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Vol. 18, No. 26 Week of June 30, 2013
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Profits of top miners plummeted in 2012

Industry focuses on maximizing value of existing projects; new projects need 25 percent internal ROI or better to interest buyers

Curt Freeman

For Mining News

The author Curt Freeman, CPG #6901, is a well-known geologist who lives in Fairbanks. He prepared this column June 24. Freeman can be reached by mail at P.O. Box 80268, Fairbanks, AK 99708. His work phone number at Avalon Development is (907) 457-5159 and his fax is (907) 455-8069. His email is avalon@alaska.net and his website is www.avalonalaska.com.

Further proof that the mining industry is undergoing fundamental changes can be found in “Mine: A Confidence Crisis,” the 10th edition of PricewaterhouseCoopers’s annual report on the global mining industry. This recently released report indicates that in 2012 the top 40 global mining companies saw net profits plummet 49 percent to US$68 billion.

To make matters worse, after a 25 percent decline in average mining stock value in 2011 and a slower but still downward trend in 2012, mining stocks dropped an additional 20 percent in the first quarter of 2013. And gold companies took it on the chin harder than companies producing other commodities; gold companies also suffered a 15 percent decline in market value, decreasing a whopping US$29 billion in market capitalization in 2012. Companies are looking more and more toward maximizing value from existing projects. New projects being considered for acquisition will need to demonstrate at least a 25 percent internal rate of return on capital invested, if they want major companies to take serious interest. With new CEOs and senior managers at a number of major and intermediate producers, caution looks to be the word for the day, month and year.

Western Alaska

Linux Gold Corp. said it has executed an agreement with Kenn Roberts to produce gold using a unique placer mining technology at its Dime Creek project in the Koyuk Mining District. Under terms of the agreement, Linux Gold will earn a dividend amount of 50 percent and Kenn Roberts will earn a 50 percent interest after payback of an initial US$32,000 provided by Roberts. During payback, 20 percent of all gold recovered will be allocated to Linux Gold and 10 percent will be allocated to Robert. Details regarding the in-situ placer gold recovery process also were released.

Partners Northern Dynasty Minerals and Anglo American plc released economics and employment estimates for their Pebble copper-gold-molybdenum project. During the five-year construction period of the mining facility, the project would employ 2,525 people directly and an additional 925 indirect jobs in Alaska. In the lower 48-states, the mine would employ an additional 6,250 indirect jobs. During the first 30-years of mine life, the operation would employ 915 people directly and an additional 1,175 indirect jobs in Alaska. During the same 30-year period in the lower 48 states, the mine would employ an additional 305 people directly and provide an additional 6,070 indirect jobs. Average annual employee salaries estimated during construction and during the first 30-years of operations average US$63, 500 and US$72,500, respectively, which equates to wages that are 24 percent and 42 percent, respectively, above the average annual income in Alaska. It is estimated that 75 percent of the mine-based jobs would be held by Alaskan residents, generating some US$400 million per year in contributions to the Alaskan economy during construction and US$1.14 billion to US$1.43 billion per year in contributions to the Alaska economy during operations. During the five-year construction period the project would pay the State of Alaska US$27 million per year in taxes and royalties. During the first 30-years of mine operations, the project would pay the State of Alaska US$136 to US$180 million per year in taxes and royalties. Federal government revenue generated in Alaska would average US$54 per year during the five-year construction period and US$164 million to US$218 million per year during the first 30 years of operations. Estimated annual tax receipts to the Lake and Peninsula Borough would range from US$29 million to US$33 million for the first 30 years of mine operations, compared with the commercial fishing industry’s tax contributions of US$1.5 million to US$2 million per year. During the first 30 years of operations at Pebble, the mine would churn out 150,000 to 300,000 metric tons of copper, 10 million to 40 million pounds of molybdenum, 400,000 to 900,000 ounces gold, 1.25 million to 2.25 million oz silver and commercially significant amounts of palladium and rhenium. This 30-year production schedule would consume only 17 percent of the Pebble deposit’s known resources, indicating the mine could be a part of Alaska’s economy for more than 100 years.

Full Metal Minerals Ltd. reported the release of a Canadian National Instrument 43-101 technical report on its Pyramid copper-gold-molybdenum project on the Alaska Peninsula. The US$3.7 million recommended budget includes 4,000 meters of additional infill and expansion drilling on the deposit along with additional surface exploration work. At a 0.21 percent copper equivalent cutoff, this near-surface supergene enrichment zone hosts 93.7 million tons of mineralization, averaging 0.40 percent copper, 0.019 percent molybdenum and 0.092 grams-per-metric-ton gold, or 0.55 percent copper equivalent. This equates to 823 million lbs of copper, 40 million lbs of molybdenum and 277,000 oz of gold. The hypogene zone hosts 79.1 million metric tons, averaging 0.26 percent copper, 0.020 percent molybdenum 0.083 g/t gold, or 0.45 percent copper equivalent at a 0.21 percent copper-equivalent cutoff. This equates to 514 million lbs of copper, 35 million lbs molybdenum and 212,000 oz gold.

Alaska Range

Pure Nickel Inc. announced commencement of its 2013 exploration program on the Man Alaska property. Activity in 2013 will consist primarily of a 2,200-meter drill program. The work program will focus on a zone of nickel-copper-platinum group element mineralization, informally termed the Eureka zone, identified in the Alpha mafic-ultramafic complex in 2012. The Alpha complex is one of five discrete mafic -ultramafic complexes located on the 47,000-hectare (116,137 acres) property. The Eureka zone consists of a broad interval of disseminated sulfide mineralization that straddles the contact between gabbroic and ultramafic rocks in the northern half of the Alpha complex. Past drilling has intersected the zone in widely spaced holes along a strike length of seven kilometers (4.34 miles) in the central part of the complex.

WestMountain Gold Inc. reported the start of its summer 2013 exploration program at its Terra gold project in the western Alaska Range. The program includes an upgrade of the pilot mill facility, construction of a C-130 Hercules aircraft-capable runway, road construction and mine portal construction. This infrastructure expansion should result in the recovery of gold during the 2013 season. Additional exploration and drilling are planned for later in the season.

Southeastern Alaska

Constantine Metal Resources Ltd. said it has commenced a 4,000-meter drilling program on its Palmer volcanogenic massive sulfide project near Haines. The US$3 million 2013 budget is funded by Dowa Metals & Mining Co., Ltd. The current drill program includes plans for 10 to 15 holes focused on the South Wall and RW zones, both of which are open to expansion in multiple directions. The 2013 program also will include metallurgical test work, downhole geophysics, and environmental baseline surveys. The project is host to a NI 43-101-compliant inferred resource of 4.75 million metric tons, grading 1.84 percent copper, 4.57 percent zinc, 0.28 g/t gold and 29 g/t silver.

Arrowstar Resources Ltd. reported the release of a NI 43-101 technical report on its Snettisham iron ore project south of Juneau. The company has conducted additional mapping and sample work over the project in May and filed a drilling permit for the project. Arrowstar hopes to drill up to nine holes to depths of 500 meters this year. Additional geophysics and geologic mapping would accompany the drilling in the proposed US$1.2 million exploration program.



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