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OLD, NEW MINERS SEEK GOLDEN SNITCH

By Thom Calandra, Editor
CBS.MarketWatch.com
Tuesday, October 1, 2002

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DENVER -- Precious metal miners are chasing the golden
snitch: the perfect mine at the perfect price.

Trouble is, few of the executives at the Mining Investment
Forum are wizards who can assure fund managers their
favorite metal will achieve the perfect price. That perfect
price is anywhere north of what gold, at $323 an ounce,
trades for today.

quot;Most miners are not expert about the price of gold,quot;says
Richard DeVoto, a former geology professor at the
Colorado School of Mines and longtime chief executive
of Canyon Resources (CAU). quot;I'll take a shot and say the
secular bear market in stocks will trigger more gold rallies.quot;

DeVoto, at the age of 67, has been traveling in mining
circles most of his life. His story demonstrates that grizzled
veterans of the gold trade have a lasting belief in their
product, even if only 20 percent of the demand for the
precious metal comes from investors.

DeVoto started Canyon Resources out of his back
pocket in 1979. Trim and fit, DeVoto says he has
climbed 54 peaks in the state of Colorado, all of them
14,000 feet or higher.

But the peak in front of him is probably one he may not
hurdle for several years: his company is suing in court
to challenge Montana voters' 1998 resolution prohibiting
new gold mines in that Western state.

quot;Our legal constraint on this asset makes us very much
a contrarian play,quot; DeVoto said in an interview Monday.
Canyon Resources' McDonald Mine could have as much
as 10 million ounces of gold. He calls it the largest unmined
deposit in North America. Voters by a 52-48 margin put the
kibosh on the company's efforts at turning itself into a
mid-sized producer of Montana gold, with projections of
400,000 ounces a year pulled from the ground.

Canyon Resources is suing the state of Montana as it
continues the permitting process for the state-owned
land, which the company leases. DeVoto's lawsuits,
in federal and state court, demonstrate that gold isn't
just about the gold price.

Environmental and legal hurdles are as formidable as
the 50-to-1 odds of sinking a successful test-drill into
rock. DeVoto draws a parallel between the McDonald
gold deposits in Montana and the Las Cristinas deposits
in Venezuela, caught in a sandstorm of political intrigue
and cross-company fire, with tiny Crystallex International
(KRY) claiming it has the all-clear signal at a resource
estimated at 15 million ounces.

Crystallex, presenting at the Mining Investment Forum in
Denver, said Monday it had secured $15 million and
taken possession of the Las Cristinas properties that
were under Venezuela government supervision. In a move
to convince investors that it has won a 5-year battle to
control the deposits, Crystallex CEO Marc Oppenheimer
handed out copies of his company's agreement with the
government.

quot;I have been making that parallel, between our mine and
Las Cristinas, for years,quot; DeVoto said. quot;Ultimately, Las
Cristinas will be developed. And ultimately, I feel ours will
be too.quot;

DeVoto says he realizes any positive legal developments
for Canyon Resources in its Montana wrangling could be
a windfall for his small company's shares, which trade on
the American Stock Exchange.

quot;We used to be $18 a share,quot; he said about Canyon
Resources stock, which trades closer to $2 these days.
quot;If we come through this OK, this is a 20-1 payoff, maybe
more.quot;

DeVoto notes the annual income in Montana is $13,000
a year. quot;These are tough times, and this is a $1 billion
asset in the ground. No other company is going to come
in the state looking for gold.quot;

A senior Merrill Lynch portfolio manager says he's
seeing strong demand for gold investments.

Speaking at the Denver Gold Group's Mining Investment
Forum, managing director Graham Birch of Merrill Lynch
Investment Managers said about $150 million of new
money came into his unit's London-based gold funds in
the month of September. Birch manages about $1 billion
in the natural resources sector for Merrill.

Cumulative money flow into the firm's gold investments,
largely gold mining companies, has been creeping up
since early 2001, when about $300 million was flowing
out of the London-based Merrill gold funds. Birch said
he is seeing an increase in the share of money from
large investors and an increased number of participants
looking to diversify their holdings.

quot;I think it's crucial that asset allocators start to recommend
gold. That's crucial,quot; he said.

As it stands, gold (in its physical form) often is absent from
the traditional asset allocation lists of the world's largest
investment banks. Institutions such as pension funds that
want to buy physical gold on behalf of clients must
overcome custodial challenges and a herd mentality that
still favors paper investments, even with stock markets
across the world approaching six-year lows.

quot;Gold (in past years) became a pariah investment,quot; said
Birch. quot;It's not in any benchmarks.quot;

Speaking to about 350 fund managers and mining
executives, Birch said just $25 billion of new money into
bullion would about equal one year's total global
production of gold. In this year's first six months, against
a backdrop of a weak economy and fiscal turbulence,
investment demand for gold doubled to $2 billion, Birch
said, using figures from Gold Field Mineral Services.

Related to that, a number of companies at the Denver
forum are reporting new shareholders, some individual
and others institutional, of their gold mining shares, the
most profitable investment class in many of the world's
stock markets this year.

quot;It has come to the point where it is safe to talk about
gold to the kids,quot; said Chris Thompson, chairman of
the World Gold Council, a trade group. Thompson, who
is also chairman of one of the world's largest gold
companies, Gold Fields (GFI) of South Africa,
acknowledges it is not easy for investors, large and
small, to buy gold. quot;So few people buy it,quot; he said.

So they instead choose gold mining shares. Thompson
and his chief executive, Ian Cockerill, said the company's
shareholder base in North America is now 27,000, up from
17,000 four months ago. Gold Fields in May listed its shares
as American Depositary Receipts on the New York Stock
Exchange.

If gold executives have their way, investors soon may have
more choices than mining shares. Several groups, including
the gold council, are said to be working on instruments that
would act as pure proxies for physical gold, perhaps in the
form of an exchange-traded fund that changes hands in real
time, like an equity.

On Monday, GoldMoney.com said it is working on a
Canada-traded security that would allow instantaneous
gold ownership. Called the XGG, quot;It would be the first listed
gold bullion security,quot; said GoldMoney.com Chairman
Clifford Press.