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Vol. 15, No. 47 Week of November 21, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Alaska faces tough road on global stage

CNBC report ranks state last in terms of cost of doing business and as having the worst transportation system in the United States

Curt Freeman

For Mining News

Alaska’s mining industry is entering the final lap for what has turned out to be a more robust than expected year for exploration, development and production. Strong worldwide demand for mined products has certainly helped push metallic and energy minerals prices up, but all is not rosy for Alaska’s mineral industry.

A recent CNBC report placed Alaska dead last of all the states in terms of overall business attractiveness. We were a dismal 46th of 50 in terms of cost of doing business. The survey indicated that only Hawaii, New York, California and Connecticut were more costly places to work than Alaska. Not surprisingly, Alaska was rated as having the worst transportation system of all the states. Since we live in a world where perception is reality, Alaska has a tough road ahead of it when competing on the world stage.

Western Alaska

Teck Resources Ltd. announced third-quarter 2010 results from its Red Dog Mine which turned in operating profits of US$199 million, versus an operating profit of US$138 million in the same period in 2009. The mine generated 137,000 metric tons of zinc and 26,300 metric tons of lead in concentrate during the quarter, versus 150,800 and 31,800 metric tons of zinc and lead, respectively, in the third quarter of 2009. The mine sold 169,900 metric tons of zinc and 86,300 metric tons of lead during the latest three-month period. Average zinc and lead grades mined were 17.2 percent and 4.9 percent respectively, versus 20.6 and 5.8 percent in the third quarter of 2009. Mill throughput of 959,000 metric tons in the third quarter was up from the 890,000 metric tons milled in the third quarter a year ago. During the mid-July to late October shipping season, Red Dog shipped a total of 1.035Mt of zinc concentrate and 235,000 metric tons of lead concentrate. The mine also paid out US$89 million in royalties to the State of Alaska and its partner, NANA Regional Corp. during the period. Profits rose significantly due to higher metals prices and sales. Zinc ore grades fell 17 percent in the third quarter compared with average grades during the same period a year ago as recent mining has been taking place at the edges of the main pit. The company expects the average zinc ore grade to improve to 19.8 percent in 2011. Ore from Aqqaluk, the ore deposit adjacent to Main pit at Red Dog, will account for approximately 65 percent of total throughput in 2011.

Freegold Ventures Ltd. announced drill results from its Vinasale gold project near McGrath. The program was aimed at expanding the known resources as well as testing weaker geophysical anomalies to the northeast of known mineralization. Significant results include 71.3 meters grading 1.52 grams per metric ton gold in hole VM10-01 and multiple mineralized intervals in hole VM10-02, including 6.1 meters grading 5.34 g/t gold, 56.1 meters grading 2.58 g/t gold and 55.9 meters grading 1.58 g/t gold. Hole VM10-6 returned 36.1 meters grading 2.33 g/t gold and 16.2 meters grading 1.28 g/t gold. Hole VM10-01 is the northern most hole drilled in the Central Zone. The drill hole intersected mineralization approximately 100 meters west and at least 350 feet deeper than previously known mineralization. Hole VM10-02 was collared approximately 60 meters southwest of hole VM 10-01. The hole extended mineralization approximately 300 feet deeper than previously intercepted mineralization. An historical resource of 925,000 ounces of gold (14.5Mt grading 1.95 g/t gold) was estimated for the Central Zone.

Interior Alaska

Kinross Gold Corp. announced third-quarter 2010 production results from its Fort Knox Mine near Fairbanks. The mine produced 108,680 ounces of gold versus 60,629 ounces produced in the third quarter of 2009. Cash costs were US$501 per ounce versus US$591 per ounce in the third quarter a year ago. The mine processed 7,655,000 metric tons of ore grading 0.96 g/t gold. Recovery from the mill for the quarter was 82 percent. Production and costs improved significantly in the third quarter, with a 26 percent increase in gold equivalent production and a 22 percent reduction in per-ounce cost of sales compared with results in the second quarter of 2010. The improvements were largely the result of increased mill throughput, higher grades, and lower re-agent costs. On a year-over-year basis, new production from the heap leach contributed to a 79 percent increase in production and a reduction in cost of sales per gold equivalent ounce of 15 percent compared with third quarter 2009 results.

Silverado Gold Mines Ltd. provided an update on its Eagle Creek gold-antimony project in the Fairbanks Mining District. The Scrafford structure on the Eagle Creek property was once the second-largest producer of antimony in Alaska. During previous mining operations for antimony, gold credits associated with the sale of the antimony ore averaged 0.18 ounces per metric ton gold. Both high-grade vein and fault-host mineralization as well as lower grade intrusive-hosted mineralization is possible on the project. Geochemical assay results are pending from work conducted earlier in the year.

First Star Resources Inc. provided an exploration update on its West Pogo gold project under option from International Tower Hill Gold Mines in the Goodpaster District. Chip sampling on three traverses over a 40-meter wide zone of mineralized rubble crop returned 6.53 g/t gold and 0.73 grams per metric ton silver over 6 meters, 3.79 g/t gold and 13.05 g/t silver over 6 meters and 3.84 g/t gold and 4.86 g/t silver over 6 meters. Rock samples collected by previous exploration campaigns returned gold values of up to 118.5 g/t gold from sericite altered granite and quartz vein material. Dominant structures on the property are east-west shear zones related to northwest and northeast trending fault zones.

Tri-Valley announced that its wholly-owned minerals subsidiary, Select Resources Corp., has initiated efforts to attract a joint venture partner to assist in the exploration and development of its Shorty Creek copper-gold-molybdenum project in the Livengood District. The company released data indicating that the property may host a porphyry copper-gold-molybdenum system up to 8 miles in diameter. Previous shallow drilling was limited in scope but recent work by the Alaska Division of Geological and Geophysical Surveys has confirmed the presence of replacement-style alteration and mineralization on the Hill 1835 prospect. Mineralization at Hill 1835 is hosted by structurally and possibly stratigraphically controlled, polyphase, grain-supported and matrix-supported silicified breccias. Intense flood silicification occurs in matrix-supported breccias and is often accompanied by arsenopyrite-quartz veinlets and disseminated pyrite and arsenopyrite. Drill results indicate that deeper portions of the system contain arsenopyrite-pyrite-chalcopyrite stockwork veinlets along with local disseminated pyrite, chalcopyrite and rare bornite. Gold values tend to be higher near the top of the drill holes. Widespread pervasive sericite or clay alteration appears to overprint all other alteration and mineralization styles, resulting in a pale yellow to tan “bleached” appearance in altered host lithologies. Outcrops of matrix supported breccia often are restricted to one or more mappable lithologic horizon, indicating possible stratigraphic control of at least a portion of the gold mineralization present. Significant drill intercepts include 220 feet grading 1.216 g/t gold in hole RH8908, including 25 feet grading 4.577 g/t gold, 60 feet grading 0.800 g/t gold in hole RH9016, 25 feet grading 1.707 g/t gold in hole RH9017 and 55 feet grading 1.035 g/t gold in hole RH9019.

Alaska Range

Usibelli Coal Mines reported that for 2010 its Healy coal mine will produce 2 million short tons of coal. Approximately 1 million tons of that production will be supplied to six Alaska power plants and the other 1 million tons was exported to Pacific Rim destinations. The mine currently employs 130 full-time workers.

Kiska Metals Corp. reported additional drilling and metallurgical work at the Island Mountain prospect at its Whistler project. Hole IM10-013 was collared 110 meters northwest of the discovery hole and intersected 252.0 meters of 0.707 g/t gold, 2.6 g/t silver and 0.15 percent copper beginning at a depth of 42.0 meters depth and includes a higher grade interval which returned 114.9 meters of 1.251 g/t gold, 4.0 grams of silver and 0.23 percent copper (1.74 g/t gold equivalent). This hole marks the first intersection of classic porphyry-style gold and copper mineralization at Island Mountain. The bulk of this interval is diorite with disseminated chalcopyrite + pyrrhotite in association with potassic alteration marked by potassium feldspar and biotite. Additional drilling is planned for 2011.

Southeast Alaska

Hecla Mining Plc announced third-quarter production results from its Greens Creek mine on Admiralty Island. The cash cost per ounce of silver for the quarter was a negative US$3.05 compared to a negative US48 cents in the third quarter of 2009. The average grade of ore mined during the quarter was 12.76 ounces of silver per ton compared with 12.63 ozs/t silver in the year-previous period. During the third quarter, the mine produced 1,852,250 ounces of silver, 17,985 ounces of gold, 6,738 tons of lead and 18,777 tons of zinc. Total production costs for the quarter averaged US$4.09/oz silver, a significant decrease from US$7.08/oz average costs in the third quarter of 2009. The total cash cost per ounce of silver was lower in the third quarter of 2010 compared with the same period in 2009, primarily because of higher by-product credits, higher average realized prices for zinc, lead and gold, combined with higher zinc and lead ore grades. The impact of these improvements was partially offset by higher production, treatment and freight costs. Exploration activities continued with drilling to define high-grade resources at the Northwest West zone along two newly defined limbs below the current workings and along strike for at least 400 feet. Within this more typically base metal-rich area, there are distinct lenses that are enriched in precious metals. Significant results from this zone include 41 feet grading 0.3 ozs/t gold, 33 ozs/t silver, 4.1 percent zinc and 10.9 percent lead and 15.1 feet grading 0.2 ozs/t gold, 20.6 ozs/t silver, 8 percent zinc and 24.3 percent lead. Definition and exploration holes continue to refine and expand the 200 South zone. Recent drilling continues to intersect mineralized intervals from 12 to 30 feet wide of mixed white siliceous ore and baritic ores. Significant results from this zone include 13.3 feet grading 0.8 oz/t gold, 106 ozs/t silver, 4.5 percent zinc and 1.6 percent lead and 12.8 feet grading 0.2 ozs/t gold, 10.6 ozs/t silver, 6.9 percent zinc and 3.7 percent lead. In a bit of understated new, surface and underground drilling continue to define the NE contact which represents a continuation of the favorable Greens Creek mine contact. This contact has been folded underneath the current workings and to the east. Recent drilling has defined mineralized intervals along this contact which has a folded strike length of over 5,000 feet and down dip extension of 3,000 feet. Keep your eye on this area!

Coeur d’Alene Mines reported third quarter production results from Alaska’s newest mine, the Kensington mine. During the third quarter the mine produced 15,155 ounces of gold at a cash operating cost of US$1,199 per ounce. The mine processed 90,254 tons of ore grading 0.19 ounces of gold per ton. Average mill recovery was 87.7 percent. The mine expects to produce 125,000 ounces of gold during 2011, its first full year of production.

Niblack Mineral Development Inc. and joint venture partner Heatherdale Resources today announced new drill results from 22 underground holes completed at the Niblack volcanogenic massive sulfide project on Prince of Wales Island. Significant results include 28.4 feet grading 2.12 percent copper, 1.49 g/t gold, 2.01 percent zinc and 16 g/t silver in hole U064, 12.8 feet grading 2.64 percent copper, 4.51 g/t gold, 2.95 percent zinc and 43 g/t silver in hole U072, 6.6 feet grading 2.36 percent copper, 5.88 g/t gold, 1.29 percent zinc and 83 g/t silver in hole U078, 60.8 feet grading 1.26 percent copper, 1.94 g/t gold, 1.28 percent zinc and 38 g/t silver in hole U081and 47 feet grading 1.74 percent copper, 3.73 g/t gold, 2.47 percent zinc and 75 g/t silver in hole U083. Two underground drill rigs are currently working in the Lookout Zone to expand the precious metals-enriched mineralized body to the south and southwest. Since October 2009 the joint venture has completed 62,500 feet of drilling in 56 drill holes.



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