Canyon Resources Corp. (CAU)
Interview with:
Richard H. De Voto, Chairman and President
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
McDonald gold deposit in Montana, USA and El Aguila property in the State of Oaxaca, Mexico.

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With a current market capitalization per gold ounce in the ground at about six dollars per ounce Canyon Resources is well undervalued relative to other small to medium sized gold mining companies

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Basic Materials
Gold and Silver

Canyon Resources Corp.

14142 Denver West Parkway, Ste 250
Golden, CO 80401
Phone: 303-278-8464

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Richard H. De Voto
Chairman and President

Interview conducted by:
Lynn Fosse
Senior Editor
July 2004

Dr. Richard H. De Voto

President, Chairman, Director
Chief Executive Officer, Co-founder of Canyon in 1979; 40 years experience in natural resource exploration and management. Formerly Co-founder and Director of Delta Gold N.L. and Vice President of Earth Sciences Inc.
Company Profile:
Canyon Resources Corp. (AMEX:CAU) is a U. S. based mining company, whose business is the discovery and production of precious metals. The Company’s gold inventory of 13.8 million ounces includes 9.8 million ounces of mineable reserves* (at $350/oz gold price) which are being mined or developed into operating mines in the western United States. Canyon’s market capitalization per gold resource ounce of approximately $6.00 represents a remarkably low capitalization (and share price) relative to other junior gold companies with large gold assets. Canyon currently operates the Briggs Mine in California, which is in the declining stages of production, having produced 96,000 ounces of gold in 2001, 57,000 ounces in 2002, and 37,000 ounces in 2003.

Projects being developed by Canyon include the 10.9 million ounce McDonald gold deposit in Montana. Once permitted and constructed, the McDonald Mine is anticipated to produce 445,000 ounces of gold per year for a 14-year period. Development of the McDonald project has been impeded by passage of an anti-mining initiative, I-137, in Montana. The Company has filed lawsuits against the state of Montana seeking to overturn the anti-mining initiative or, if that fails, to obtain a damage award for the value of the properties “taken” by the initiative. In addition, a broad coalition of citizen, business, and labor groups in Montana is moving forward with activities to place a new initiative, I-147, on the ballot for citizen vote in November 2004 which, if enacted, would allow the use of cyanide processing in new open-pit gold mines in Montana with certain engineering practices and environmental safeguards. Polls of Montana voters indicate that a substantial majority of voters want to change I-137.

In anticipation of overturning the initiative, a redesign of the McDonald Gold project, conducted by Chlumsky, Armbrust & Meyer (at a gold price of $350/oz), has resulted in a Pre-Feasibility Study that projects that gold and silver can be produced profitably from an open-pit mining operation with run-of-mine treatment of ore on a dedicated leach pad with in-pad solution storage. With the run-of-mine ore treatment design, approximately 9.23 million ounces of gold and 56.5 million ounces of silver would be mined, with the production of approximately 6.22 million ounces of gold and 18.7 million ounces of silver over a 14-year period, an average of approximately 445,000 ounces of gold and 1.13 million ounces of silver per year over the mine life.

Canyon is continuously evaluating other advance-stage precious metal projects in the western United States and Mexico in efforts to increase shareholder value through new discoveries or acquisitions. The high-grade gold/silver El Aguila property in the State of Oaxaca, Mexico, has resulted from this activity.

CEOCFOinterviews: Mr. De Voto, I know you Co-founded Canyon many years ago; what was the vision for Canyon then and where are you today?

Mr. De Voto: “When we founded Canyon in 1979, three geologists formed a company as a private exploration mineral company. We have evolved the company into a publicly listed company, listed on the AMEX and our ticker symbol is CAU. It is a mining and production company of gold and silver. We have operated several mines sequentially in several western states and are conducting exploration as well as mine development and operations.”

CEOCFOinterviews: Where are you operating today?

Mr. De Voto: “We are operating a mine in the desert of South Eastern California, and we own 13.7 million ounces of gold in three deposits in Montana, which represents a sizeable asset base for Canyon. We are hoping to be able to bring these projects forward into mine development.”

CEOCFOinterviews: What needs to be done, and will you give us an overview of how this business works?

Mr. De Voto: “Normally when you conduct exploration, you discover a deposit that may have economic merits; you drill out the deposit with sufficient spacing of drill holes, which allows engineers and metallurgists to study the recovery of the gold and the cost to recover it. When you have enough of that information, you do feasibility studies to determine economic viability and then you start the permitting process, which is rigorous, more so than any place in the world, but particularly in each state in the US. That process of permitting of the mine plan to accommodate concerns for every aspect of the environment and providing baseline data on the environment for that specific project’s site, is at least a two and generally a three-year period. At the end of that process, assuming that you have obtained comfort by the engineers that are employed by the state agencies that are involved in reviewing the applications, then you will obtain the operating permit to mine, and then you will start construction of the mine.”

CEOCFOinterviews: What happened in the state of Montana with regards to the mining industry and can you tell us where things stand today?

Mr. De Voto: “In Montana, we were in the middle of the permitting process for the McDonald Gold Project, in 1998, when the citizens passed, but barely at 52 to 48%, an anti mining initiative, by citizen ballot vote, that would not allow any new goldmine development in the state. Unfortunately mining companies and their employees at that time were not allowed to campaign by prohibition of an earlier initiative, and that prohibition has since been deemed unconstitutional by a federal court. Now that is not the case and in fact we, as well as many business citizens and labor groups in the state of Montana, are putting a new ballot measure, I-147, as a new initiative on the ballot this November for a new vote of the citizens in the state of Montana, which if passed would modify that prior prohibition and allow new projects.”

CEOCFOinterviews: Is the change of mind-set in the state because of the need to develop more jobs?

Mr. De Voto: “There is certainly a change in the economy as well as in the nation. Polls and questions asked of citizens six years ago vs. four years ago, vs. two years ago vs. now, as the Chamber of Commerce has done, indicate that the balance is now more favorably inclined towards economic development in jobs vs. environmental concerns, and has swung strongly in favor of economic development and jobs over the last six to eight years. That is a major factor.”

CEOCFOinterviews: How do you weather a setback like that?

Mr. De Voto: “It is tough, but we had an operating mine in the desert of California during this period. In fact, the operating mine uses exactly the same technology, which has been banned in Montana for the last six years. It is the same technology that we operated at an earlier mine in Montana before the prohibition. It is the same technology, which is used widely for utilization around the world by all the global gold producers. In this case, we have such an immense resource base in Montana, that our shareholders know the great value, albeit legal impeded presently. Our shareholders have continued to support the company through our selling additional stock in the company and raising equity to allow us to advance these issues.”

CEOCFOinterviews: Was that the recent financing?

Mr. De Voto: “Yes and the previous one as well.”

CEOCFOinterviews: You have some anticipation of the initiative being overturned, what happens then?

Mr. De Voto: “Permitting would resume on the project that was interrupted half way through the permitting back in 1998. In the interim, we have redesigned the configuration of the project. It is called the McDonald gold deposit and is six miles east of the town of Lincoln, Montana. We have redesigned it to take into account many of the environmental comments that were made by citizens and regulators during earlier public hearings on the permitting, and to make it more environmentally secure and politically sensitive. It goes a long way towards accommodating concerns that were expressed. The earlier design was engineered safely but this one is even better. We have a redesign of the McDonald gold deposit, which would be part of the re-initiation and recommencement.”

CEOCFOinterviews: Are there other gold mines or potential mining companies joining with you to get the initiative overturned?

Mr. De Voto: “Absolutely! There is the entire mining industry and the State of Montana Mining Association, which is the association of all mining companies in the state. There are two active gold mines; Placer Dome’s (NYSE: PDG), Golden Sunlight mine and Apollo Gold’s (AMEX: AGT) Montana Tunnels operations, which continue to operate sizable gold mines in the state. They were grand fathered from any affects of the earlier initiative that was passed in 1998, but they are very concerned about changing that law to allow new operations and new projects in the state and they are actively involved in this new effort. The new initiative to be on the ballot is labeled I-147 and it has a website called I-147 would allow mining to use solutions containing cyanide to extract gold and silver but requires stringent new regulations to protect the environment. There is an informational website that includes the petitions that are now being circulated for signatures of registered voters throughout the state and a text of the initiative is also on that website.”

CEOCFOinterviews: Will you tell us about the Briggs mine?

Mr. De Voto: “The Briggs mine in California uses exactly the same technology, it is an open pit mine, heap leaching, and a low-grade gold deposit. We built it in 1996 and started production in 1997. Through the end of last year, we had produced 513,000 ounces of gold collectively and are still in production, however we are finished mining. Last week, we exhausted the ore that was available to us. All of the 26,000,000 tons of ore is still under leach and being leached. We expect to produce 31,000 ounces of gold from the mine this year.”

CEOCFOinterviews: What happens when there is nothing left?

Mr. De Voto: “We are commencing reclamation of the site as we speak and our staff levels, which were once at 135 people during active mining and crushing, was at 55 people this last six months when we were just mining, and is now down to 24 people. At the end of this year we will be at 12 people on site and producing gold still, producing cash flow for the company, while we complete reclamation.”

CEOCFOinterviews: You know how this is going to proceed, so you can plan for this.

Mr. De Voto: “Absolutely! We knew this was happening when we started the mine, In fact when we started the mine, we only thought we would produce about 350,000 ounces of gold. As we started the mine, we drilled out additional reserves and brought the reserves up to almost a million ounces from which we will have mined and ultimately we will recover about 560,000 ounces.”

CEOCFOinterviews: Where are you looking now?

Mr. De Voto: “We are examining other advanced stage projects in western states of the U.S; projects that have been drilled and are known to have good resources that are not yet opened up. We have a complete equipment fleet at the Briggs mine, which will be available for use elsewhere when we are finished using it in the reclamation mode later this year, and we would like to find a project that could utilize that fleet and would add gold production and cash flow for Canyon, between Briggs as it winds down and McDonald’s start up.”

CEOCFOinterviews: What happens if McDonald’s doesn’t start up?

Mr. De Voto: “We are still in the court system on McDonald’s, however I think our chances are excellent that we will win the I-147 initiative election. There is such an economic interest in mining continuing in the state. We will stay in the court system. Our asset value has been taken from Canyon by the legal action of the earlier initiative and there is strong U.S. precedent on taking awards being granted by the courts in circumstances such as this. We don’t want to be on that path, we would rather make the mine; but if all else fails, we have a good case in court. By then, we will have other assets that we hope will be advancing in other states.”

CEOCFOinterviews: So you believe the McDonald project is going to bear fruit.

Mr. De Voto: “We absolutely believe so! We discovered it in the early nineties; it is an immense world class district, it is a significance for any gold mining company on earth and for our shareholders, we must fight for its value by one means or another, and we would rather do it in a way that Montanans across the state derive economic benefit. The McDonald gold project will generate 1.5 billion dollars out of the ground that will be spent in Montana throughout its life. Included in that is at least a hundred million dollars because the state owns the ore body, that will be paid in royalty payments to the state, and is already earmarked for Montana Tech University.”

CEOCFOinterviews: From looking at your website, it seems that you have been very environmentally conscious for many years now.

Mr. De Voto: “You have to be very sensitive to the environment with any activities that you conduct anywhere on earth. I consider myself an environmentalist; I love the natural environment. I am a geologist and that is what got me into this business. You have to plan and take a very detailed and sophisticated concern for the environment before you drill and before you mine. You must know the baseline conditions of all aspects of the environment, the water, the biology of various kinds of animals and plants that exist and are going to continue to exist long after the mine is operated and closed; you want to make sure you don’t affect that adversely. With that planning and engineering, you lay out your plan and have it approved so that you can go forward and at the end of the day, you follow through on that advanced plan an complete the reclamation and have it designed before you start. Our understanding of how you do this today is much more sophisticated than fifty or a hundred years ago. The environmentalists who would like no mining point to projects that have had adverse environmental affects one hundred years ago. There were projects that we would not design and operate today that were conducted a hundred years ago and we aren’t doing those things today.”

CEOCFOinterviews: Why should people be interested in Canyon as opposed to any of the other gold exploration and mining companies that are out there?

Mr. De Voto: “There are a lot of other good companies as well, but the reason investors should consider Canyon is that we are undervalued today, and there is opportunity for strong shareholder positive increase in share price. The total value for Canyon Resources right now is that, our assets gold ounces in the ground are such that our present day market capitalization per gold ounce in the ground is about six dollars per ounce. If you look at other small to medium gold mining companies, they have market capitalizations that range from thirty to a hundred dollars per gold ounce in the ground. We are at six dollars. When we get this thing changed in November with the I-147 ballot that would allow us to start work in our McDonald Mine in Montana, there ought to be a very dramatic re-rating of Canyon share value. I don’t know where it will go, but it ought to go up, somewhere in the mix of thirty to a hundred dollar range. That is a six to eight-month view.”

CEOCFOinterviews: As CEO, what are your functions on a daily basis?

Mr. De Voto: “We have a small corporate staff that shrunk down to its current level during the low gold price of the six-year down period in gold prices, so I do a lot of functions within the company.   First, I am a geologist. So, I use my geologic guise on new and existing projects. I supervise our activities in Montana. I run most of the investor relations programs in the company and tomorrow I am headed off to three gold conferences in Zurich, London, and New York, to talk about the company to institutional and retail investors.”

CEOCFOinterviews: In closing, how do you get investors’ attention?

Mr. De Voto: “The same bottom-line number; six dollars market capitalization per gold ounce the source from the ground. That is the key single item about Canyon Resources. Those who know gold mining companies, know that is a very low number for a company with very sizeable gold resources.”


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