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Permitting stalls Alaska gold dredging Arctic Gold incurred roughly $150,000 in start-up costs for a project that probably won’t mine any gold this season Patricia Jones Petroleum News Contributing Writer
A start-up gold mining company planning to conduct suction dredging prospecting offshore at Nome, Alaska, this fall is still waiting for a final decision on its permits from the Alaska Coastal Management Program.
ACMP’s public comment period for a suction dredging project proposed by Arctic Gold Co. LLC ended Sept. 16, and the agency is scheduled to issue a final determination by Oct. 2 on the project’s consistency with coastal management policies.
Arctic Gold’s agent Jeff Keener, a Fairbanks-based geological consultant with Nordwand Enterprize, told Petroleum News that he submitted the company’s original application to state and federal regulators on June 9.
“I fully admit that the project came together late in the game,” Keener said.
That’s because Arctic Gold “wasn’t sure if they would be able to get their financing together,” Keener said. “That’s almost always the case — it’s an aspect of the mining industry.”
Keener knew his client would not be able to dredge at the start of the mining season in Nome in early July. But he did anticipate a 60-day turnaround timeframe for the permit application, which would have allowed Arctic Gold to conduct initial dredging this season, giving the company more information about where to start work next summer.
Arctic Gold received conditional permission from other regulatory agencies in late July or early August, Keener said.
“They all acted quickly, normally, and this is probably the busiest time of the year for all these agencies,” Keener said. “I felt we were all working together on this.”
After receiving a provisional permit from the U.S. Army Corps of Engineers in early August, Keener received a letter stating that the Alaska Coastal Management Program review and public comment period had just started and would be complete in early October. The Corps of Engineers permit was conditional upon a consistency review by ACMP, Keener said.
The ACMP “gave a very poor excuse,” Keener said. “This is absolutely devastating to the company. They counted on prospecting this year so they could go into production next year.” Short staffing in ACMP ACMP project review coordinator Susan Magee, who is overseeing Arctic Gold’s consistency review, blames the delay on reduced staffing when the division was moved from the governor’s office to the Alaska Department of Natural Resources earlier this year.
“Our review started a month past time,” Magee told Petroleum News Sept. 10. “Our staffing was cut when we were moved to DNR … we got behind and we’re still working on a backlog.”
She said the state division has posted job vacancies to restore staffing, part of the agency’s effort to catch-up on the permitting backlog.
“We’re hiring people — steps are being taken,” she said. “They should be filled this year, so next year we should be normal again.”
Meanwhile, Randy McKinney, manager of Arctic Gold, is trying to figure out how to explain to Arctic Gold’s investors why the company incurred roughly $150,000 in start-up costs for a project that probably won’t mine any gold this season.
“It doesn’t look good,” he said. “It’s wiped out our cash flow.”
He’s also uncertain whether the company, recently formed for this mining venture by McKinney, a 20-plus year veteran of Alaska mining, will be able to return for next year’s season.
“I don’t have any idea,” he said. “It’s a terrible loss. Just by the stroke of a pen they decided we can’t do this.”
Conventional dredge plan McKinney’s plan for prospecting and mining with a floating suction dredge offshore of Nome isn’t unusual. In a telephone interview from Nome Sept. 10, he said six other dredges are working offshore this season — two with a set-up similar in size to his plan.
The plan Arctic Gold submitted to regulators proposed using a 10-inch suction dredge, mounted on a 25 foot by 12 foot floating barge, to lift to the surface gold-bearing material from Nome’s offshore beach deposits.
At a rate of roughly 200 cubic yards a day, gravels are pulled up using the suction dredge, then are concentrated using a conventional sluice box.
Tailings are then discharged via a tails pipe at mid-point of the seawater column to minimize turbidity on the water’s surface, according to the project’s public notice.
Keener said Arctic Gold proposed prospecting in five areas offshore, roughly one-eighth to one-quarter of a mile from the shoreline. A maximum of two acres would be disturbed and reclaimed during the 2003 season.
“They cannot mine in waters deeper than 20 feet,” he said. “It’s rough water — if it were deeper, it might be easier.”
Arctic Gold’s proposed working areas are not currently leased by the state, but open for mineral entry.
“Arctic Gold planned to collect samples on a number of leases with the idea of prospecting. If they feel there is a commercial level or amount of gold, they will go to the state to request another lease sale,” Keener said. “It’s a well-defined deposit that’s world class — there’s nothing else found like this. It’s very unique and the state has been working very hard to promote it.”
Previous large-scale dredge operators and lease holders have punched up to 4,000 drill holes in an area stretching about 20 miles along Nome’s beach, extending up to three miles from shore, Keener said.
Using that data, the University of Alaska Fairbanks calculated a global resource of more than 3 million ounces of gold in the area, he added.
“It’s a relatively high pay grade for placer — about 0.014 ounces per cubic meter,” he said. “That compares to onshore average grades of 0.017 ounces per cubic yard.”
Offshore mining, while hindered by the Bering Sea weather and a short working season, has one advantage over typical placer mining. “There’s no overburden to strip,” Keener said. “The gold is within the upper meter of material.”
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