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Mining News: ISER report: Mining sector pays its way Alaska loses longtime respected geologist Chuck Hawley; despite flat price, gold finishes 2015 among year’s best investments Curt Freeman For Mining News
Although news from the mining industry is generally limited this time of year, several items of import over the past month bear discussion. Alaska suffered a tragedy with the recent passing of mineral industry giant Chuck Hawley, one of Alaska’s most talented and respected geologists.
Although Chuck loved the mineral exploration game, he was far more than a geologist to many of us and to the state. His plus-50-year love affair with Alaska spanned some of the state’s most tumultuous years and his expertise, insight and opinions were widely and often sought by industry, government and academia. To me, he was a mentor that, during a low point in the mining industry in the early 1980s, counseled me not to take a job I had been offered in the oil patch. His well-reasoned advice helped me avoid working for the “dark side”, a decision I have never regretted.
On the more uplifting side, a recent publication by University of Alaska Anchorage’s Institute of Social and Economic Research brought to light some surprisingly bright news regarding the costs and benefits of administering the mining industry here in Alaska. Authored by Bob Leoffler and Steve Colt and titled, “Fiscal Effects of Commercial Fishing, Mining and Tourism,” the research reviewed the State of Alaska’s costs of administering three economic engines as well as the revenue generated for state coffers by these industries. The mining industry is the only one of the three industries studied that generates more revenue to the state than it costs to administer. Wait. What? A profit center inside the State of Alaska government? Yes, the mining industry costs the state about $15 million per year to administer, while it contributes more than $96 million per year in revenue to the state. Compare that with almost $97 million and $55 million in costs to administer the fishing and tourism industries, respectively, versus revenue generation of $70 million and $54 million, respectively, for those same industries.
One last thing to get us cranked up for 2016: A recent article in the Fairbanks Daily News-Miner compared returns from various financial instruments over the course of 2015 and the results surprised me. If you invested $1,000 at the end of 2014, the only two investments that gave you a positive return for calendar year 2015 were gold, which gave you $1,045 back, and investment grade bonds which gave you $1,005 back. Everything else returned less than the $1,000 you invested, including utility stocks, health care stocks, copper, S&P 500 stocks, Asian stocks, oil, tech stocks, etc. So despite all the gassing and posturing by the financial talking heads and after more than 7,000 years since it was first used as a store of value by humankind, gold is still your best investment!
Western Alaska Teck Alaska, operator of the Red Dog mine, filed a complaint against the Northwest Arctic Borough over a new severance tax that the latter recently tried to impose. The company estimates the new tax could more than triple the mine’s annual payments as of 2016. The company had already been operating under an negotiated agreement to pay taxes, which averaged payments to the Borough of about $11.5 million per year over the past five years, a rate more than double the Borough tax rate for any other Alaskan mine. If enacted, the new tax would increase the payment to an estimated $30-40 million per year over the next five years. The complaint filed by Teck requests an injunction against enforcement of the severance tax and a requirement for the Borough to meet with Teck to negotiate a new payment agreement.
Interior Alaska Freegold Ventures Ltd. is pleased to announce positive results of its preliminary economic assessment prepared in accordance with National Instrument 43101 guidelines for its 100 percent-owned Golden Summit project located 32 kilometers (20 miles) northeast of Fairbanks.
The PEA evaluates a two-phase, 24-year open pit mine generating two gold ore streams, one from oxide ore, the other from sulfide ore, each operating at 10,000 metric tons per day. Using a cutoff grade of 0.3 grams per metric ton gold, the PEA was based on in-pit indicated oxide resources of 345,000 ounces grading 0.66 g/t gold, in-pit inferred oxide resources of 183,000 oz. grading 0.59 g/t gold, in-pit indicated sulfide resources of 1,018,000 oz. grading 0.70 g/t gold and in-pit inferred sulfide resources of 1,401,000 oz. grading 0.70 g/t gold. Processing operations for the oxide and sulfide mineralized materials are heap leach and bioxidation, respectively. Based on a gold price of $1,300/oz., the PEA concluded that the operation would have a post-tax net present value, calculated at 5 percent, of $188 million and an internal rate of return on investment of 19.6 percent. Over its 24-year mine life, it would have average production of 96,000 oz. per year with peak annual gold production of 158,000 oz., generating a total of 2,358,000 oz. of bullion over its operating life. The project has a total cash operating cost estimated at $842/oz., including royalties, refining and transport. Initial and sustaining capital costs, including contingency, were estimated at $88 million and $348 million, respectively, with a payback of 3.3 years post-tax. Gold recovery was estimated at 80 percent for oxide ore processed by heap leaching in years 1 through 14, and 90 percent for sulfide ore treated by bioxidation followed by carbon in leach cyanide recovery in years nine through 24. The truck and shovel operation has been scheduled to provide up to 3.5 million metric tons per year of each ore type. Primary mine production is achieved using 64-metric-ton payload rope shovels along with 227-metric-ton payload haul trucks. Gold mineralization on the project occurs in three main forms, including 1) intrusive-hosted sulfide-quartz stockwork veinlets (such as the Dolphin gold deposit), 2) auriferous sulfide-quartz veins (exploited by historic underground mines), and 3) shear-hosted gold-bearing veinlets. All three types are considered to be part of a large-scale intrusive-related gold system. Freegold made the initial discovery of widespread gold mineralization in the Dolphin stock during the initial drilling campaign on the prospect in 1995, however resource definition drilling did not commence until 2011. A total of 87 holes, totaling 24,156 meters, have been drilled within the resource area since 2011.The company indicated that it will begin advancing the project to preliminary feasibility-level, looking at several value-enhancing opportunities, including oxide resource expansion, leased mine equipment, improved metallurgical performance through additional testing, liquid natural gas, local labor surveys, electrical power generation equipment, and local power contracts. Additional drilling, metallurgical testing, and environmental/permitting activities will be required to complete the preliminary feasibility study.
On Jan. 12, 2016, Sumitomo Metal Mining’s Pogo gold mine celebrated its 10th anniversary since ore was first processed at the mill. On Feb. 12, it will celebrate the 10th anniversary of its first gold pour. During that period, the mine had poured well over 3 million oz. of gold and taken its place as one of Alaska’s largest mines and one of Alaska’s best corporate citizens. Congratulations to everyone that has helped Pogo reach this goal!
Alaska newcomer Gold Reserve Inc. announced the signing of a sales and purchase agreement on Corvus Gold’s LMS gold project in the Goodpaster District. The property was sold for $350,000 and is subject to a 3 percent net smelter return production royalty on precious metals and a 1 percent net smelter return production royalty on base metals, both of which were retained by a subsidiary of Corvus. Discovered in 2004, the Camp zone at the project contains an inferred resource, at a cut-off grade of 0.5 g/t gold, of 8.32 million metric tons of material estimated to contain 267,000 ounces of gold at an average grade of 1.00 g/t gold. The main resource is developed in stratiform siliceous breccias in schist which contains abundant pyrite and minor galena, arsenopyrite and graphite. These mineralized low-angle zones are cut by a series of later, extremely high-grade, possibly mesothermal, stockwork vein systems emplaced along a general east-west trend. The discovery of the gold-bearing outcrop which returned 6.2 g/t gold led to further sampling and drilling in 2006 which delineated a shallow-dipping planar zone of mineralization that has been followed down-dip for more than 300 meters. This feature is situated at the southeast end of a six-kilometer- (3.72 miles) long, northwest-trending zone of aligned surface geochemical samples containing anomalous gold and arsenic and lesser silver and copper. Welcome to Alaska Gold Reserve Inc.!
Southeast Alaska Hecla Mining announced preliminary fourth quarter and annual production results from its Greens Creek mine on Admiralty Island. During the fourth quarter, the mine produced 2,568,025 oz. of silver and 17,198 oz. of gold, constituting 4.4 percent and 12.5 percent increases, respectively, over fourth-quarter 2014 production levels. Annual production was 8,452,153 million oz. of silver and 60,566 oz. of gold, representing 8 percent and 3.1 percent year-on-year increases over 2014 levels. The mill operated at an average rate of 2,231 tons per day during 2015, almost identical average throughput when compared with 2014.
Coeur Mining presented fourth quarter and annual production on its Kensington gold mine north of Juneau. The mine produced 126,266 oz. of gold in 2015 compared to 117,823 oz. of gold for 2014. The mined produced 33,714 oz. of gold in the fourth quarter of 2015, up slightly from the 33,533 oz. of gold in the fourth quarter of 2014. The mine processed 161,927 short tons of ore in the fourth quarter at an average grade of 0.22 oz. per ton. Average recovery was 96 percent. Record operating results were due to a 16 percent increase in the average grade as well as a higher recovery rate. The mine is expected to produce 115,000-125,000 oz. of gold in 2016. Development of the Jualin decline has advanced roughly 1,500 feet and remains on-schedule. Underground drilling of the high-grade Jualin deposit is expected to begin during the first quarter of 2016.
Ucore Rare Metals Inc. announced that two high net-worth US-based investors have exercised their right to convert their investments in royalties on the sale of products and services from the Bokan-Dotson rare metal project to common shares of the company. The investors paid a total of $5.3 million for the royalties, and the conversion will result in a total of 30,470,760 shares being issued.
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