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Mining News: When the dust settles… AMA director Borell predicts Alaska will become more attractive to mining companies and reflects on important events of 2008 Shane Lasley North of 60 Mining News
Alaska’s mining industry captured the attention, not only of Alaskans but also the country during the past year when a controversy over the proposed Pebble Project in Southwest Alaska bubbled to the surface. Supporters and opponents of a ballot initiative aimed at blocking the mining venture squared off in a vocal and often strident campaign that made headlines nationwide.
Alaska Miners Association director Steve Borell cited the contest over development the world-class copper-gold-molybdenum deposit as the state mining industry’s hottest issue of the year. Borell reviewed issues and challenges facing the industry during the past year in a recent interview.
Though the Kensington Project near Juneau was not as widely publicized, an anticipated U.S. Supreme Court ruling on the potential gold mine’s tailings permits will set a precedent that is destined to affect mine permitting across the nation, Borell told Mining News.
A financial crisis that rivals the Great Depression, meanwhile, has dominated headlines in recent weeks, but turmoil in the financial markets hit the mining industry several months now. Zinc is selling for half of prices buyers paid a year ago, and junior mining stocks have tumbled over the past 12 months.
The mining industry is divided into three categories: Large mines, small placers and exploration projects. To talk about Alaska’s mining industry, Borell said, “You have to take a snapshot of all three separately.”
The youngest and oldest “large mines” The number of large-scale operating mines rose to six when NovaGold Resources Inc. began operations at its Rock Creek gold mine on the outskirts of Nome a few weeks ago. After a lengthy court battle with environmentalists followed by complications associated with record snowfall amounts over the past winter, NovaGold fired up the plant on Sept. 19.
“In Alaska, a mine with 100 people is a big mine, in the rest of the world that is a real small mine,” Borell said.
The mining association director said he is thankful to have Rock Creek on Alaska’s large-mine roster; 20 years ago, Alaska only had one large-scale mine, he explained.
The Usibelli Coal Mine, a fourth generation family-owned Alaska business in Healy that has been in production for 65 years, was that first mine. The Interior mine, too, has only about 95 employees.
In September, Usibelli said it would send two trial shipments of coal this year to new Pacific Rim customers. While most of Usibelli’s coal output is used for power generation within Alaska, the coal producer’s exports are expected to top 500,000 metric tons in 2008, nearly a third of its annual production.
Lower zinc prices will hurt revenues When it comes to the large operating mines, Borell said, “The real crunch is going to be zinc prices going down and that is going to hurt. It will hurt both Red Dog and Greens Creek and that will make the biggest difference on revenues to the state.”
Due to strong zinc prices in 2007, Teck Resources Ltd. paid $58 million in royalty payments to its partner NANA Native regional corporation and $230 million in federal and state taxes from production at the Red Dog Mine in Northwest Alaska. Over the past year, zinc prices have declined steadily; a pound of zinc is only selling for about half of its $1.30 a pound price a year ago.
Earlier this year Hecla Mining Co., which owned a 29.7 percent stake in the Greens Creek Mine on Admiralty Island, bought out partner Rio Tinto’s 70.3 percent interest, giving Hecla 100 percent ownership of the mine.
The Greens Creek Mine, located about 16 miles south of Juneau, is known for its silver production, but zinc, lead and gold are also recovered from the mine. During the second-quarter of 2008 Hecla produced about 2.4 million ounces of silver, 15,257 ounces of gold, 16,000 tons of zinc, and 9,000 tons of lead at a relatively low average cash cost of $3.43 per ounce of silver, after by-product credits.
Coeur awaits high court ruling While it is not yet an operating mine, Coeur d’Alene Mines Corp.’s Kensington project has received all necessary permits and completed construction of all facilities needed to mine the gold deposit except for tailing storage. The construction of the tailings facility is pending a decision The construction of the tailings facility is pending a decision by the U.S. Supreme Court on a challenge by environmental groups to tailings permits regulators awarded the company.
“If this is not decided the right way, this has long- term ramifications across the country and in Alaska, in particular,” Borell said. “I am so pleased that Coeur has stood up to the fight, because if they had not continued the case, it would have stayed with the Ninth Circuit (Court) decision. This is important for the entire country.”
Coeur has spent more than $230 million on the Kensington Project, and expects the high court to hear the case in early 2009. A favorable decision early in the year should allow for production by year’s end. Once in production, Coeur expects to recover about 150,000 ounces of gold per year from the underground mine.
Because of delays in getting approval of its tailings storage plan, Coeur has reduced its work force at Kensington. The most recent labor reduction occurred in early October when the company laid off about half of its remaining 82 employees. Once in production, the company anticipates paying out about $16 million in annual wages and benefits to some 200 workers at the mine.
Explorers hit hard Months before the “financial crisis” made headlines, junior exploration companies were feeling the effects of investors’ fading confidence in the stock market. Some juniors exploring in Alaska have seen their stock values fall as much as 90 percent in the past six months.
“What the large mines are going to be able to do is going to be affected by the price of metals, and it is going to be affected by the economy, but not as severely as the exploration companies. The exploration guys are the ones that are really going to get hit. They have had a very hard time raising money,” Borell explained.
While the current financial situation has forced developers of many early-stage exploration projects to scale back, advanced stage projects have continued at expected levels this year.
NovaGold Resources, for example, has “spun-out” its early-stage exploration properties in Alaska and shifted its focus to its core assets. At the Donlin Creek gold project in Southwest Alaska, NovaGold and partner Barrick Gold Corp. have completed a 21,000-meter drill program originally budgeted for 2008 and have expanded into a Phase-2 program for a total of more than 32,000 meters of drilling for the year.
Most other junior exploration companies have taken a similar approach; concentrating their efforts and capital on their flagship properties.
In addition, some exploration companies are choosing to merge with one or more of their fellow juniors. Niblack Mining Corp., for example, combined operations with Committee Bay Resources Ltd.
The merger provided the capital for Niblack to continue underground development and exploration at its high-grade gold/copper-rich volcanogenic massive sulfide prospect on Prince of Wales Island in Southeast Alaska, and provided the well funded Committee Bay Resources with a property to develop when it is too cold to explore its flagship asset in northern Nunavut, Canada.
Junior explorers also have reduced costs and risk on exploration projects by entering into joint venture agreements with others. Full Metal Minerals has joint venture agreements with seven different companies – including Kinross Gold, Freeport McMoRan and BHP Billiton – on properties spanning Alaska.
World-renowned Pebble The Pebble Project, often described as a world-class copper deposit, also could be described as world-renowned after the past year’s media coverage of the controversial project.
The controversy arose because a multimillionaire, whose wilderness getaway is near the Pebble deposit, took issue with plans for the mining project. Pebble is also located within the same watershed as the Bristol Bay salmon fisheries.
Opponents of the Pebble Project, in an attempt to prevent development of the giant copper prospect, organized a citizen’s initiative to go on Alaska’s primary ballot. Because Ballot Measure 4 threatened not only Pebble but all large-scale hardrock mining in the state, Alaska’s mining industry united against it. Alaska’s citizens sided with mining when they voted down the ballot measure in August.
The Pebble Partnership, a 50/50 partnership between Northern Dynasty Minerals Ltd. and Anglo American plc, has continued to carry out drilling and baseline studies at the project in preparation of a proposed development plan expected to be released next year.
Borell told Mining News that he would like more Alaskans to see Pebble firsthand. He believes that once people get to witness what the Pebble Partnership is doing at the project site, they will have more confidence in the development.
Placer mining; a lead to the lode Placer mining in Alaska is not as prominent as it has been in the past. Borell said this is a characteristic of mining around the world. The placers – which can typically be produced with conventional means and for less expense than hardrock mining – are mined first and then the source of those placers are sought out.
The largest operating placer gold mine in Alaska is Silverado’s Nolan Creek Mine. Crews work through the winter mining frozen gravels from underground. Located 280 miles north of Fairbanks, the gold-bearing gravels at Nolan Creek do not thaw until mid-June. During the ensuing three months, crews work around the clock, sluicing as much ore as possible before subfreezing temperatures return to the Arctic.
The placer gold recovered from the property is about 75 percent nuggets larger than 0.1 ounce. The largest nugget recovered at Nolan Creek was 41 ounces.
Silverado is searching for the lode source of the huge nuggets it finds in the frozen gravels. Because of the crystalline nature and other characteristics of some of the placer gold recovered the company believes it is close to the lode source.
Vancouver, B.C.-based Silverado concluded that the large nuggets it is finding in the valley originated in the five-mile-long Solomon shear zone, which runs along the east side of Nolan Creek. The Workman’s Bench, which adjoins Pringle Bench, is currently being developed as the prime target for gold and antimony resources.
The company has tunneled beyond the placer deposit into an area under Workman’s Bench where it believes the lode source is located. The placer miner turned hardrock explorer says drilling is being conducted on the Workmen’s Bench to determine whether the company can confidently proceed with additional test mining.
Goldrich Mining Co., formerly known as Little Squaw Mining Co., also has Arctic placer mining claims that it is exploring for its lode potential. The Spokane, Wash.-based company controls 14,993 acres in mining claims covering most of the Chandalar Mining District on the southern slope of the Brooks Range about 190 miles north of Fairbanks.
Recent drilling at Little Squaw Creek indicates that about 8.8 million cubic yards of pay gravel holds about 216,602 ounces of gold and the company has been searching for the lode source of that gold.
The property hosts the Mikado Lode, a historically mined hardrock deposit. Goldrich says the Chandalar District has not experienced any kind of exploration study utilizing modern exploration techniques, and many of the source lodes for the rich placer gold deposits remain undiscovered.
Goldrich has begun exploring the Chandalar property for its lode potential.
When the dust settles About 70 percent of the 39.4 million troy ounces of gold recovered in Alaska from 1880 through the end of 2006 has been placer. While placer gold has proven to be abundant in nearly every region of Alaska, only three modern operations are mining the lode source of the placer.
Alaska is rich not only in its gold potential, but also abundant prospective and proven deposits of copper, coal, zinc, uranium, silver, platinum, lead and molybdenum. Major deposits have been discovered in every region of the state.
Borell said he is confident that with growing uncertainty worldwide, Alaska will become increasingly attractive to mining companies.
Talking about the current financial situation, Borell said, “My personal opinion is; yes that is tough. It is going to hurt everybody. It is one more layer of uncertainty and is one more reason – with the mounting uncertainties elsewhere – people are going to come to Alaska. When the dust settles, people are going to look at Alaska even harder.”
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