Having spent US$2.3 million on a due diligence investigation, Echo Bay Mines (TSE) has decided not to participate with Canyon Resources (NASDAQ) on a proposed joint purchase of an interest in the McDonald gold deposit in Montana.
The two companies had planned to buy the 72.25% ownership interest of Phelps Dodge (NYSE) in the Seven-Up Pete joint venture, which included the McDonald gold deposit.
If the transaction had been completed, Echo Bay would have acquired a 55% interest for US$114 million and Canyon would have increased its current 27.75% interest to 45% for US$36 million.
Canyon does not intend to continue with the transaction without Echo Bay, but it is still interested in the possibility of increasing its ownership in the project.
The McDonald gold deposit contains 414 million tons grading 0.02 oz. gold per ton. A feasibility study projects the mine could produce 308,000 oz. gold annually, with reserves expected to last 12 years.
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