferred resources increased 9% to 1.2 million oz. from 1.05 million oz., with an average grade of 11.7 grams gold. The cutoff grade was 6.9 grams gold per tonne.

Atna also holds a portfolio of exploration projects in Nevada, including: a large land position in the historic Jarbidge gold district in Elko Cty.; the Clover property, situated along the northern margin of the Midas trough, where Meridian Gold (MNG-T, MDG-N) is earning a 51% interest; and the Triple Junction and Dixie Fork projects at the south end of the Carlin trend, where Sage Gold (SGX-V, SGGDF-O) is working towards a 55% interest.

Finally, Atna holds a 9.45% royalty interest on silver and gold produced from the Wolverine deposit, which is currently being developed by Yukon Zinc (YZC-V, YZCCF-O).

Canyon’s main project is the open-pit Briggs gold mine, which was built in 1996 and produced over 550,000 oz. gold. Mining ceased in 2004 during the gold-price downturn but in 2006, Canyon started to investigate the merits of reviving the project.

A feasibility study concluded that US$8.25 million would be required to bring the mine back into production, followed by another US$4.6 million to develop a small underground mine. The open-pit study combined a reserve for three pits with an average strip ratio of 3.4:1.

Combined, the open-pit and underground mines would produce 30,000 oz. gold in the first year, 45,000 oz. gold in the second, 33,000 oz. gold in year three and 4,500 oz. gold in year four. Cash operating costs are estimated at US$430 per oz., including off-site refining. Reserves stand to grow because the company has only drilled enough to justify the start of underground mining, saving further underground exploration work until a decline is in place. Canyon also holds four advanced-stage exploration targets adjacent to the Briggs area claim block.

Canyon’s other near-production project is the Reward gold property near Beatty, Nev. A prefeasibility study on Reward in early 2006 foresaw an open-pit mine delivering 1.6 million short tons of ore per year over three years of mining, with leach operations continuing over five years. Operating cash costs were estimated at $330 per oz.

The combined company plans to advance the Briggs and Reward projects to production by 2009. The two mines would produce a total of 60,000-80,000 oz. gold annually.

In addition, Canyon’s project portfolio includes four other gold exploration properties in Nevada and the Seven-Up Pete gold project in Montana; the company also owns 3,642 sq. km of fee mineral rights in Montana. Canyon is a carried partner on the Sand Creek-Converse uranium project in the southern Powder River basin, in Wyoming, and holds royalty interests in gold properties in Montana, Argentina, and the Dominican Republic.

Atna shares fell slightly on news of the merger, closing down 10 at $1.58 on 349,400 shares traded. The company has a 52-week trading range of $1.08-1.96. Canyon moved up US6 to close at US44.1 on 1.1 million shares traded.