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Alaska's mining industry forges ahead.

In 1885, when Americans were just becoming aware of the great mineral wealth under the ground in the northwestern reaches of the continent, President Grover Cleveland spoke to Congress on the subject. "|T~he discovery of mineral wealth in the |Yukon~ territory," Cleveland said, "... admonishes that the time has come when an accurate knowledge of the |Alaska-Canada~ boundary is needful to avert jurisdictional complications."

Alas, poor Grover! How little he knew about "jurisdictional complications." American mining companies are now faced with a bureaucratic quagmire involving the jurisdiction of federal and state agencies unimaginable in the 19th century. Add the complications in Alaska introduced by Mental Health Trust litigation, and you have a formula for frustration.

As one industry expert put it recently, American miners are subject to "an overly zealous regulatory atmosphere." As an example, Joe Usibelli Jr. pointed out in an interview last year that a single mine can be required to answer to 100 different government offices and agencies. Usibelli Mining Co., he says, spends more than 20 percent of its total operating costs on the permitting process.

So then, is Alaska's mining industry healthy? Or is it terminally ill? Despite some formidable challenges in both the near and long-term future, the evidence says that the mining business in Alaska is both vigorous and strong.

"The situation on state land in Alaska looks favorable for mining right now," says Mitch Henning, a geologist with the state's Division of Mining. "Our land situation is stable, our tax structure only requires a 3 percent net profits royalty, and politically we like to think that we provide better stability than some other places, like South America."

Steve Borell, executive director of the Alaska Miners Association, agrees. "Alaska's mining reclamation statute is logical and reasonable while still ensuring that the area mined is left in a stable condition that will provide for public safety and not pollute the environment," Borell says. He adds that the law "requires bonding in the fairest possible way."


Wishbone Hill. While Alaska's regulatory climate may be relatively favorable, a sluggish world economy has worked to slow down the state's mineral development. Idemitsu Alaska's Wishbone Hill coal deposit is a good example. The site near Sutton has proven recoverable reserves of high-rank coal totaling 15 million tons. According to project manager Dave Germer, the mine is fully permitted and could go into production fairly quickly if the world price of steaming coal were to show an improvement.

Red Dog. Poor market price is also affecting the production of zinc, the state's leading metal commodity in 1991 and 1992. Zinc accounted for 54 percent of the total dollar value of Alaska mineral production in 1992, up from 51 percent the previous year, according to the state's Division of Geological & Geophysical Surveys (DG&GS). But that performance is not likely to be repeated in 1993. Kennecott Greens Creek Mine, the state's second largest producer of zinc, was idled in the spring because of low prices.

Ralph Hargrave, president and general manager of Cominco Alaska, also expressed concern over the persistently low price of base metals. While acknowledging that Cominco's Red Dog Mine has been a success in implementing a new ore-processing technology, Hargrave points out that "we need the world economy to improve if we are to be considered a success in the profit and loss categories."


But if prices for coal, zinc and lead are stagnant, there is better news when it comes to gold. After many months of lethargy, spot gold prices began to move upward this summer, approaching the $400 level for the first time in July. Gold production figures for 1992 reported by the DG&GS showed a gold production weight increase of 7 percent. Couple these factors with development activities around the state, and the news becomes encouraging.

Echo Bay. Even before the gold price began to increase, large mining companies, including Canada's Echo Bay Mines Ltd. and AMAX Gold Inc. of Golden, Colo., continued to show a high level of commitment to their Alaska gold properties. Echo Bay, for instance, is presently involved in a $15 million project to prove 20 percent to 30 percent more underground reserves in the historic A-J Mine in Juneau. Additionally, the company has announced two construction projects involving a combined $480 million investment in the A-J property and in the company's Kensington joint venture with partner Coeur Alaska.

Fort Knox. AMAX subsidiary, Fairbanks Gold Mining Inc. (FGMI), continued its $220 million development project on the Fort Knox deposit just 15 miles northeast of Fairbanks. Late last year, the company released a 350-page environmental assessment prepared by the Anchorage office of the international engineering firm, CH2M Hill. This was a significant step toward having the operation fully permitted.

Valdez Creek. On a smaller scale, but equally significant because it is currently Alaska's top producing gold mine, Cambior Alaska's Valdez Creek Mine also reported construction expenditures. Early this spring, the company completed a 4,800-foot creek diversion project, and during midsummer finished relocating the mine's gold-processing facilities fur6ther upstream to improve efficiency in mine operations. The combined cost of the construction projects exceeded $5 million, according to senior mine engineer, Jack Robertson.

Echo Bay's two construction 2projects near Juneau await completion of the permitting process. According to company spokesman Dave Stone, state and city permits have been received for the Kensington mine, and federal permits are expected by fall. The planning commission-approved city permit was upheld on appeal by a unanimous vote of the assembly in April, but that decision has now been appealed to the state Superior Court.

Similarly, the A-J's city permit has been approved but is under appeal. The Coastal Zone consistency review has been completed, and the state permits should be issued before fall. Likewise, Stone says, the company expects federal permits to be issued in September.

The A-J and FGMI's Fort Knox project are mines of major proportions. The addition of these two mines alone will more than triple Alaska's current output of gold. FGMI reports an anticipated 300,000-ounce annual production, and Stone says the A-J will produce between 365,000 and 400,000 ounces per year. This compares with the 1992 total Alaska gold production of 262,500 ounces reported by the DG&GS.

Nome. Another important player in the Alaska gold mining community is the Alaska Gold Co., currently operating two dredges in the Bering Sea out of Nome. The dredging operation has been producing more than 20,000 ounces of gold dust per year, according to published reports.

But thaw-field drilling off Nome has ceased as the company prepares to shift operations to inland surface mining activities. The company dug a test pit last winter, and anticipates beginning a full production surface operation late this year. According to company general manager Joseph Fisher, Alaska Gold expects to mine and stockpile more than two million yards of pay load over the winter for washing next spring and summer. They anticipate an annual gold production of 25,000 ounces.

Illinois Creek. The gold-silver deposit at Illinois Creek in the Yukon River basin moved into a new phase of exploration in January when North Pacific Mining Company (NPMC) reached letter agreement with Echo Bay. NPMC has had an ongoing exploration project in the area for several years. Mineralization was first discovered there in 1980 by Anaconda Minerals, whose Alaska database is now owned by NPMC.

According to NPMC's vice president, Tom Crafford, the results of NPMC's own explorations convinced them that the reserves "were of a large enough size to justify a major mining company coming in." Echo Bay's director of Alaska pre-development, Rick Fredericksen, says that Echo Bay now has two drill rigs working on Illinois Creek. It expects to complete drilling sometime in August, and hope to have the assay back by mid-October.

The goal is to verify sufficient mineral reserves to show that the project will satisfy Echo Bay's viability criteria for development. "We consider it a great exploration project," Fredericksen says, "but we have a lot of proving to do." Crafford was enthusiastic about Echo Bay's involvement. "In addition to Echo Bay's technical expertise in this type of deposit, its level of commitment to Alaska makes it a particularly desirable partner in this project," he says.


Lake Iliamna. Cominco Exploration has essentially finished defining the reserves at its Pebble Copper deposit just north of Lake Iliamna. The DG&GS 1992 summary of Alaska's mineral industry shows reserves of 500 million tons grading 0.35 percent copper. Gold and molybdenum are also present. According to Bruce Bouley, manager of Alaska exploration for Cominco Exploration, the company has no immediate plans to develop the deposit, but will continue to examine the options, including transportation studies.

Healy. The Healy clean coal project received additional federal and state support in the last year, although environmental concerns raised by the U.S. Department of the Interior are causing delays. This developing technology is particularly exciting to those in the mining industry. Says Borell, "If clean coal technology proves out, it can be reapplied in Canton, Ohio and Cleveland; existing boilers can be retrofitted to take advantage of it. Not only will it result in cleaner air, it is true resource conservation because it will improve the output of existing mines."

John Sims, vice president of marketing for Usibelli Coal Mines Inc., has a more immediate and focused perspective. "I hope to persuade the foreign markets, especially Japan and Korea, to focus on the technology being developed here, linked to usage of Alaska coals, which are an excellent match," he says. According to Sims, TRW, the vendor of the Healy clean coal technology, believes that this option represents the lowest cost life extension option for coal-fired plants. Usibelli hopes the demonstration project will convince Pacific Rim coal buyers of this as well.

In all, mining in Alaska is here to stay, although the industry is certain to undergo significant changes in the remainder of the twentieth century. Changing methods of extraction, the development of more efficient ways of using mine products, and an increased commitment to infrastructure, especially transportation, are all probable and necessary changes.

Concern for the environment is very much a part of the business of mining. But one comment by NPMC's Tom Crafford is worth keeping in mind. "Economic prosperity allows you to protect the environment," he says. The mining industry's goal of putting people to work and keeping them there is, in fact, a vital part of any environmentally-sound resource development policy. Alaska is, and can remain, a leader in that effort.


In 1992, Alaska mines produced 68,664 tons of lead and 274,507 tons of zinc. The estimated total value of the lead was $31.5 million, and the zinc was valued at just under $302 million. Half of the U.S. production of new zinc came from two Alaska mines: the NANA-owned Red Dog Mine near Kivalina, and the Kenneco1tt Greens Creek Mine on Admiralty Island near Juneau. The two mines also produced 12 percent of the nation's new lead.

These two commodities affect your lives every day. Here are some products you might have to do without in a world lacking zinc and lead:

* Do you hunt, plink or shoot at targets? Ammunition accounts for the second largest use of lead. In 1989, ammunition manufacturers consumed nearly 63,000 metric tons of lead.

* How about the lead-acid storage battery you used to start your car this morning? Or the batteries that the local warehouse uses to power their indoor forklift? Storage battery manufacture accounts for the largest consumption of domestic lead. Battery makers use more than a million metric tons of lead every year.

* Lead is also used to make cable sheathing, solder, fishing weights, brass and bronze, glass and ceramics, bearings for electrical and electronic equipment, and castings for machinery and automobiles.

* Zinc has long had an important role in corrosion resistance. More than half the zinc metal consumed in the U.S. is used for galvanizing and electrogalvanizing. A new nickel-zinc, hot-dip galvanizing process, patented by Cominco Ltd., is gaining increased industry acceptance.

* Dry cell batteries utilize zinc in two ways: sheet zinc is used for the casings, and zinc dust in used internally in alkaline batteries.6

* Since 1980, the U.S. penny has been made of zinc covered by a copper wash. In 1989, the U.S. Mint used more than 30,000 tons of Special High Grade (SHG) zinc in minting nearly 13 billion pennies. SHG zinc is defined as 99.99 pure.
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Title Annotation:includes related article
Author:Phelps, Jack e.
Publication:Alaska Business Monthly
Date:Sep 1, 1993
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