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Vol. 15, No. 35 Week of August 29, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Japan plays key role in Alaska mining

To further strengthen trade bonds with Pacific Rim neighbor, Alaska delegation provides minerals update to Tokyo business leaders

By Shane Lasley

Mining News

Japan is an important player in Alaska’s mining industry. The island nation imports more than US$125 million in minerals from the Far North state annually and Tokyo-based businesses own the Pogo gold mine and are making significant investments in other mining projects across the state.

To further strengthen this mutually beneficial bond, Alaska accepted an invitation by Japan Oil, Gas and Metals National Corp. to update the country’s minerals business community about the state’s mining industry.

A delegation comprised of Alaska Department of Natural Resources Commissioner Tom Irwin, Department of Environmental Conservation Commissioner Larry Hartig, International Trade Director Cindy Sims, and Office of Project Management and Permitting Director Ed Fogels met with business leaders in Tokyo.

A seminar offered by the Alaska delegation addressed land ownership, mine permitting, and an overview of successful operating mines in the state along with a look ahead to operations likely to come on line in the near future.

Fogels told Mining News the Japanese mining leaders that attended the seminar were already aware of Alaska’s vast mineral potential, and the group was primarily interested in learning more about the state’s regulatory environment.

Fogels said he was most impressed with the long-term vision of the business leaders that he met in Japan.

Companies like Sumitomo Corp., which has been in the copper business since early in the 17th century and operated the Besshi Mine for 283 years, seek jurisdictions in which they can have long-standing relationships.

“We’re pleased to have this opportunity to continue our positive relationship with one of Alaska’s most important markets and investors,” Irwin said. “The long-term nature of natural resource development requires a continued effort to keep world markets aware of Alaska opportunities.”

Seeking raw metal

Minerals are an increasingly important component of the some US$1 billion in goods that Alaska ships to Japan every year. In 2009, mining products accounted for about 14 percent of the US$981 million in commodities the Far North state shipped to the island nation.

Japan is nearly 100 percent dependent on imported minerals. It only has a handful of operating mines, but has developed a large-scale custom smelting sector that processes about 1.5 million metric tons of copper and more than 600,000 metric tons of zinc annually.

In order to source the metals it needs to supply it electronics, automotive and steel industries, Japan monitors mineral resource development and opportunities around the world.

Japan discovers Pogo

JOGMEC, the host of the mining seminar, is a government organization charged with ensuring Japan has a reliable source of needed mineral and energy resources by providing financial and technical support to the country’s private sector.

JOGMEC also conducts overseas mineral surveys, and it played an integral role in the discovery of the Pogo gold mine in Interior Alaska. The state-owned corporation began conducting geological, geochemical and geophysical investigations of the area in 1994, which resulted in the discovery of a 4.5-meter-wide vein of ore grading 27 grams of gold per ton. Sumitomo Metal Mining took over exploration at Pogo and eventually partnered with Teck Resources Ltd., a miner that had experience in both permitting and operating mines in Alaska.

In 2009, three years after putting the underground gold mine into production, Sumitomo Metal Mining Co. and Sumitomo Corp. bought out Teck’s 40 percent interest in Pogo, giving the Japanese firms 100 ownership of the project.

The buyout represents an investment of 12 years and more than US$350 million in the Alaska mining venture by the Japanese firms.

Sumitomo Metal Mining has been a comprehensive nonferrous manufacturer since the 16th century. The 400-year-old business said the acquisition of the remaining interest in Pogo is a significant step toward it becoming a major force in the nonferrous metals industry.

“Pogo became the first operating mine by Sumitomo Metal Mining Co. outside of Japan. This is the first step to expand SMM’s mining business worldwide,” said Sumitomo Metal Mining Pogo President Nori Ushirone.

Seeking nickel, PGE

Itochu Corp., another enormous and long-lived Japanese company, has agreed to invest as much as US$40 million to earn up to a 75 percent stake in Pure Nickel Inc.’s 750-square-kilometer, high-grade nickel-copper-platinum group element Man property south of the Alaska Range.

The 150-year-old Tokyo-based company turned to JOGMEC for financial assistance and technical support when it decided to become a partner in the Man project.

Under terms of the November 2008 agreement, Itochu can earn a 60 percent interest in Man by spending US$30 million on exploration over the first six years of the option period and can increase its stake in the property by investing another US$10 million in exploration during the seventh year of the agreement. The pact also provides for acceleration of the earn-in timetable.

Itochu, which had the option to get out of the pact at the end of the 2009 field season, has confirmed its confidence in the Man project in Alaska and will proceed with exercising its option to vest its interest.

Based on encouraging results of the 2009 exploration season, the Tokyo-based company decided to increase its exploration spending over the next three years. The budget for 2010 was bumped up to US$7.5 million, a US$3.5 million increase over the original agreed upon spending. Pure Nickel said Itochu also increased its budget to US$8 million for each of 2011 and 2012.

Pure Nickel President and CEO David McPherson said, “Itochu has a solid reputation for its long-term vision. Itochu’s many decades of success speak volumes about the quality of the organization and its people. We have been fervent believers in the potential of Man, and it is extremely gratifying that Itochu has embraced our belief in the property.”

Interest in Alaska coal

Fogels said Japanese business leaders who attended the seminar also showed keen interest in Alaska’s vast coal reserves. In 2009 Japan imported nearly 162 million metric tons of coal, about 92 million tons of which was thermal coal. Only a very small amount of this total currently comes from Alaska.

If Alaska-based Usibelli decides to deve op the Wishbone Hill Mine north of Palmer in Southcentral Alaska, some 500,000 tons a year of the cleaner-burning bituminous coal will likely be shipped to Japan via newly constructed loading facilities at Port MacKenzie on the west side of upper Cook Inlet, directly across from Anchorage.

J-Power, a Tokyo-based company that operates 67 power plants with a total output capacity of about 17,000 megawatts of electricity, is collaborating with Usibelli on a feasibility study for Wishbone Hill and is expected to be the purchaser of coal mined there.

The feasibility study will be based on 6 million tons of coal reserves identified in Mine Areas 1 and 2. Usibelli plans to excavate 500,000 tons of coal annually for about 12 years from these two regions.

“J-Power has been identified as the most likely purchaser of the coal. They have expressed interest in purchasing all of the output from Wishbone Hill,” said Usibelli project spokeswoman Lorali Carter. “They currently buy coal from Healy. So this coal would be in addition to what they already purchase.”

The feasibility study also will include analysis of transportation options, updates to project permits and gathering additional environmental information.

As part of the feasibility study, the JP Azure, a super-Panamax ship, was loaded with Usibelli Coal at Port MacKenzie in May. Too large to transit the Panama Canal, the vessel, laden with 76,000 tons of coal loaded in Seward, successfully docked at the new Matanuska-Susitna Borough-owned port, where another 1,250 tons trucked down from Healy topped off its load. The massive freighter transported the coal from the upper Cook Inlet facility to J-Power’s plants in Japan.

While in Japan the Alaska delegation visited J-Power’s Isogo power plant, which ranks as the cleanest coal-fired power plant in the world in terms of emissions intensity, with emissions comparable to those from natural gas-fueled power facilities. Each of Isogo’s two power units is capable of churning out 600 megawatts of electricity, or roughly the power consumption of the entire state of Alaska.

An eye on Pebble

Japan also is watching developments at the Pebble project in Southwest Alaska. Tokyo-based Mitsubishi owns stock in Pebble partner Northern Dynasty Ltd., giving the mega-corporation a more than 5 percent stake in the copper-gold-molybdenum project.

This is part of Mitsubishi’s non-ferrous metals division strategy to “make foreign investments to secure raw materials, mainly focusing on copper concentrate, aluminum bullion, and precious metals.” The company turns these raw metals into products that can be used in Japan and sold abroad.

Japan’s interest in Bristol Bay goes beyond Mitsubishi’s desire to secure an interest in the massive stores of copper, gold and molybdenum at Pebble. The island nation imported nearly US$540 million worth of Alaska seafood in 2009, making it the state’s largest international seafood market.

While visiting Tokyo, the Alaska natural resources delegation also met with Japanese seafood buyers at the Japan International Seafood and Technology Expo, one of the world’s largest seafood shows.

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