Mining News: New power line may carry Alaska power

Conduit could generate billions in capital investment for northwest region mines, economy and transmit electricity to Lower 48

Rose Ragsdale

For Mining News

The Northwest Transmission Line along Highway 37 is once again on the front burner in British Columbia, and development of the 517-kilometer-long, or 321-mile-long, power line could provide easier access to Lower 48 markets for power generated in Alaska.

British Columbia has resumed the environmental assessment process and First Nations consultation required for the project, following an announcement by the Canadian province’s Premier Gordon Campbell Sept. 26 that the power project was back on track.

The B.C. government envisions the power line carrying 287 kilovolts and extending 335 kilometers, or 208 miles, from Terrace to Meziadin Junction and northward to Bob Quinn Lake. It would provide access to the electricity grid, while supporting the economic diversification of the area. Currently, the electrical power grid along Highway 37 ends at Meziadin Junction to the north and Stewart to the west.

“The electrification of Highway 37 is an important part of the ongoing economic diversification of rural British Columbia,” Campbell said in his annual Union of B.C. Municipalities address.

“It builds on the success we’re already seeing in the Northwest, including the new container port in Prince Rupert, the resurgence of the mining industry and the potential new Alcan smelter. We’re making the investments needed now to continue that growth and help communities seize opportunities to diversify and create jobs,” the premier said.

The environmental assessment is the first stage of the project.

“The communities in the North have a vision to further open their region to economic opportunities on a global scale, and today I want them to know that we share their vision and we are going to pursue the Northwest Transmission Line,” said Campbell.

He described the move as the first step towards building a power line that the mining industry has long maintained is vital to successful development of the northwestern quarter of the province.

Considerable promise in power line

Demand for power in Northwest British Columbia is driven largely by the mining sector, independent power projects and regional municipality growth, with additional opportunities to revitalize the tourism sector.

“We have the potential to create more than 10,000 jobs in a region where unemployment is high,” said Janine North, CEO of the Northern Development Initiative Trust. “Electricity can spur economic development through mining, tourism, clean power, transportation and supply industries in the northwest.”

B.C. gross mining revenue has nearly doubled during the past seven years, from C$3.6 billion to nearly C$7 billion, and 10 new mines have opened in that time. Investment in mineral exploration soared to a record high of nearly C$416 million in 2007, up 1,300 percent from 2001.

But little of this development has occurred in the mountainous, but scenic, northwestern corner of the province.

Public-private cooperation essential

“The findings of the report provide a strong case for First Nations, the provincial government, industry and communities to work together to make the power line a reality,” he said.

Such multi-party cooperation will be needed for the project, which is estimated to cost about C$400 million, Campbell said.

The British Columbia government is seeking a partnership with members of the private sector to fund the project.

Campbell, meanwhile, vowed to invest about C$10 million to immediately restart the environmental assessment process for the power line. The environmental assessment must be completed before construction can begin.

The Tahltan Nation and Gitxsan Hereditary Chiefs have long expressed support for the power line and the joint-venture opportunities it could generate for the First Nations.

“However, first there must be a process that considers all potential social, cultural and environmental impacts,” said Bill Adsit, president of the Tahltan Nation Development Corp.

The mining sector envisions construction of a 517-kilometer, or 321-mile, line with an estimated cost of about $600 million. It would generate more than 2,000 megawatts of electricity annually, and also could be fed power from other sources in the northwest, including alternative energy projects in British Columbia, Alaska and the Yukon Territory.

“There is significant potential for power generation in the region, from hydro and wind projects to geothermal,” said Gratton. “The power line could reduce greenhouse gas emissions as communities are transitioned away from diesel generators.”

The study points out that development of new mines in the region would be dependent on a number of factors, including completion of feasibility studies, continued strength of commodity prices and availability of affordable electric power.

Potential power sources proliferate

Separate discussions with developers active in the area indicate that 700 megawatts of small hydro are currently being investigated.

Northwestern British Columbia also has a substantial wind resource. While many of these resources are atop difficult and often glacier-clad terrain on the coast, several projects further inland, including the area of Level Mountain northwest of Dease Lake, with up to 1,500 megawatts of wind power potential are being actively investigated.

The mining association also noted additional potential for geothermal power.

Alaska could make connection

Though the mining association declined to comment on the potential of such development, it noted that a transmission line along Highway 37 would facilitate easier connection to Alaska and the Yukon, the southeast region of which has prospective independent power provider developments.

The study also said that independent power developers in southeast Alaska have noted two key potential benefits for British Columbia, should a connection between Alaska and BC ever be constructed: Back-up supply during the winter months, when B.C. run-of-river generation is low and the potential to profit from supply of additional energy to the Lower 48.

Alaska Power & Telephone, for example, recently began the permitting process for a 75-megawatt hydroelectric project in the Soule River about 10 miles southeast of Hyder. Designed to be a peaking facility, it would generate up to 270 GWh per year, and could provide electricity West Coast energy markets transmitted via British Columbia’s power grid. AP&T is a utility that serves eastern Alaska communities throughout Southeast and the Interior with electricity and telecommunication services.

This full study is available online at www.highway37.com.

Northwest B.C. mining opportunities at stake

Proposed Highway 37 power transmission line could benefit numerous mine projects currently in various stages of development

Bankable feasibility study completed

Project name: Red Chris

Developer: Imperial Metals Corp.

Direct employees: 250

Indirect jobs (est. 3:1): 750

Capital costs: C$400 million

Annual revenue: C$265.5 million

Annual operating costs: C$137.8 million

Yearly tax: C$38.1 million

Electricity charge: C$11.3 million

The Red Chris project, located 20 kilometers, or about 12 miles, southeast of the village of Iskut, is owned by Imperial Metals, which acquired the porphyry copper project from B.C. Metals Corp. in early 2007 for C$65 million. Red Chris would be developed as an open pit mine and possibly a later supplement to mill feed with higher grade underground ore.

Further exploration is under way while a solution is sought to supply the future mine with power. Red Chris needs an estimated 37 megawatts of power for operations and less than 10MW during construction. The estimated mine life is 25 years.

A 138 kilovolt line could potentially be built in partnership with another mining project or an independent power producer. Capital costs are currently estimated by Imperial at about C$400 million, assuming a transmission line runs from the project to Iskut. Construction would take an estimated 18 to 24 months.

Bankable feasibility study under way

Project names: Galore Creek, Mount Klappan

Developers: Teck Resources Ltd./NovaGold Resources Inc., Fortune Minerals Ltd.

Direct employees: 923

Indirect jobs (est. 3:1): 2,769

Capital costs: C$3.4 billion

Annual revenue: C$905.8 million

Annual operating costs: C$262.4 million (excluding Mount Klappan)

Yearly tax: C$81.3 million (excluding Mount Klappan)

Electricity charge: C$33.1 million

Galore Creek is located about 70 kilometers, or 44 miles, west of Highway 37 and 150 kilometers, 95 miles, northeast of Stewart. After a November 2007 announcement regarding an increase in capital costs, the giant copper-gold project has undergone a period of review and optimization that is expected to reach an initial conclusion in the fall of 2008. Assuming a favorable outcome, a revised feasibility study and project execution plan would be prepared in 6-12 months to confirm the project’s viability. After that, proposed modifications to the project’s previously approved design will require another one to three years.

Galore Creek’s potential power requirement is estimated at 100-145 megawatts during operations with a mine life of 18-20 years. It would require either a mostly dedicated 138 kilovolt line or a 287 kV line.

Mount Klappan, 150 kilometers, or 95 miles, northeast of Stewart and 330 kilometers, or about 210 miles, northeast of Prince Rupert, contains a very large resource of high-rank anthracite coal in four deposits straddling the BC Railway right-of-way southeast of the Red Chris Project. Mount Klappan’s Lost Fox deposit was assessed in a positive bankable feasibility study in 2005, that indicated a greater than 20-year mine life at an annual production rate of 3 million metric tons of pulverized coal. Fortune has assessed a number of transportation alternatives, including rail transport of product to the port of Prince Rupert, truck transport of product to the port of Stewart and slurry pipeline transport of product to Stewart or Prince Rupert. Fortune is in the environmental assessment process and expects to submit a final project application in late 2008.

At the 3 Mt annual production rate, the Mount Klappan project would require some 8-10 megawatts of power, under Fortune’s current development scenario. However, power consumption could be substantially higher if line power became available.

Pre-feasibility studies under way

Developers: Copper Fox Metals Inc., Hard Creek Nickel Corp., Sherwood Copper Corp.

Direct employees: 600 (excluding Turnagain)

Indirect jobs (est. 3:1): 1,800 (excluding Turnagain)

Capital costs: C$2.99 billion

Annual revenue: C$782.4 million

Annual operating costs: C$340.4 million

Yearly tax: C$123.4 million (excluding Kutcho)

Electricity charge: C$55.5 million

The Schaft Creek project is located 45 kilometers, about 27 miles, west of the Stewart-Cassiar Highway and 60 kilometers, about 37 miles, south of Telegraph Creek. Copper Fox Metals has earned a 70 percent interest in the copper-rich polymetallic Schaft Creek Project, and has the right to acquire up to 93.4 percent interest in the project pursuant to an option agreement with Teck. At feasibility Teck can exercise certain back-in rights in order to participate in the project in partnership. A preliminary economic assessment study released in early 2008 indicates the potential to develop an open-pit mine with a projected daily milling rate of 65,000 metric tons and a mine life of more than 31 years. Copper Fox is pursuing a pre-feasibility study for a 100,000 t/d operation, submitted an environmental assessment application in 2008 and is targeting production by 2011 at Schaft Creek. Capital costs are estimated at $1.43 billion.

Power requirements are estimated at 93 megawatts (140MW under a 100,000t/d operation) with a mine life of 31 years.

The Turnagain project is located 70 kilometers east of Dease Lake and north of Turnagain River. In December 2007, Hard Creek Nickel completed a preliminary assessment study for the Turnagain nickel-cobalt-platinum project that considered a 50,000 t/d operation over a 29-year mine life. The construction schedule was estimated at 24 months with initial capital costs of C$1.38 billion. Future studies were expected to focus on a 100,000 t/d operation to benefit from economies of scale. Further exploration was planned for summer 2008. Hard Creek Nickel also began environmental baseline acquisition studies with a view to entering the provincial and federal environmental assessment processes consistent with a 2012 startup. The metallurgy of the deposits is expected to require a hydrometallurgical processing route.

Power requirements are estimated at 78 megawatts (105MW in a 100,000 t/d operation) with a mine life of 29 years.

The Kutcho project, 120 kilometers east of Dease Lake and 330 kilometers north of Smithers, completed a pre-feasibility study that evaluated the potential development of the Kutcho deposit in September 2007. In June 2008 Sherwood Copper acquired the project and released the results of a preliminary economic assessment that considered a smaller-scale, higher return development concept. The study considered a 4,000 t/d operation for an 8-year mine life and capital costs estimated at C$183 million. A pre-feasibility study is now under way along with an exploration program to support the studies.

Kutcho’s estimated power requirement is 10-15 megawatts. The pre-feasibility study assumed diesel-generated power.

Earlier stages

Developers: Canadian Gold Hunter Corp., Silver Standard Resources Inc., Seabridge Gold Inc., Skyline Gold Corp.

Direct employees: 1,000

Indirect jobs (est. 3:1): 3,000

Capital costs: C$3.8 billion

Electricity charge: C$68.7 million

The GJ project is located 200 kilometers, or 124 miles, north of Stewart. In March 2007, Canadian Gold Hunter reported a significant, lower-grade copper-gold resource on the property. Additional drilling, a new resource calculation and an economic evaluation of the Donnelly Zone were expected in 2008. A preliminary assumption regarding mine life for this project based on the resource size and suggested production rate is 15 years.

A preliminary estimate of the project’s power requirement is 37 megawatts. GJ is located only about 10 kilometers from Highway 37.

The Snowfield project is located 65 kilometers, or about 40 miles, north of Stewart. In March 2008, Silver Standard Resources Inc. reported an increase in the measured and indicated gold-copper resource at the Snowfield project to 3.1 million ounces. Silver Standard planned to follow-up the 2007 program with a four-drill, 20,000-meter exploration program in 2008. The earliest expected start-up date is 2015, with a preliminary estimated mine life of 10 years.

A preliminary estimate of power required for the project is 37 megawatts.

The KSM project is located 20 kilometers, or about 12 miles, southeast of the Eskay Creek mine. In February 2008 Seabridge Gold Inc. published a NI 43-101 resource estimate for the Kerr and Sulphurets zones which confirmed total resources of 29.6 million ounces of gold and more than 5.1 billion pounds of copper at KSM. In April 2008, Seabridge filed a project description with the B.C. environmental regulators, and a preliminary economic assessment is scheduled for completion by the end of 2008. Seabridge also planned a 2008 drill program and began environmental studies required for the permitting process.

The project falls within and adjacent to traditional territories of two or more First Nations. An access road to the proposed plant site, along which a transmission spur line is expected to run, is 12 kilometers, or about 7.5 miles, long. The earliest expected start-up date is 2015 and a preliminary estimate of mine life is 25 years.

The estimated power requirement for KSM is 150 megawatts. The KSM deposits are adjacent to Silver Standard’s Snowfield project, which offers potential infrastructure synergies and savings for developers of the two projects.

The Bronson project is located 110 kilometers, or about 68 miles, northwest of Stewart. In May 2007 Skyline Gold Corp. reported completion of an updated measured and indicated resource at Bronson containing significant gold, silver, copper and molybdenum. In August 2007 the company began a preliminary economic assessment, including conceptual pit plans, a mine schedule, process plant design, construction cost estimate, mining and processing cost estimates. The preliminary estimate of the mine life for Bronson is said to be 15 years.

The project’s estimated power requirement is 20 megawatts.