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Is Alaska poised for a mining boom?

Is Alaska Poised for a Mining Boom?

While the rest of the country emerges slowly from a recession, current events may push Alaska's mining industry into boom times again. Recent mine openings, new development, and exploration efforts, a newly elected governor, and looming joint venture opportunities with the Soviets were all topics of discussion at the Alaska's Mining Association's (AMA) annual trade show and convention held at the Hotel Captain Cook in Anchorage.

The AMA, celebrating it's fifty-first year, sponsored the convention which was highlighted by visiting Soviet mineral scientists, who participated in a symposium covering Soviet Far East, Alaskan, and Canadian mineral deposits. The level of excitement at the convention was enhanced because Walter Hickel, former governor and Secretary of Interior under Richard Nixon, was just elected state governor again. Hickel was instrumental in the early development of the Trans-Alaskan Pipeline and Prudhoe Bay oil-field, and favors orderly development of the state's natural resources.

New development and


The good news for Alaska's mining industry is that the lean years of the '80s appear to be over. During the last decade, when the price of gold and other metals bottomed out, many mining companies left the state. In 1989, however, gold production hit a 39-yr high, and mining companies are returning to the state after suffering through one of the worst metal slumps since the Great Depression. In 1986, exploration spending in the state bottomed out at $9 million. In 1990, companies spent about $60 million to prospect for minerals, and the upward trend is expected to continue into the 1990s.

A case in point is the exploration effort outlined by Steven R. Newkirk of Central Alaska Gold Company on their Nixon Fork gold prospect near McGrath, which may turn into one of the largest producing underground lode gold mines in Alaska. In 1989, CAGC drilled 18 core holes totalling 4,790 ft. In 1990, in addition to extensive trenching, CAGC completed 70 cores holes totalling 28,953 ft.

The Nixon Fork Project is a joint venture between CAGC, the operator, and Battle Mountain Exploration Company endeavoring to discover and develop high-grade oxide and sulphide Au-Cu skarn deposits in the foothills of the Kuskokwim Mountains, 35 miles northeast of McGrath, Alaska. Gold was first discovered there in 1917, Newkirk said, and placer and lode gold mines have yielded approximately 65,000 oz from intermittent operations since its discovery.

By fast tracking permits, the company plans to put the copper-gold deposit into production by late 1991, or early 1992. The mine will produce 250 st of ore daily, which would make it about twice as large as the design capacity of the Grant Mine in Fairbanks or about one-quarter the size of the state's largest mining operation, at Greens Creek on Admiralty Island. The mine will probably be run by a rotating work force flow in and out of the remote site from McGrath and Anchorage, according to Newkirk.

Another potential mine, Geddes Resources' Windy Craggy massive sulphide deposit in north-western British Columbia near the Alaskan border, has reserves that have yet to be fully defined. The 1990 drilling program was directed at confirming quality and quantity of existing reserves and verifying ore/waste boundaries. However, additional massive and disseminated sulphide lenses have been intersected in many areas, frustrating attempts to confine the deposit for mine planning, according to Gerald Harper, an official of Geddes Resources, Ltd. The deposit contains copper, zinc, cobalt, gold, silver and other metals. Plans call for trucking concentrates to the Alaskan port of Haines, where it will be barged south for further processing. Access roads and waste rock disposal for the deposit have aroused much controversy in the area.

Echo Bay Mines Ltd., another Canadian company, is pushing to get government approval to open two gold mines, the A-J and the smaller Kensington, both located near Juneau. The A-J Mine, formerly one of the largest underground gold mines in the world before its closure in 1944, is situated adjacent to Juneau, and faces formidable opposition from city residents. The mine, a joint venture with WGM, with Echo Bay as the operator, would be a 22,500 st per day operation, said John Reiss, Echo Bay Project Manager. It has 46 million st of proven and probable gold reserves, at 51 million oz/ton. The mine would employ up to 490 people, and would have a 12 year life. Reserves at Kensington are estimated at 2 million oz.

Other prospects under active exploration/development in and near Alaska includes the Rainbow Hill gold project near Cantwell and the Fort Knox gold project near Fairbanks. Results from test holes indicate the Fort Knox deposit, near Cleary Summit, may hold 5-6 million oz of gold, making it Alaska's largest known reserve. New coal mines have potential as well. Development of the Wishbone Hill, one of several potential coal mines located in the Anchorage area, is being held up over the dispute in property ownership. Construction of the new mine would employ 200 people and triple the state's coal exports.

Producing mines

Two big mine openings, Red Dog, and Greens Creek, in recent years have fueled optimism about Alaska's mining industry. These are the largest metal mines to open in the state since World War II, and prove that mines can be developed economically in Alaska.

Red Dog, located near Kotzebue, was one of the largest zinc producers last year. Greens Creek, located on Admiralty Island near Juneau, was the largest U.S. silver mine in 1989.

According to preliminary reports, production at these mines in 1990 pushed the value of Alaskan mineral production to more than $500 million, nearly twice the previous year's value. This came despite a 25% drop in gold production and a statewide drop in the number of active claims being worked. These two deposits appear to rich enough to withstand large down turns in metal prices.

In 1990, Red Dog shipped an estimated 350,000 st of high grade zinc and lead ore before the ice on the Bearing Sea closed the port for the winter. Full year production is estimated at 560,000 st zinc concentrate, 120,000 st lead concentrate, and 50,000 st (ISF?). The mine was developed as a joint venture between Nana Corp., the regional Native Corp., and Cominco, a Canadian mining company.

A key to their success, according to Ralph Hargrave, President, Cominco Alaska Inc., has been Red Dog's people approach in terms of local hire, code of conduct, and safety. Hargrave felt that the local agreement on local hire with Nana worked much better than a legislated quota, and costly legal battles and contractual delays were avoided.

At Greens Creek, the largest underground silver lode mine in North America, 1990 production is estimated at 400,000 st of ore, yielding 7.6 million oz Ag, 38,000 oz Au, 37,000 st Zn, and 16,500 st Pb. David King, Senior Mine Planning Engineer, outlined the company's planning and stope design.

At Alaska's only currently operating coal mine, the Usibell mine near Healy, production remained steady at about 1.5 million st/yr of low heat, low sulphur coal. The mine, which employs 105 people, ships about half of it's coal for local use, while the other half is exported to South Korea. Joe Usibell Jr., President of Usibell Coal Mine, Inc., discussed the potential for Alaska's huge coal reserves (estimated at 5 trillion st), and the contribution it makes to our energy needs.

All is not rosy

There are downsides to Alaska's new mining vigor. State and local tax laws are certain to change in view of the state's declining oil reserves. Environmental concerns and permits tend to delay the development and increase the cost of most projects. The lack of roads and other infrastructure can make exploration and mining a very costly business in Alaska.

In one of the more enlightening presentations of the convention, Richard Garnett, Director of Operations, West-Gold Ltd., discussed the challenges of offshore dredging in Alaska. The BIMA, a large gold dredge working off the coast of Nome, had a difficult year, with production falling off from 35,000 oz in 1989 to approximately 24,000 oz in 1990.

The water off the coast of Nome is open only 170 days/yr. Availability of the dredge was less than 50%, driving the costs to over $3/cu yd. Composition of the ocean floor ranged from boulders to silt, with clay being the primary problem. The huge dredge requires 20-25 ft of water to work effectively. Unfortunately, most of the reserves were in shallower water. Garnett suggested that a crawler mounted suction device working the sea floor might be a more economically viable approach. With the drop in gold prices and the numerous operational problems, WestGold has pulled the BIMA out of Alaska and idled the project.

Soviet Far East

The Soviet Symposium featured speakers covering many geological, tectonic and mining topics during a day and a half. Of particular interest to many were discussions by Soviet experts of the gold deposits in the Magadan region and the associated placer mining technologies, which turn out to be not that different from those employed in Alaska.

One speaker, Daniel R. Fondell, President of Bering Straits Trading Company, spoke of some of the challenges and opportunities for joint mining ventures in the Soviet Union. Fondell is the Deputy General Director of the SVZAL joint venture, a gold mining operation in the Magadan region. Some of the challenges encountered during the year that it took to form the JV included overcoming communication and logistics problems, rapid political and economical changes, and trade/monetary restrictions. The opportunities include the facts that the Soviet Union has numerous natural resources, and there is a strong need for capital, consumer goods, and technology. While struggling toward a free market economy, the volatility of a nation emerging from 70 years of communism offers both exciting financial opportunities as well as risks.

Poised for a mining boom? Time will tell. The natural resources are certainly available in and around the state; favorable economics and public support will enable them to be developed.
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Publication:E&MJ - Engineering & Mining Journal
Date:Nov 1, 1991
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