Canyon Resources Corp

Railroad Land Grant Mineral Rights

 

Canyon Resources Retains Sheldon Good & Company to Auction Million Acres of Mineral Rights and Fee Lands in Western Montana

Company news release, February 13, 2002

http://www.canyonresources.com/press/13feb02.html

GOLDEN, CO--Canyon Resources Corporation (AMEX:CAU), a Colorado-based mining company, today announced that it has retained Sheldon Good & Company to develop an auction strategy to auction and sell Canyon's nearly million acres of mineral rights and fee lands in western Montana. The lands and mineral rights are comprised primarily of lands assembled in the early 1900's by The Anaconda Company for their timber and mineral potential. The lands occur in 14 counties in the mountainous terrain west of the Continental Divide, with most of the lands being located within 50 miles east and west of Missoula, extending to the Idaho State line, and within 60 miles west of Kalispell in northwestern Montana. The mineral rights and fee lands contain many known occurrences of gold, silver, copper, barite, phosphate, and other mineral commodities.

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Canyon to sell its rights

By Sherry Devlin, Missoulian, Feb 14, 2002

http://www.missoulian.com/articles/2002/02/14/export6189.txt

McDonald project stays

Canyon Resources Corp. will auction off the mineral rights to nearly 1 million acres in western Montana, including some Flathead lakefront property and as many as 700,000 acres of industrial timberland, its president said Wednesday.

"This is an early notice to everybody that these mineral rights will be sold," said Richard De Voto, president of the Golden, Colo., company that also owns - and is not selling - rights to the proposed McDonald gold project north of Lincoln.

"We are trying to obtain value that is sitting silently in the ground, not doing us any good," De Voto said. "For a mining company, the principal value of mineral rights is the exploration potential - and that's a very long-term view of exploring, spending money and finding something. We have a shorter-term need for capital."

Canyon owns only the mineral rights, though, not the surface of the land.

De Voto said he has "been struggling with how to achieve value from this holding" for the past 10 years, since Canyon Resources bought the rights from Western Energy Co. "We have asked real estate agents if they would be willing to handle the sale, but it is such a unique property that we couldn't find anyone with experience in this kind of transaction. We've finally found the connection we needed."

Sheldon Good and Co., the largest real estate auctioneer in the United States, will handle the sale - which De Voto hopes will occur in late spring or early summer. "They handle the largest volume of real estate sales in the nation each year," he said. "Resorts, commercial, industrial, some high-end residential, all over the country."

The first task, already under way, will be to compile an inventory of who owns the surface of those million acres. Then all of the surface landowners will be contacted and given information on the pricing, mechanics and date of the auction.

"We believe about 70 percent of the land is owned by Plum Creek Timber Co.," De Voto said. "Probably 10 percent is U.S. Forest Service and not quite 10 percent is state-owned. Then there's somewhere between 10 and 15 percent owned by individuals, some ranchers and some lakefront home sites at Flathead Lake."

"There are some trophy home sites where we own the mineral rights," he said.

The land is scattered across 14 counties, mostly in mountainous terrain west of the Continental Divide. Most of the land is either within 50 miles east and west of Missoula, extending to the Idaho state line, or within 60 miles west of Kalispell.

Below the ground, De Voto said, are known occurrences of gold, silver, copper, barite, phosphate and other mineral commodities.

The holdings came to Canyon Resources by way of Anaconda Copper Co. A century or more ago, the Anaconda Co. bought the million acres outright - surface, mineral rights, and oil and gas rights. The timber was used for mine supports and railroad ties. All else was in "savings."

In 1977, Atlantic Richfield Co. bought the Anaconda Co., and with it the land. Arco kept the oil and gas rights, but sold much of the surface - soil and timber - to Champion International Corp., which owned a plywood plant and sawmill in Bonner. Champion sold the timber to Plum Creek in 1993.

In 1984, Arco sold the mineral rights to Western Energy Co., the mineral arm of Montana Power Co. "It's a pretty complicated chain of events," De Voto said.

Western Energy eventually entered into a sales agreement with Adwest Minerals, predecessor to Canyon Resources and co-owner of the Kendall gold mine near Lewistown. "Then we bought that company entirely in 1990, and completed the purchase of the Western Energy mineral rights in 1992," De Voto said. "So through that chain of title, we own the mineral rights to these million acres."

De Voto explained that the deeds give Canyon Resources the right "to explore and develop a mine on whatever mineral deposits are discovered or found."

"The deed of transfer on the mineral rights from Arco and also the deed of transfer on the surface ownership clearly stated that the mineral rights were not transferred to the timber company and that the mineral right holder would have the right to explore and mine the land should a valuable deposit be found," De Voto said.

Of course, if the exploration or mining damages the surface, the miner must compensate the surface owner, he said. But the mineral rights do trump the surface rights. "My attorneys tell me the right is actually embodied in the Montana Constitution," De Voto said.

Canyon Resources did contact Plum Creek Timber about possibly purchasing the mineral rights several years ago, he said, but there was no interest. They'll call again before the rights are auctioned.

Late Wednesday afternoon, a Plum Creek spokesman in Seattle said the company would have no comment on Canyon's announcement.

Other landowners should hold tight until they hear from Canyon, De Voto said. "Look at your own deed and if you don't own the mineral rights, here's a clue as to who does. Eventually, we'll set up shop to answer questions. But not yet. We have to tour the land first and finish the inventory."

De Voto said he could not estimate the value of the mineral rights, but said he expects the auction to attract bids from mining companies, timber companies and environmental groups. The money will go toward "overall corporate needs," he said.

"It's a big block of land," he added. "It's already attracting attention. This is such a big acreage, lots of land."

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Canyon Resources sets auction date

By Sherry Devlin, Missoulian, July 11, 2002

http://www.missoulian.com/articles/2002/07/11/export14377.txt

Mineral rights, land sale is biggest of its type

Canyon Resources Corp. has set an Aug. 6 auction date for the sale of 900,000 acres of mineral rights and 650 patented acres in western Montana, as well as 850 acres in the North Moccasin Mountains of central Montana.

"Anything we aren't currently working on, we are going to try to sell," said Richard De Voto, president of the Golden, Colo., company that also owns - but is not selling - rights to the proposed McDonald gold mine north of Lincoln.

Most of the patented acres are in the old Argenta mining district south of Butte, De Voto said, and were once worked by placer miners or by the Anaconda Copper Co. Most of the mineral rights - about 700,000 acres - are beneath land owned by Plum Creek Timber Co.

However, De Voto said there are as many as 3,000 landowners affected by the mineral-rights auction, including people who live in several subdivisions west of Kalispell and some who own property at Flathead Lake and "all around Missoula."

Canyon's holdings include known occurrences of gold, silver, copper, barite, phosphate and other minerals.

Because of the significant acreages, the upcoming auction will be the largest sale of its type in the history of the auction industry, said Steven Good, president of Sheldon Good & Co. - which will conduct the auction by way of an audio simulcast in Missoula and Lewistown, beginning at 11:30 a.m.

The lands and mineral rights are composed primarily of property assembled in the early 1900s by the Anaconda Co. for its timber and mineral potential, Good said. They are located in 14 counties west of the Continental Divide, although most are within 50 miles east and west of Missoula and west of Kalispell to the Idaho border.

The parcels range in size from 700 acres to 26,000, and include rights to do exploratory and development work, and the rights to mine and extract ore.

Good said he expects interest from timber companies, mining companies, conservation groups and individual landowners. All owners of the affected surface land have been notified by mail - "or at least everybody who we could identify from courthouse records," De Voto said.

The actual property to be auctioned is being offered in 13 parcels, ranging in size from 9 acres to 120 acres, "and is ideal for ranching, mountain homesites, hunting, hiking or camping," according to Good. "The property provides the buyer with a number of entrepreneurial opportunities such as harvesting of timber, mineral exploration, hunting clubs, or as a base for adventure excursions throughout the area."

The 850 acres for sale in the Northern Moccasin Mountains include the Kendall gold mine, which is in mid-reclamation following years of mining. Reclamation will continue, De Voto said, but the land itself will be sold during the auction.

Fourteen parcels will be sold at Kendall, some of which have not been developed. Canyon is not, however, selling the core claims that include the mine's leach pads and settling ponds, De Voto said.

The auctioneer has advertised the property and mineral leases for the past month in the Wall Street Journal, and will present auction information sessions in Missoula, Kalispell and Lewistown in the days ahead.

Those sessions are planned for 2 p.m. Saturday at the Yogo Inn in Lewistown, at 6 p.m. Sunday at the Hampton Inn in Kalispell, and at 6 p.m. Monday at the Holiday Inn Parkside in Missoula. On-site inspections of the Kendall mine property are planned for 10 a.m. Saturday, and again Aug. 3.

De Voto said the Anaconda Co. originally bought all of the western Montana acreage outright - surface, mineral rights, and oil and gas rights. The timber was used for mine supports and railroad ties. All else was considered "savings."

In 1977, Atlantic Richfield Co. bought the Anaconda Co., and with it the land. Arco kept the oil and gas rights, but sold much of the surface to Champion International Co., which owned a plywood plant and sawmill in Bonner. In 1993, Champion sold the land to Plum Creek Timber Co.

The mineral rights, in turn, were sold to Western Energy Co., the mineral arm of Montana Power Co. Western Energy eventually entered into a sales agreement with Adwest Minerals, the predecessor to Canyon Resources and co-owner of the Kendall mine. In 1990, Canyon bought the company.

"It's a pretty complicated chain of events," De Voto said, "but through that chain of title, we own the mineral rights to nearly a million acres."

Canyon is selling the land, he said, simply for the cash - but also because "we have no near-term or medium-term need for the property."

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Mineral auction infuritates

By Sherry Devlin, Missoulian, July 16, 2002

http://www.missoulian.com/articles/2002/07/16/export14593.txt

Landowners miffed at Canyon sale of rights below their land

Amid grumbles of "highway robbery" and "scam," auctioneers explained to more than 150 area landowners Monday that Canyon Resources Corp. owns the mineral rights beneath their homes - and that they have two weeks to pay up to $500 an acre or the rights will be sold at public auction.

"The minerals and ores that are beneath the surface, these minerals belong to Canyon Resources and they want to sell them," said Bob Hatcher, director of the forest and natural resources division of Sheldon Good and Co., which will auction Canyon's 900,000 acres of mineral rights and 650 patented acres in western Montana and another 850 acres at the Kendall gold mine near Lewistown.

The sale affects thousands of individual landowners who have title only to the surface of their property, not the minerals below the surface. All of the land was once owned by the Anaconda Co.

Hatcher told landowners who stuffed a hotel meeting room in Missoula to overflowing Monday night that they have "a once-in-a-lifetime opportunity" to acquire the minerals beneath their homes and ranches.

"You have an opportunity to put your real estate back together," he said. "It's up to you to decide if this is an opportunity you want to take advantage of."

That's when the explanation got tricky, and complaints of "carpet-bagging" began.

If surface owners want to "pre-empt" the Aug. 6 auction, they must buy the mineral rights for a price that could be 10 times the minimum bid set for the auction, said auction manager Jeffrey Azuse. And they must do so by Aug. 5.

On auction day, the mineral rights will be subject to a minimum bid of $5 per acre.

Between now and then, Canyon Resources is willing to sell the minerals to surface owners for $500 an acre, if they own one to 10 acres; or $300 an acre if they own 11 to 20 acres; $200 an acre if they own 21 to 40 acres; $150 an acre for 41 to 60 acres; $100 an acre for 61 to 100 acres; $50 an acre for 101 to 500 acres; $25 an acre for 501 to 1,000 acres; or $15 per acre for landowners with more than 1,000 acres.

"Hell, I didn't pay that much for the land," one man shouted from the audience.

"That's the asking price if you want to remove the mineral rights under your land from the auction," Azuse said. "You can also offer a lower price and we will present your offer to the seller, who could either accept it or reject it."

"If we pay the asking price, then we get the mineral rights to our property?" a man asked.

"Yes," Azuse said.

"If I don't purchase the mineral rights, then can't I just deny the mining company access to my property?" asked Tana Bignell, whose property is in Avon.

"No," came the reply. "In Montana and most Western states, the mineral estate is the dominant estate. The mineral owner has the right to mine the property."

"We knew we didn't own the minerals," Bignell said. "But we never expected that we'd have to pay $8,000 for them. Or that we'd only have two weeks to do so."

"The time constraint is the worst part," said a woman from Potomac, who didn't want her name in the newspaper lest the notoriety cause her more troubles. "This is just a fund-raiser for Canyon Resources; it's not too subtle. It's a punitive thing. It's highway robbery and a scam."

"Folks up the Blackfoot are none too happy," said Hank Goetz, manager of the University of Montana's Lubrecht Experimental Forest - land donated to the state by the Anaconda Co. in 1937.

Anaconda Co. gave the university the mineral rights to most of the 19,000 acres in UM's forest. But the company kept the rights to mine 1,650 acres at Lubrecht, rights that the university must now purchase or see auctioned away.

"We are going to make them an offer," Goetz said. "Some future manager would have my head if I let this go without trying to lock up the ownership."

But it won't be easy to accomplish in such a short amount of time. "Canyon Resources has known it was going to sell these rights for years probably," Goetz complained during the meeting. "But they're only giving us two weeks."

"That's so people will act out of emotion," said Ninemile Valley resident Randy Harrington, who said he and his neighbors are in the same predicament.

In fact, Canyon Resources owns mineral rights to land in 14 counties in western Montana, including property along the Blackfoot River, on Placid Lake, along Lolo Creek, in the Sixmile and Ninemile drainages, in the Fish Creek drainage, along the Thompson River, at Ashley Lake and McGregor Lake, on the shores of Flathead Lake, in the Pleasant Valley, on Little Bitterroot Lake, Loon Lake, Swan Lake, in the Hog Heaven Range, and in some neighborhoods in Grant Creek, the Rattlesnake, O'Keefe Creek and Mill Creek near Missoula.

Seventy percent of the property is owned by Plum Creek Timber Co., but the rest is scattered among thousands of landowners and in very small pieces.

Last week, Canyon Resources president Richard De Voto said his company is selling the mineral rights to raise cash for its other mining projects, one of which is the McDonald gold mine north of Lincoln. That mine cannot be developed because of Montana's prohibition on open-pit cyanide heap leaching.

De Voto said Anaconda Co. originally bought all of the western Montana acreage outright - surface, mineral rights, and oil and gas rights. The timber was used for mine supports and railroad ties. All else was put into "savings."

In 1977, Atlantic Richfield Co. bought the Anaconda Co., and with it the land. Arco kept the oil and gas rights, but sold much of the surface to Champion International Co., which owned a plywood plant and sawmill in Bonner. In 1993, Champion sold the land to Plum Creek Timber Co.

The mineral rights, in turn, were sold to Western Energy Co., the mineral arm of Montana Power Co. Western Energy eventually entered into a sales agreement with Adwest Minerals, the predecessor to Canyon Resources and co-owner of the Kendall gold mine. In 1990, Canyon Resources bought the company.

Now, Canyon needs cash, De Voto said. And auctioneers at Monday night's meeting assured landowners that the mineral rights will be sold at the Aug. 6 auction - which will occur simultaneously at the Holiday Inn Parkside in Missoula and Yogo Inn in Lewistown.

"But why is there such a big discrepancy between the $5 an acre you'll take on Aug. 6 and the $500 an acre some of us are going to have to pay between now and then?" one man asked.

"Because at the auction, we're selling 900,000 acres," Azuse said. "And the buyer is willing to sell for $5 an acre if someone's taking one of these big parcels. To take a little parcel out of the package, you've got to pay a premium."

On auction day, the 900,000 acres of mineral rights will be grouped into 82 parcels ranging in size from 700 acres to 26,000.

"We are devaluing these parcels by selling you the mineral rights beneath your property," said Hatcher. "The seller wants to be compensated for that lost value."

The seller also will charge a 10 percent premium on all purchases - before or during the auction - to recoup its marketing expenses, Hatcher said. And bidders must purchase various guidebooks, at a cost of up to $30 each, if they want to know more about the parcels.

"They'll do us this big favor for only $500," said Harrington, the Ninemile resident. "Either that, or they'll sell it to some other corporation so they can nickel-and-dime us to death."

If you're interested: Canyon Resources Corp. will sell 900,000 acres of mineral rights, as well as land parcels in western Montana and at the Kendall mine site at an auction set for 11:30 a.m. Tuesday, Aug. 6. The auction will occur simultaneously at the Yogo Inn in Lewistown and at the Holiday Inn Parkside in Missoula. Bidder information packets are available by contacting the project manager at (312) 630-0915.

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A golden opportunity? Maybe not

Missoulian, July 17, 2002

http://www.missoulian.com/articles/2002/07/17/export14654.txt

SUMMARY: Landowners feeling pressured to buy mineral rights might not have much to worry about.

Canyon Resources hasn't had much luck digging for gold, silver or copper. Now it's mining anxiety.

The mining company that has been thwarted in its efforts to develop a huge, open-pit gold mine near the headwaters of the Blackfoot River owns mineral rights to close to a million acres elsewhere in western Montana. Canyon Resources says it's auctioning them off to the highest bidder Aug. 6., giving landowners a brief chance to buy - at a premium - the mineral rights to their own property in advance of the auction.

Canyon Resources says landowners must pony up as much as $500 an acre - and they must do it quick - or the mineral rights will be auctioned away.

It's an unsettling proposition to some landowners. A couple of weeks isn't much time to mull this over, much less to come up with what, for some, could amount to a substantial sum of money. But before anyone shells out good money with the idea of securing future riches or protecting their property from some rapacious mining company, perhaps it's wise to ponder what these rights are actually worth.

Not much would be our guess.

The mineral rights in question once belonged to the Anaconda Co., not one to leave a lot of gold nuggets lying around. Atlantic Richfield bought them when it bought Anaconda, then sold them to Western Energy, which sold them to Addwest Gold. Canyon Resources got them in 1990 when it bought Addwest. If there's much to be mined under the lands in question, it's eluded a whole lot of folks over the years.

The Associated Press reported in 1995 that an Australian mining company had made a deal with Canyon Resources to spend $2.5 million over six years exploring the mineral potential of its western Montana holdings. If they found much out there, they kept it to themselves.

The next word on the mineral rights came two years ago, when Canyon Resources publicly offered to sell its mineral rights to environmentalists, having found no takers for the rights among other mining companies. Environmental groups weren't buying, either, as it turned out. Plum Creek Timber Co., also declined the chance to buy from Canyon Resources the mineral rights beneath its western Montana timberlands.

Meanwhile, Montana voters went to the polls in 1998 to pass Initiative 137, banning the mining practice known as cyanide heap leaching. The initiative was intended to protect Montana's rivers and streams from pollution, such as that envisioned from Canyon Resource's proposed Blackfoot mine. Canyon Resources has since contended the initiative "made it very difficult for anyone to explore (for minerals) in the state of Montana."

Sort of makes you wonder why anyone would now pay Canyon Resources' asking price of up to $500 an acre for the rights to minerals that others have failed to find, knowledgeable buyers have rejected, environmentalists aren't much worried about and the company itself suggests may be, by virtue of I-137, unreachable.

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Canyon auction criticized

By Sherry Devlin, Missoulian, July 22, 2002

http://www.missoulian.com/articles/2002/07/22/export14918.txt

State lawmaker tells landowners not to fall for firm's 'scare' tactics

Canyon Resources Corp. has tried for years to sell the 900,000 acres of mineral rights it owns in western Montana and has yet to find a buyer, state officials said.

Time after time, other mining companies have said no, as have Plum Creek Timber Co., the Montana Department of Natural Resources and environmental groups.

In fact, only once was the mining company even able to convince a state agency to accept mineral rights as partial payment for a fine - and then, the state valued the rights at $3.33 an acre.

And that makes the mining company's current attempt to frighten thousands of individual landowners into buying the rights for up to $500 an acre all the more "reprehensible," said state Sen. Jim Elliot, D-Trout Creek.

"They're taking advantage by threatening people's security in their home and property, and I just find that abominable," said Elliot, whose constituents are among thousands of landowners who received letters from Canyon Resources warning that the minerals beneath their property will be auctioned away on Aug. 6 unless they "pre-empt" the sale.

So Elliot did a bit of research, hoping to help his constituents evaluate Canyon's offer.

"I wanted to get some information to give folks a straight answer," he said. "And I think the straight answer is screw 'em. They've been trying to sell these mineral rights for years and nobody has taken them up on it."

"The fear of having a drag line in your front yard is what's driving this thing," said Larry Mitchell, a research analyst in the Montana Legislature's Environmental Policy Office. "Canyon Resources has figured out that they can't make any money off these things as mineral rights, so they're going after them as conservation easements."

Elliot's telephone started ringing shortly after an auctioneer hired by Canyon Resources held "workshops" in Missoula and Kalispell last week, explaining the company's plan to sell mineral rights in 14 western Montana counties.

At auction, the mineral rights will be packaged as 82 parcels ranging in size from 700 acres to 26,000. In reality, though, they are split among as many as 3,000 individual landowners - and include homes, ranches and summer getaways along the Blackfoot River, on Placid Lake and Flathead Lake, in the Sixmile and Ninemile drainages west of Missoula, in some neighborhoods in Grant Creek and the Rattlesnake Valley, along the Thompson River, at Ashley Lake and McGregor Lake, and in the Fish Creek drainage.

Individual landowners have until Aug. 5, the day before the public auction, to "pre-empt" the sale by purchasing the mineral rights beneath their own property, the auctioneers explained. But while the minimum bid at auction will be $5 an acre, the pre-emptive price is much higher - up to 100 times higher.

If surface owners have one to 10 acres, Canyon Resources will sell them the mineral rights beneath their land for $500 an acre, the auctioneers said. If they own 11 to 20 acres, the early-bird price is $300 an acre, with further reductions as an individual's ownership increases - down to $15 an acre for those with more than 1,000 acres.

Surface owners can offer the company less than the asking price, but Canyon Resources has no obligation to accept lower bids.

When landowners complained at the Missoula meeting that the prices were "highway robbery," the auctioneers defended the amounts and lauded Canyon Resources for giving surface owners "a once-in-a-lifetime opportunity" to consolidate their property rights.

"Not necessarily so," said Mitchell, who advises the Environmental Quality Council. "Let's say someone else buys the mineral rights beneath my property. I can always go to that purchaser and say, 'I'll buy them from you.' You can always buy these rights from the new owners."

Mitchell, however, begged off advising landowners on how to respond to Canyon's offer.

"I don't have a crystal ball, but I don't think I would lose much sleep over it," he said. "This is obviously an effort to generate cash for a company that's in desperate need of cash. On the one hand, it's a great opportunity for people to rejoin the ownership estates in their property. On the other, how much is that really worth?"

Recent history suggests that, because they are purely speculative, the mineral rights likely aren't worth more than $5 an acre, according to Mitchell.

In 1999, when the state Department of Environmental Quality fined Canyon Resources for water-quality violations at its Kendall gold mine, the company asked if it could pay in mineral rights rather than cash. Because it had no cash.

"At this point, the gold business is very tight," Conrad Parrish, the mine's environmental manager, said in an August 1999 interview. "We have to look for ways to fulfill obligations that aren't necessarily the traditional ways."

A few years earlier, Canyon offered to sell the same mineral rights to the state Department of Natural Resources. According to a staff memo, DNRC officials looked into the offer and deemed it an imprudent investment.

When the company offered the minerals as payment for its environmental fines, DEQ initially said no. Instead, state officials reduced the original $302,000 penalty to $132,000. Still, the company claimed poverty, Mitchell said.

Eventually, the mine owners recruited the Montana Department of Fish, Wildlife and Parks to their cause. Sort of. FWP said it would be interested in acquiring the mineral rights that Canyon Resources owned beneath that agency's land in western Montana, which included wildlife management areas, state parks and fish access sites in Missoula, Flathead, Lake, Deer Lodge, Lincoln, Powell, Ravalli and Sanders counties.

But how much were the rights worth? Experts at the Bureau of Mines suggested the speculation rate of $5 per acre.

"If you came to town and said, 'I want to buy all the mineral rights in Montana,' but you didn't know if there was anything of value or not, that would be the rate," Mitchell explained. "In this day and age on the open market, you can probably buy mineral rights anywhere in the state for a speculation rate of $5 per acre."

Still, in the 1999 case, the state insisted that Canyon Resources give 1.5 times the value in mineral rights. So the Department of Fish, Wildlife and Parks picked up its 35,640 acres of mineral rights for $3.33 an acre.

"But you've got to realize what happened here," Mitchell said. "Canyon Resources settled two years of water-quality fines. They essentially bargained away the fines by giving away a bunch of paper that's either a king's fortune or worthless."

So, too, is the speculative nature of the mineral rights now being offered to individual landowners, and then to the general public at the Aug. 6 auction.

Canyon Resources CEO Richard De Voto has repeatedly defended the mineral rights as valuable. The "whole block," he said, "is worth tens of millions of dollars." (The sale does not include the company's controversial McDonald gold project north of Lincoln. That proposed mine was prohibited when voters approved a ban on cyanide heap leach mining.)

No one is being forced to buy the mineral rights beneath their property, De Voto said. But if they want to avoid the risks associated with an auction, surface owners need to pay a higher price. To take a few acres out of a many-thousand-acre parcel, a landowner must pay a premium.

"If I had all the money in the world and didn't give a hoot, I would write them a check and say get lost," Mitchell said. "Or I'd make them an offer slightly higher than $5 an acre."

Landowners have little reason, though, to fear that their homes will be eaten up by a new hard-rock mine, he said. "Those things take forever to permit."

But, depending on where they live, some surface owners might be justified in worrying about a gravel pit, as the mineral rights include gravel, talc and peat. "Every highway project needs a gravel pit," Mitchell said.

"Of course, with hard-rock and industrial minerals, the surface owner has to be compensated for any damage caused by the mineral rights owner," he said. "So if you've got a 20-story skyscraper or a $200,000 house on your property, for those minerals to be economically exploitable, you've got to be sitting on a pretty rich gold mine or gravel pit."

"That's the game," he said. "As long as property rights in this state and others are identified as a bundle of rights, that's the way life is. You've got mineral rights and within those you have oil and gas rights. And you've also got water rights, hunting and fishing rights, access rights and surface rights.

"That's how we ended up with these split estates."

The problem is, of course, that some landowners didn't realize until now that someone else owned the minerals beneath their homes, Mitchell said. And, more importantly, they didn't realize that the mineral rights were superior. A surface owner cannot block a mineral rights owner from extracting minerals.

Still, he said, a long list of potential buyers has already told Canyon Resources that they're not interested. Two years ago, the company even offered the rights to environmental groups, which saw so little potential for development that they, too, declined.

Plum Creek Timber Co., which owns 70 percent of the surface rights affected by the upcoming auction, said no to an earlier entreaty, Mitchell said. The company hasn't yet decided how to respond to the latest offer, a company spokesman said last week.

"Really," Mitchell said, "what are the chances that there's some value here that hasn't been found, developed or discovered by now? It seems pretty slim."

Worse than that, said Elliot, the state senator. "Darn little."

"I want to eliminate the fear factor," Elliot said. "The tactic that Canyon is using is reprehensible. The likelihood of these lands ever being developed is highly improbable. If you offer them $5 an acre, that's $1.66 more than they've ever gotten."

"Talk about corporate ethics," he said. "Here's the corporate ethics of a mining company: 'If we scare the pants off people, we might raise a few bucks.' "

Auction information

Canyon Resources Corp. will sell 900,000 acres of mineral rights, as well as land parcels in western Montana and at the Kendall mine, at an auction set for 11:30 a.m. Tuesday, Aug. 6. The auction will occur simultaneously at the Yogo Inn in Lewistown and at the Holiday Inn Parkside in Missoula. Bidder information packets are available by contacting the project manager at (312) 630-0915.

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Mineral rights don't include hydrocarbons

by Daryl Gadbow, Missoulian, July 27, 2002

http://www.missoulian.com/articles/2002/07/27/export15213.txt

Analyst says rights to gas, oil, rock and gravel not part of public auction

The 900,000 acres of mineral rights in western Montana that Canyon Resources Corp. is trying to sell in a public auction Aug. 6 do not include the ownership rights to rock, gravel, gas, oil or other hydrocarbon substances.

The mineral rights Canyon Resources are selling are restricted to the rights to mine ores and minerals only, according to Larry Mitchell, a research analyst in the Montana Legislature's Environmental Policy Office.

In the Aug. 6 auction, which will take place simultaneously at 11:30 a.m. at the Holiday Inn Parkside in Missoula and Yogo Inn in Lewistown, Canyon Resources' mineral rights will be packaged in 82 parcels ranging in size from 700 acres to 26,000 acres. The minimum bid will be $5 an acre.

However, as many as 3,000 individual landowners have until Aug. 5 to "pre-empt" the sale by purchasing the mineral rights beneath their own property for up to $500 an acre.

In an interview with the Missoulian last month, Mitchell said landowners have little reason to fear that their property would be used for a new hard-rock mine. But he suggested landowners might have to worry more about a gravel pit, "as mineral rights include gravel, talc and peat."

"That was an error," Mitchell said Friday. "You can't buy rights to gravel from Canyon Resources. Someone else owns them."

Just who that owner might be, he said, is hard to tell.

Arco, the company that sold Canyon Resources the mineral mining rights, retained the gas and oil rights to much of the acreage involved in the auction. Arco also owns some of the rock and gravel rights to the acreage. In some cases, Arco has sold the rock, gravel, gas and oil rights to someone else.

No matter who owns the rights, however, they must compensate the surface landowner for any damage caused to the property by retrieving the mineral or other material, Mitchell said.

He recommends that landowners check their deeds and titles to find out for sure what property and rights they own and what they don't.

Canyon Resources has tried for years to sell the 900,000 acres of mineral rights in western Montana, but has yet to find a buyer. Plum Creek Timber Co., which owns 70 percent of the surface rights affected by the upcoming auction, has turned down previous offers to purchase the mineral rights from Canyon Resources.

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