The ongoing scarcity of venture capital available to junior companies coupled with a retreat in metals prices has landed a one-two blow that sent mineral exploration spending in Alaska plunging for the second straight year. A handful of big-budget projects scattered across Alaska, though, is softening the hit to exploration spending across the Far North State during 2013.
Mineral exploration expenditures in Alaska, which were a meager US$23.8 million in 2001, topped US$365 million by 2011. But since the million-dollar-a-day record, mineral exploration in Alaska has been losing steam. Roughly US$335 million was spent on exploration across the 49th State during 2012 and the 2013 exploration spending is expected be closer to US$200 million, according to early numbers compiled by Mining News.
With investors unwilling to provide venture capital, the majority of junior companies with promising mineral projects scattered across the Last Frontier were unable to raise the funds to replenish their coffers for the 2013 season. Many of these companies carried out smaller than planned exploration programs, while others conserved their precious funds in hopes of better markets going into 2014.
While the share prices of producing companies have not been hammered as hard at their exploration counterparts, uneasy equity markets and lower metals prices have still taken their toll, causing miners such as Hecla Mining Co. and Coeur Mining Inc. to scale back exploration spending in 2013.
“I believe that in these times of price volatility and uncertainty, those companies like Hecla with low costs, high margins and the flexibility to scale back or increase discretionary expenditures, such as exploration, pre-development, capital and investments, will fare the best,” said Hecla President and CEO Phillips S. Baker, Jr.
Coeur, which has been doing belt-tightening of its own, foresees a brighter outlook for companies that can weather the lower precious metals prices.
“After a difficult period for commodity prices since mid-April, silver and gold prices appear to be finding a bottom recently, although we expect continued volatility throughout the remainder of the year,” Krebs said in August. “Looking ahead, we anticipate supplies of both silver and gold will tighten as a result of project deferrals, difficult capital markets, reduced exploration expenditures, and greater geopolitical and community-related challenges.”
Time will tell whether metals prices stabilize and the drought in venture capital recovers in time for mineral explorers to refill their coffers and continue to unlock Alaska’s vast mineral potential in 2014.
Southwest mega-projects
Mega-scale copper and gold projects in Southwest Alaska account for around half of the 2013 exploration-stage spending in the state.
The Pebble Partnership budgeted US$80 million for 2013, which was expected to result in the finalization of a highly-anticipated mine-plan for the enormous copper-gold-molybdenum project in Southwest Alaska.
After investing more than US$541 million in this world-class asset, though, London-based Anglo American plc announced in September that it was withdrawing from the Pebble Partnership, returning sole ownership to Northern Dynasty Minerals Ltd.
Adding in the investment made by Northern Dynasty prior to Anglo American joining the Pebble Partnership, nearly US$750 million has been spent on readying this project for permitting.
The massive Pebble copper deposit is more than equal to the investment.
The current resource, last updated in 2010, estimates this massive deposit contains 80.6 billion pounds of copper, 107.4 million ounces of gold and 5.6 billion pounds of molybdenum. That is enough copper to supply the copper needs of every person on the planet for four years, based on 2012 consumption, and as much gold as held by Germany, which has a gold reserve second only to the United States.
Without Anglo American funding, it is anticipated that spending at Pebble in 2014 will be substantially less than the US$90-million-per-annum average over the past six years.
Donlin Gold LLC – the operating company equally owned and supported by subsidiaries of Novagold Resource Inc. and Barrick Gold Corp. – agreed to a budget of US$30 million to continue advancing the 40-million-ounce Dolin Gold project through permitting.
The mine plan Donlin Gold LLC submitted for permitting in 2012 envisions a 53,500-metric-ton-per-day mill churning out an average of 1.1 million ounces of gold annually at a cash-cost of US$585 per ounce for 27 years. During the first five years of operation, this massive operation is scheduled to produce 1.5 million ounces of gold annually at an average cash cost of US$409 per ounce.
With the completion of the public scoping and comment period in March, the U.S. Army Corps of Engineers is preparing a draft environmental impact statement that will provide stakeholders with a complete picture of the benefits and potential risks posed by development of a mine at this world-class gold asset.
A decision on the final EIS as well as a bevy of accompanying permits needed to develop Donlin Gold is slated for the end of 2015. The construction of a mine at the 40-million-ounce gold deposit is expected to take about four years.
In the meantime, Donlin Gold LLC continues to optimize the project with an eye on reducing the estimated US$6.7 billion of capital costs needed to build the mine.
Situated about 125 miles (200 kilometers) northeast of Pebble and about the same distance southeast of Donlin, WestMountain Gold Inc.’s Terra project is one of the only earlier stage exploration projects in Southwest Alaska that saw significant exploration during 2013.
During 2012, Westmountain fed 23 metric tons of high-grade ore through a two-metric-ton-per-hour pilot mill at Terra. This sample of two vein-systems, Ben and Fish Creek, produced 75 ounces of gold and 23 ounces of silver.
WestMountain Gold returned to Terra in April to begin a busy 2013 season that includes optimizing the gravity circuit, upgrading the site infrastructure, expanding the resource, exploration, scoping and construction of an underground mining portal and feeding more high-grade ore through the mill.
WestMountain’s 2013 drill program focused on the expansion of the Ben resource and tested other high-grade veins cropping out of the mountains at Terra.
TNR Gold Corp. (Shotgun project) and Freegold Ventures Ltd. (Vinasale project) were two exploration companies that conducted exploration on their Southwest Alaska gold properties during 2012 but did not return for follow up programs in 2013. Other companies with reduced or significantly scaled back projects in Southwest Alaska and Alaska Peninsula include: Millrock Resources Inc. (Audn and Humble copper-gold projects); and Full Metal Minerals Ltd. and Antofagasta Minerals (Pyramid copper-gold project).
NovaCopper busy in NW
With a budget of C$16 million for its Upper Kobuk Mineral Project in the Ambler Mining District of Northwest Alaska, NovaCopper Inc. was amongst a small group of junior companies with major exploration programs in the 49th State during 2013.
This work included continued expansion of the 3.5-billion-pound Bornite copper deposit and completion of a preliminary economic assessment for an open-pit mining scenario at the Arctic volcanogenic massive sulfide deposit.
Arctic and Bornite are united under the Upper Kobuk Mineral Projects, a partnership between NovaCopper and NANA Corp., the Alaska Native regional corporation that represents the Inupiat people of Northwest Alaska.
The open-pit scenario for Arctic produces a net present value topping US$537 million and is likely to fit well with the potential future development of Bornite, a copper-rich carbonate-replacement deposit situated about 17 miles (27 kilometers) southwest of the VMS deposit.
“We think this (PEA) demonstrates that the open-pit is a viable alternative; and I think with further study as we work toward a feasibility study, we will hone in on that decision,” said NovaCopper President and CEO Rick Van Nieuwenhuyse.
The 2013 drilling at the Upper Kobuk Minerals Project focused on continued expansion of Bornite, a carbonate replacement deposit with two copper-rich zones, Ruby Creek and South Reef, separated by a major northeast-trending fault known as Iron Mountain.
Ruby Creek is a near-surface zone with an indicated resource of 6.8 million metric tons averaging 1.19 percent (179 million lbs) copper and an inferred resource of 47.7 million metric tons averaging 0.84 percent (883 million lbs) copper. South Reef, a richer but deeper zone, has an inferred resource of 43.1 million metric tons averaging 2.54 percent (2.4 billion lbs) copper.
Further west, Teck continued it exploration of high-grade sediment-hosted zinc deposits in and around it Red Dog Mine. Zazu Metals Corp. continued environmental, engineering, infrastructure and other studies in preparation of filing permits to develop its Lik zinc-lead-zinc project about 14 miles northwest of the Red Dog Mine.
In September, Graphite One Resources Inc. announced a late-season drill program at its Graphite Creek deposit, located on the Seward Peninsula roughly 40 miles (65 kilometers) north of Nome.
A 4,248-meter drill program carried out at Graphite Creek in 2012 established a maiden inferred resource of 107.2 million metric tons averaging 5.78 percent graphitic carbon, or some 6.2 million metric tons of graphite.
The resource at Graphite Creek represents drilling along 2.2 kilometers (1.4 miles) of an 18-kilometer- (11.2 miles) long conductor. The six to eight drill holes planned for 2013 are designed to expand the resource by demonstrating the continuity of the mineralization along strike. Graphite One said this data will be useful as the company works towards a preliminary economic assessment and feasibility study over the upcoming months.
Andover Mining Corp., which successfully expanded the VMS mineralization at its Sun property with a C$3.1 million exploration program in 2012, did not complete a significant follow-up program at the property situated roughly 30 miles (48 kilometers) east of the Arctic deposit this year.
Tintina Resources Inc., (Baird copper-zinc-cobalt project); and Kinross Gold Corp. and Millrock Resources Ltd. (Council gold project) are other companies that completed significant exploration in 2012 but did not return with substantial programs in 2013.
Golden Interior
Covering the eastern half of the Tintina Gold Belt, a vast aurum province that sweeps some 850 miles (1,350 kilometers) across the breadth of the state, Alaska’s Eastern Interior region continues to be a favored destination for mineral explorers.
Contango ORE Inc., which raised US$14.2 million early in 2013, completed a US$10-million program focused on establishing an inaugural resource at a unique gold-copper-silver discovery made at the Peak zone of its Tetlin project in eastern Alaska during the 2012 season.
Following the discovery, Contango Ore traced a 500-meter-long zone of copper-gold-silver mineralization unlike any other found in Alaska.
Like intrusive-related deposits found in the Tintina Gold Belt, the gold discovered at Peak zone has a strong correlation with bismuth. The deposit also demonstrates some similarities to porphyry copper deposits.
Contango ORE came into the 2013 unsure the style of mineralization they were dealing with at the Peak discovery but by mid-season the company had interpreted the zone as an intrusive-related skarn.
By mid-September, the company had received assay results from the first 34 of roughly 80 holes planned for 2013. Highlights from this drilling include: TET13062 cut 64.8 meters averaging 13.1 g/t gold, 21 g/t silver and 0.48 percent copper; TET13063 cut 40.5 meters averaging 16.6 g/t gold, 36.1 g/t silver and 0.73 percent copper; TET13085 cut 45 meters averaging 2.74 g/t gold, 69.5 g/t silver and 1.40 percent copper; and TET13094 cut 23.7 meters averaging 0.42 g/t gold, 106.6 g/t silver and 0.72 percent copper.
Sumitomo Metal Mining Pogo LLC – a joint venture between Japanese firms Sumitomo Metal Mining Company (85 percent) and Sumitomo Corp. (15 percent) to operate the Pogo Mine – continues to expand East Deep, a zone of mineralization located within 300 meters of the existing underground workings at the high-grade gold mine.
Through the end of 2012, Sumitomo had outlined 936,000 ounces of high-grade gold reserves at East Deep.
This initial reserve is expected to be the tip of the iceberg when it comes to East Deep. Sumitomo continues to expand this deposit to the west and north.
A number of juniors with gold projects in the vicinity of Pogo deferred exploration for the 2013 season, including: Corvus Gold Corp. (LMS); Alix Resources Corp. (Money Rock-West Pogo); and Freegold Ventures (Rob).
Kinross Gold Corp.’s Fort Knox Mine is on pace to produce more than 400,000 ounces of gold in 2013, enough to retake the position of the top gold producer in Alaska.
Going into 2013 Kinross reported 3.6 million ounces of gold reserves at Fort Knox.
According to Kinross’ most recent projections, there is enough ore in the immediate Fort Knox mine area to feed the mill until 2018 and to continue the heap leach operation through 2021.
The Gil gold property, located about five miles (eight kilometers) east of Fort Knox, is a potential source of ore to extend the life of the mine. Kinross, which held a longstanding partnership with junior explorer Teryl Resources Corp. at Gil, bought full ownership of the property in 2011.
Shortly before selling its stake in the property, Teryl reported an NI 43-101-compliant heap leach resource of 514,916 ounces of gold contained in 19.86 million short tons of mineralized rock.
Kinross has not announced results from the drilling, trenching and other exploration completed at Gil since it purchased full ownership of the property.
Roughly five miles north of Fort Knox, Freegold Ventures Ltd., focused its 2013 drilling on expansion of the Dolphin-Cleary Hill deposit at its Golden Summit project, as well as calculating a resource for the oxide component found there.
The company completed 3,472 meters of this drilling during a winter program that ran from February to April and 1,667 meters during a summer program that began in July.
Eight holes drilled during the winter program bolstered the resource at Golden Summit to 6.1 million ounces of gold.
Majestic Southcentral
Cradled to the north and west by the majestic Alaska Range, Southcentral Alaska is home to a number of promising copper, gold, nickel and platinum group metals prospects and deposits.
A US$3.5-million exploration program conducted by Pure Nickel Inc. and Itochu Corp. continued the pursuit of an extensive PGM deposit the partners have been dialing in on at the Man Alaska project.
The program primarily focused on drilling the Eureka zone, a distinct and widespread layer of platinum-palladium-gold-copper-nickel mineralization the partners have encountered across a wide swath of the central portion of the Man property.
About 15 miles west of the Man property, Millrock Resources is investigating Stellar, a new property added to the company’s portfolio in 2012.
The Stellar claims are considered prospective for porphyry copper-gold deposits and cover a copper-gold skarn deposit known as Zackly.
In August, Millrock announced that a world-leading copper producer has entered into a first right of refusal to option the property pending the results of an initial exploration program funded by the unnamed miner.
Millrock completed a minimal exploration program that included geophysical, geochemical and geological surveys at Estelle, a Southcentral Alaska gold-copper property located some 200 miles southwest of Stellar.
Adjacent to the east of Estelle, Kiska Metals Corp. completed minimal work on its Whistler copper-gold project in 2013.
Kiska said it is assessing options for moving Whistler forward in the current market conditions. Bringing on a partner to fund further exploration and development of the multiple porphyry deposits and prospects the company has identified at the expansive property is an option under consideration.
Producers top SE exploration
Although Southeast Alaska has no shortage of precious, base and rare earth metals deposits and prospects, only a handful of these were explored in 2013.
The largest exploration programs where completed by the panhandle’s two producers – Hecla Mining and Coeur Mining.
Hecla has lowered full-year exploration spending across all of its current projects to US$22 million. The Idaho-based miner the company has not indicated whether cuts in its discretionary spending will dip into this.
Hecla, which originally budgeted US$6.6 million for 2013 exploration at Greens Creek, said the drilling at the VMS deposit has made significant progress in defining high-grade extensions to the silver mineralization along the Deep Southwest, 5250 and Gallagher ore trends.
Coeur had three drills turning at the Kensington project during 2013. One rig was dedicated to definition drilling in the immediate Kensington mine area, while the remaining two were allocated to exploration drilling at Kensington and neighboring Jualin property.
After a two-year hiatus, Constantine Metal Resources Ltd. undertook a 4,000-meter drill program at its Palmer project near the port town of Haines.
A US$22 million option and joint venture agreement forged with Dowa Metals & Mining Co., Ltd. early in 2013 provided Constantine with the ability to carry out a US$2.5 million exploration program targeting the expansion of Glacier Creek, the most advanced of a number of VMS prospects known across the 15,000-acre (6,300 hectares) property.
Five zones of mineralization have been discovered to date at Glacier Creek – RW East, RW West, and South Wall zones 1, 2 and 3.
The 2013 program includes widely spaced step-out holes along the multiple open edges of the South Walls zones as well as holes testing the 300-meter gap between RW East and RW West.
At the southern end of the panhandle, Ucore Rare Metals Inc. staged a late-season field program at its Bokan Mountain rare earth project. This program consists of an infill, geotechnical and monitoring well drilling as well as construction of an interim camp. Ucore said this program will provide information to support the engineering work being conducted to develop the mine plan for Bokan Mountain.
Grande Portage, which encountered multiple high-grade gold veins while drilling its Herbert Gold project in 2011 and 2012, did not complete a drill program at the Southeast Alaska project in 2013.
Likewise, Heatherdale has, as of the date of this report, deferred exploration for the year. In October, Heatherdale entered into an agreement with the Alaska Industrial Development and Export Authority to evaluate the potential of developing an offsite plant near Ketchikan to process material from the copper-gold-zinc-silver deposits at its Niblack project on Prince of Wales Island.
