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New mines could consume some ANS gas
Bill White Researcher/writer for the Office of the Federal Coordinator
Other possible mines
The Alaska business community likes to talk about three other mining prospects that could tap the Alaska LNG gas stream: the Pebble copper-gold play, Livengood gold and the Ambler mining district. (See map)
All of these prospects are less certain of development than Donlin.
Pebble. Pebble would be to Donlin what a mountain is to a mesa. It would be bigger than even the Red Dog zinc and lead mine in Alaska’s Northwest Arctic.
Where Donlin boasts an estimated 40 million ounces of gold in its reserves, Pebble hosts an estimated 107 million ounces of gold. And gold isn’t Pebble’s No. 1 prize. Copper is. An estimated 80 billion pounds of it. Pebble also holds molybdenum (used in making steel), rhenium (used in jet engines) and palladium (used in automobile emissions controls).
Pebble, if it’s developed, would need a power plant perhaps twice the size of Donlin’s - Pebble’s development plan is still a work in progress, so it’s unclear at this point what the mine’s specs would be. The developer - Canadian junior mining company Northern Dynasty Minerals - hopes to use natural gas at the mine site, whether from Cook Inlet or the North Slope. One early assessment, from 2011, estimated the mine would need 50 million cubic feet of gas per day.
Financing such a massive development is one high hurdle for Pebble. Two others are political and environmental. The deposit lies amid headwaters of two of the five river systems that comprise the Bristol Bay watershed - which supports the world’s largest wild sockeye-salmon commercial fishery. The region also hosts subsistence fishing and high-end sports fishing lodges. Opposition to development is organized, entrenched and vocal.
Atop this, in 2014 the Environmental Protection Agency proposed to protect the Bristol Bay fisheries by restricting mining in the region under its Clean Water Act powers. A final decision is pending.
Livengood. The Livengood prospect has one advantage over all the others: location. It’s on the Alaska road system, about 70 miles northwest of Fairbanks.
Although Alaska LNG’s proposed 800-mile pipeline would pass Livengood, the mine’s 2013 feasibility study doesn’t envision tapping the gas stream directly.
Rather, the developer, International Tower Hill Mines, a junior Canadian mining company, sees the Fairbanks electric utility boosting its power supply, perhaps with a gas-fired turbine at a generating plant outside Fairbanks, while the mining company builds a 50-mile, 239-kilovolt transmission line to the mine site. All in all, a $129 million project. The annual power bill would run about $113 million, about one-third of the mine’s operating costs.
International Tower Hill Mines estimates the Livengood gold resource at about 20 million ounces - “measured, indicated and inferred,” in the industry’s language. That’s about half the size of Donlin’s, but sizable nonetheless.
Livengood would produce nearly 600,000 ounces of gold a year for 14 years, making it one of the world’s more substantial gold mines.
But the project is stalled. The 2013 feasibility study concluded each ounce would cost $1,474 to produce. Gold was last above that price in early 2013. It averaged about $1,250 an ounce in the first nine months of 2014.
Management currently is “open to strategic alliance, while considering all appropriate financing options,” according to a recent presentation.
Ambler mining district. For several years, the state has discussed building a road to the Ambler district to jump-start mining there.
Ambler is remote, on the Brooks Range flanks in northern Alaska. It’s just above the Arctic Circle. The coast is far away. The nearest road is far away.
To create access, the state has drawn plans to punch a spur from that nearest road - the Dalton Highway, a two-lane north-south supply artery to North Slope oil fields. A state agency, the Alaska Industrial Development and Export Authority, has taken plans for a $500 million, 216-mile, one-lane tool road to Alaska Native groups and local communities in advance of pursuing federal permitting, including an environmental impact statement. Some groups support the plan; some oppose it.
The Ambler road is modeled after a late-1980s 52-mile toll road and port the state built to help the Red Dog mine. That road is widely regarded within Alaska as a smart use of state resources - it’s even made money for the state.
What would be at the end of the 216-mile road to the Ambler district?
Geologists believe the area is rich in copper, zinc, gold and other minerals.
AIDEA officials like to talk about a variety of companies probing Ambler’s prospects, but really only one is talking with a lot of bravado.
NovaCopper, a Canada-based junior mining company, has rights to a variety of public and private mining claims in the large district and is focused on two - one called Arctic and the other called Bornite.
Its 2013 “preliminary economic assessment” outlines a $718 million development that would mine copper, zinc, lead, silver and gold and make lots of money, according to the company’s 2013 annual report. The estimate “includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.” Translation: A lot more exploration is needed to prove up the mineral reserves.
In August 2014, the company issued a press release noting it “expects to be a consumer of LNG” from a small-scale state-led project to truck LNG to Fairbanks from a small plant that would be built on the North Slope. That assumes the AIDEA toll road to Ambler gets built. The road also would be how the mine would get its production to market.
State officials have talked about the Sun and Smucker prospects in the Ambler district, too. A Canadian junior called Andover Mining Corp. has rights to those.
In early 2014, Andover went bankrupt after failing to work out a reorganization plan with its creditors.
A golden legacy Commercial mining in Alaska dates almost to when the United States acquired the territory from Russia in 1867.
Far-north mining became a new pathway for American migration in the late 19th century as the east-west frontier ran out at the Pacific coast and a few of the most adventurous, avaricious and optimistic shifted their course northward. Mining was a key catalyst for industrial development during Alaska’s first 70 years as a U.S. territory.
Into northland lore strode such miners as Joe Juneau (Southeast), Skookum Jim (Klondike), Felix Pedro (Fairbanks) and the three lucky Swedes (Nome).
The early decades involved mostly small-scale stuff, except for some larger gold discoveries near the state capital of Juneau.
The big event - the Klondike gold rush in 1898 - actually happened just across the border in Canada’s Yukon. But aftershocks were felt across Alaska as hordes of dreamers the Klondike drew, and others, found gold elsewhere - in beach sands near Cape Nome on the Alaska’s west coast, near Chena Slough in the territory’s Interior, and so on.
Gold wasn’t the only treasure unearthed. A network of mines at Kennecott running from 1911 to 1938 produced a bonanza of copper. Coal mining began in 1917. Mercury mining near Sleetmute. Marble quarried on Prince of Wales Island. Tin on the Seward Peninsula. Platinum at the fabulously named site of Goodnews Bay.
Gold was Alaska mining’s bedrock business, but World War II blasted that industry apart. A federal order shut down gold mines as not critical to the war effort. Most big operations never restarted. The industry hobbled forward on mostly small placer operations until the big Fort Knox open-pit mine started in the mid-1990s. Two large underground mines since have opened as well, cashing in on higher gold prices.
The copper, mercury, marble, tin and platinum mining are long gone.
But mining’s aura glows over Alaska like the aurora. Riding a sternwheeler on the Chena River in Fairbanks, the “Golden Heart City,” visiting a gold dredge site and panning for gold remain popular draws for package tourists today.
Long anticipated side effect The Alaska mining industry’s ether has vibrated through the years with the possibility that North Slope gas would flow to market.
In the 1970s, the thinking was that roads built for a gas pipeline project would break new ground for the mining industry.
“Mining could be expected to grow somewhat because of the increased access to mineral rich areas,” said a 1976 environmental impact statement for two pipeline projects under consideration then. Neither was built.
In the early 2000s, Alaska’s governor formed a Natural Gas Policy Council to figure out how to get North Slope gas to market. A University of Alaska Fairbanks geological engineering professor testified about what a gas pipeline could do for the mining industry.
Alaska has 15 major “mineral occurrences” near the gas pipeline corridor through Interior Alaska, he said. The 50 percent probability gross value of these minerals is $157 billion.
The new mines could employ as many as 20,000 people, the governor’s council reported. “The economic and employment impact of developing these mineral resources could exceed that of Prudhoe Bay.” Gas from the pipeline could help address the largest single cost of mining - energy, the council said.
In 2011, the project plan for a smaller-scale state-backed North Slope gas pipeline serving Alaska also cited the benefits for mining: “The project has the potential to stimulate existing industries and encourage new industrial activities, including mining.”
Guessing gas demand Alaska’s current natural gas demand - outside of oil-field operations - averages about 200 million cubic feet a day for power generation and heat.
Looking at the mining prospects and counting cubic feet, the industry could boost that statewide total maybe 15 to 50 percent. Though 50 percent would mean everything goes well. And 0 percent is also a real possibility.
Donlin Gold, if the mine is developed, would need about 30 million cubic feet a day.
Pebble, if the mine is built, would need perhaps 50 million cubic feet a day, ideally from Cook Inlet, the North Slope or a combination of the two.
A gas-fired turbine to feed electricity to a Livengood gold mine, if it’s developed, would burn about 8.5 million cubic feet a day, according to a 2013 report on Fairbanks-area gas demand.
It’s unclear how much gas Ambler mines would demand if any get developed.
Smaller mine prospects could gain as well. Many, particularly within reach of Alaska’s roads, are in various stages of exploration. These, too, could benefit from the availability of abundant gas if they get developed and the Alaska LNG project is built.
However much North Slope gas mines would consume, natural gas could be a cheaper, more environmentally friendly source of energy than diesel fuel. It could help shave one of the highest costs of doing business in cold, remote, rugged locations: the cost of heating buildings and powering the massive machinery of mining.
Part 1 of this story ran in the Jan. 4 issue.
Editor’s note: This is a reprint from the Office of the Federal Coordinator, Alaska Natural Gas Transportation Projects, online at www.arcticgas.gov/new-mines-could-consume-some-north-slope-gas.
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