Gold mines exist in a shaky financial world


Note: This article is a sidebar to this issue's feature story.

When Phelps Dodge sold its share in the McDonald Mine this fall, no one was much surprised. The company had tried to get rid of its 72.5 percent share in 1994, when, after having spent over $42 million, it asked its partner, Denver-based Canyon Resources, and another company, Echo Bay, to take over developing the McDonald Mine.

Echo Bay tentatively agreed, but then it spent $2.3 million asking questions and changed its mind. Recently, Phelps Dodge convinced Canyon Resources to buy it out.

With Phelps Dodge gone, Montana's state legislators may be visited by fewer lobbyists when they next meet in 1999. Phelps Dodge, under the name Seven-Up Pete Joint Venture, hired four lobbyists to push pro-mining bills through the Legislature in 1995, and 13 lobbyists in 1997. In 1995, the company did not report hiring any lobbyists and was questioned for violating Montana's lobbyist disclosure law.

Compared to Phelps Dodge, the largest copper mining company in the world, Canyon Resources is small potatoes. It has managed two gold mines, but neither is close to the size of the proposed McDonald Mine.

In 1987, Canyon Resources took over the Kendall Mine in central Montana. Four years later, in two separate incidents, a pond liner shredded and a pipeline burst, spilling thousands of gallons of cyanide solution. Since Kendall is now being reclaimed, Canyon Resources only makes money at its Briggs Mine near Death Valley, now in its second year of operation.

Company finances are shaky. Its 1996 annual report showed $26.8 million in accumulated losses since 1992. During the past two months, its stocks lost over half their value, dropping from $2.44 to $1.06 a share.

But company president Richard DeVoto says there's nothing to worry about. Falling prices for gold have devalued stock in all gold companies, he says, but regardless of its finances now, Canyon Resources will post a bond sufficient to cover reclamation at the McDonald Mine. "We want to make the land better than it was before we started," DeVoto told the Helena Independent-Record. "It (the mine) could become a recreational area."