Crown sticks with exploration as best route to growth

Exploration-oriented juniors which make the transition to gold producers without stumbling are few and far between. Crown Resources (VSE) is something of an anomaly, in that the company has yet to suffer a setback. Crown’s 30%-owned Kettle River project in northeastern Washington State was brought into production in early 1990 without a hitch by operator Echo Bay Mines (TSE). It is expected to produce about 110,000 oz. of gold in 1991 at a cost of about US$230 per oz.

In mid-1990, following a successful exploration program on the company’s Crown Jewel property which is also located in northeastern Washington, Crown completed one of the best earn-in agreements seen in the industry.

Battle Mountain Gold (NYSE) agreed to pay Crown US$5 million for an option to earn a 51% interest in the property. Subsequent infill and step-out drilling more than confirmed the potential of the property, and Battle Mountain made its second cash payment of US$5 million on Jan. 4.

To earn the 51% interest, Battle Mountain must bring the property into production at a minimum rate of 3,000 tons per day by July 1, 1993. At that point, Crown begins collecting 49% of the mine’s profits immediately with no capital payback to Battle Mountain.

Crown’s share-price has never looked back, peaking in January at $13 per share, and trading at the $11 level recently.

Mark Jones, chairman of Crown, said the company’s philosophy is to grow through fundamental exploration, bringing in a major company at the appropriate stage to develop the property. He noted the major mining companies have generally not replaced their reserves and have demonstrated a willingness to pay for good, developing properties.

Christopher Herald, president, said the company plans to continue to concentrate on areas it is familiar with and where it has built up exploration expertise. These include northeastern Washington extending up into southern British Columbia, the Carlin Trend in Nevada, and the Utah gold belt.

The company’s Cord Ranch property is located at the southern end of the Carlin Trend in northeastern Nevada. The property covers about 34,000 acres, including two additional pieces of ground acquired in late 1990.

The main portion of the property was never leased prior to its acquisition in 1989. Recent drilling on the property intersected widths of up to 100 ft. grading as high as 0.04 oz. gold per ton.

Plans for the Cord Ranch this year include about 35,000 ft. of drilling on two Jasperoid formations on the western side of the property.

In what Herald described as a “one-company staking rush”, Crown has accumulated a total of 180,000 acres of ground covering eight properties in central and western Utah.

Of the eight properties, Herald is most excited about the prospects for the King Canyon project located in the western part of the state.

Some luck was involved in the discovery of the property’s potential. Originally only one hole was planned for the property in order to keep the claims in good standing. The hole was drilled on a gold anomaly (16 parts per billion gold) and returned a 20-ft. intersection grading 0.024 oz. gold per ton.

Further drilling on the property encountered a gold zone about 1,000 ft. long, 500 ft. wide and in the order of 100 ft. thick. The mineralization remains open to the west but grades are somewhat low in the 0.03-oz.-per-ton-range, given the intersections lie 270 ft. to 160 ft. below surface. Herald believes there is a very good chance the mineralization will be closer to surface on other parts of the property.

Crown plans to conduct about 40,000 ft. of drilling on the property in the coming year.

Crown has also staked about 40,000 acres between its Crown Jewel property and Corona’s Mascot Gold mine in southern British Columbia. Herald said the company would continue with surface work over the area, plus a limited drilling program.

In total, Crown plans to spend about US$2 million on exploration during 1991 in search of its next Crown Jewel.