U.S. REPORT Amalgamation to consolidate Kettle River mine interests

Shareholders meetings scheduled for mid-January, 1989 are expected to result in the amalgamation of affiliated companies, Crown Resource Corp. (NASDAQ), Gold Texas Resources (VSE) and Gold Capital Corp. The resultant company will then hold as its key asset a consolidated 30% interest in the Kettle River gold project in Washington State where Echo Bay Mines (TSE) is to bring on stream a 1,500-ton-per-day mining operation in early 1990. For the amalgamated company, the project means a significant stake in a gold mine expected to produce 110,000 oz in each of its first two years, and 85,000 oz in each subsequent year. Cash production costs are projected to be less than $175(US) per oz for two years, rising to $196(US) per oz thereafter.

According to a feasibility study by Kilborn Engineering and Pincock Allen & Holt, the $47 million(US) mine project has reserves of 3.9 million tons at an average grade of 0.189 oz gold per ton (representing total proven and probable mineable reserves amounting to 729,000 oz of gold). Metallurgical recoveries are expected to average 90%. Based on present reserves, mine life is about seven years, although it’s anticipated continued exploration will add to these figures.

The initial mining plan actually encompasses two underground mines, one at Overlook and the other about 20 miles north at Kettle. Two other ore zones north of Overlook are to be developed later.

Construction of a carbon-in- leach mill is planned to begin at Overlook in March, 1989, and construction of the Overlook decline tunnels is already in progress. One decline will total 2,700 ft and access the lowermost ore zone, while the second will total 1,250 ft, access the uppermost orebody and serve as a ventilation and escape way. A total of 8,400 ft of pre-production work is planned, which should be completed by this time next year.

Earlier this year, Crown Resource and Texas Resources arranged financing with Echo Bay to bring their combined 30% interest in the project into commercial production. Under the terms of the financing, Echo Bay is to provide the necessary funds in the form of a non-recourse loan to be repaid out of 50% of the companies net cash from the project. The property is serving as security for the loan.

After the amalgamation, the new company will also have interests in about 22 properties in the western United States and one Canadian province. Among the more advanced projects is the Seattle/Flag Hill property in Ferry Cty., Wash., located adjacent to Hecla’s Knob Hill mine. Exploration is also planned for a newly-acquired 34,000-acre property located in the Carlin Trend of Nevada.