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Mining districts in Alaska: a geographically diversified economic base.

Alaska's oil and gas resources seem to be concentrated on the North Slope and Cook Inlet, at least those discovered so far. But the state's rich mineral endowment is spread statewide, which holds the promise of a geographically diversified economic base as mineral discoveries are made and mines are developed over time.

There are discovered minerals and mines at the advanced exploration stage in different parts of the state, but there are also producing mines, so that the effect of mining in diversifying the state's economy is a fact, not just potential. Mining created about five thousand Alaska jobs in 2013 and $630 million in annual payroll. A job in Alaska mining pays over $100,000 a year on average.

Southeast

Southeast Alaska is the state's oldest minerals producing district. The discovery of gold at Juneau led to that city being established and eventually wrestling away the honor of being the capital of the then-territory from Sitka, the capital in Russian days and the early years of Alaska's being a part of the United States.

Today there are significant operating mines near Juneau: the Greens Creek Mine on Admiralty Island and the Kensington Mine at Berner's Bay, north of the capital city. Both are underground mines, Greens Creek producing a mix of silver, gold, and zinc and Kensington being a gold mine like the first mines developed in Juneau.

There are also two mine development projects farther to the south, at the southern tip of Prince of Wales Island near Ketchikan. The Niblack and Bokan Mountain-Dotsen Ridge projects are both underground mine projects in advanced stages of exploration and development planning, and if the stars align both could be producing in a few years.

Bokan Mountain is unique because it would be a rare earths project, producing an unusual and scarce set of minerals that are used in high-technology manufacturing. As the demand for high-tech expands, particularly for military uses, the need for these minerals will grow. There are strategic security issues as well because China now supplies much of the world's rare earth minerals and the United States is considered too dependent on Chinese production.

Ucore Rare Metals, Inc., the company developing the Bokan Mountain deposit about forty miles from Ketchikan, has been exploring the deposit for several years. In 2014 a 5,500-meter drilling program was completed. The bulk of the 2014 drilling was for "infill" test holes drilled between previous test holes on a more widely-spaced grid. This is needed to better model the ore body and increase the company's confidence that the mineable ore believed to be present is actually there.

There was also deep drilling aimed at expanding the known resource at deeper levels and geotechnical and groundwater drilling that was needed to provide information for development permit applications.

Ucore issued a Request for Proposals in mid-October for a consulting firm to prepare a Bankable Feasibility Study, or BFS, a major step. This is a detailed study of a quality sufficient that financing can be raised in Canadian equity markets.

One interesting aspect of Bokan Mountain is that Ucore is working on a way to electronically sort low-grade ore and process only higher grades, which will increase the efficiency of the ore processing. Ucore is also experimenting with procedures to process the rare earth minerals at the mine rather than shipping concentrates out of state to a processing facility.

The development plan is for a mine producing about 1,500 tons of ore daily. A capital investment of $221 million is estimated.

The Niblack deposit, also on southern Prince of Wales, would also be an underground mine, but one producing a mixture of metals much like the Greens Creek Mine near Juneau. Niblack is at an advanced exploration and engineering stage, similar to Bokan Mountain.

If Niblack is developed, its owner, Heatherdale Resources, plans to ship raw ore to a processing plant near Ketchikan rather than "milling" the ore on site. This is mainly to take advantage of hydro power available in Ketchikan, which is less costly than power for a plant at the mine generated with diesel. Heatherdale has invested about $37 million to date in Niblack exploration and planning. Previous exploration investments totaled $50 million.

The two operating mines near Juneau are real success stories. Greens Creek is the crown jewel of producing mines for Heda Mines, its owner. It is now the largest silver producer in North America. Production was started in 1989 by Kennecott Minerals with Hecla as a minority owner, and Hecla ultimately bought out Kennecott's share. Exploration has increased the size of the discovered ore body, and last fall Hecla received final US Forest Service approval for an expansion of its tailings storage facility, which will allow more minerals to be mined and the operating life of the mine to be extended. Greens Creek was projected to produce between 6.5 million and 7 million ounces of silver in 2014 along with 55,000 ounces of gold.

The Kensington gold mine at Berner's Bay is equally a success for its owner, Coeur Mining, Inc. of Idaho. Kensington had its challenges in starting up, but a redevelopment program by Coeur led to more efficient production and the mine is now meeting expectations.

Kensington produced 114,821 ounces of gold in 2013 and listed its resources as 566,000 ounces in the measured and indicated category and an additional 263,000 ounces in the inferred category. The mine employed about 318 people in 2013.

The Interior

In Interior Alaska, the Pogo Mine east of Delta has turned out to be a real winner for Sumitomo, its Japanese owner. The mine, an underground gold producer, has overcome early challenges after its startup, mainly in the efficiency of its ore milling and high turnover rates among its underground miners. Those problems are now under control and Pogo is now on an aggressive expansion program to tap nearby gold ore deposits and extend its operating life.

Pogo produced about 337,000 ounces of gold in 2013 and 2014 production is expected to be about the same. The mine employs about 314 with an additional 80 contractor employees. Typically the contractor workforce increases to about 180 in the summer. Currently the mine has 4.97 million ounces of unproduced gold reserves, enough to operate until 2019, but the company is confident additional reserves will be added through the development and exploration work now underway.

In the meantime, Pogo is a major economic stimulus in Interior Alaska, with a 2012 payroll of $38.5 million and an average wage of $116,916 that year, more than twice the Alaska statewide average pay in 2012. The mine also spent $127.2 million with about 290 Alaska-based vendors in 2012, $82.7 million of it in the Interior region. Pogo also paid $24.3 million in state taxes and royalty payments in 2012.

The Fort Knox gold mine northeast of Fairbanks, a surface mine, is likewise a major economic contributor to the Interior region. The mine, owned by Kinross Gold Corp., was projected to produce about 380,000 ounces of gold in 2014. It employs about 650, the vast majority living in Fairbanks and commuting to the mine; it pays about $81 million in annual payroll, $23 million in state and local taxes, and about $43 million per year to Golden Valley Electric Association, the Interior electric cooperative, for electricity purchases.

Gold production began at Fort Knox in 1996 and mining will continue for several years, but as the higher-grade portions of the ore deposit are depleted the mine may be approaching the end of its conventional milling operating, phasing more into the processing of ore by its heap leach, which is now underway for low-grade ore. The heap leach operation begun in 2009 is proving successful.

At the end of 2013 Fort Knox had 2.86 million ounces of proven and probable reserves; 1.147 million ounces of resources in the measure and indicated category and another 176,000 ounces of resources in the inferred category. On December 18, 2013, the mine produced its 6 millionth ounce of gold. Since mining began, about a quarter billion tons of ore have been mined and processed at Fort Knox.

It is not yet constructed, but a surface gold mine larger than Fort Knox could be developed near Livengood, about sixty miles north of Fairbanks. International Tower Hills Mines' (ITH) Livengood Mine project is a large, undeveloped, low-grade ore deposit close to the Elliot Highway. Extensive exploration has been done at the deposit and about 20 million ounces of gold resources have been identified by almost eight hundred drill tests: 15.7 million ounces of this in the measured and indicated category and an addition 4.4 million in the inferred category.

The ITH project is currently in a holding pattern as the company works to re-scope the development plan. An initial development plan was found to be uneconomic at the costs estimated and the price of gold at the time, and the plan is now being revised to reduce costs. Meanwhile, ITH is looking for partners for the project. If it is developed, Livengood mine operations would require about 425 workers. About 1,020 would be employed in construction for two years.

No mention of Interior mining is complete without the Usibelli coal mine at Healy, south of Fairbanks. Usibelli Mine, Inc., owned by the Alaskan Usibelli family, has been mining coal at Healy since 1943 and is Alaska's longest-operating mining operation. This is a surface mine that produces about 1.6 million tons of coal per year, about 1.1 million tons for Alaska power plants in the Interior and about 500,000 tons per year to export markets through Seward, south of Anchorage. The export volume is down from recent years due to soft coal markets in the Pacific Rim, but Usibelli did ship seven shiploads of coal in 2014 to several destinations in the Pacific.

Usibelli has ample undeveloped coal resources, enough to sustain production for several decades, and there are additional undeveloped resources in the area. A new venture for Usibelli is developing a small coal mine at Wishbone Hill in the Matanuska River valley north of Palmer. A state permit for Wishbone Hill was issued in 2014. This is a higher grade of coal than Usibelli mines at Healy.

Northwest Alaska

If there is one bright star in the sky for Alaska's miners it is the Red Dog Mine in northwest Alaska in the De-Long Mountains about ninety miles north of Kotzebue. Red Dog is a surface mine and one of the world's largest zinc producers, although lead is also mined. Ore is mined and milled at the mine and the concentrates are trucked about sixty miles to a loading port on the Chukchi Sea coast where they are stored and shipped seasonally in summer when ocean ice thaws.

The mine owner and operator is Teck Resources and the landowner is NANA Regional Corporation. Teck pays mineral royalties to NANA, but it is in reality a partnership with the many mine workers hired from villages in the Northwest region and NANA-owned companies and joint-ventures providing services to the mine, such as in trucking.

In July 2014, NANA celebrated the 25th year of production at Red Dog. Since 1989 the mine has paid more than $400 million in royalties to NANA and an additional $600 million in payments to other Alaska Native corporations through the "7i" revenue-sharing provision of the Alaska Native Claims Settlement act. (Under this, 70 percent of a regional corporation's resource earnings are shared with all other regional and village corporations.)

Red Dog is unique in one other way, as a partnership with the state of Alaska in the development of the support infrastructure for the mine, the port, and a fifty-seven-mile road. The Alaska Development and Export Authority (AIDEA), the state's economic development corporation, financed construction of the road and port because Cominco, the mine developer later purchased by Teck, had resources only enough to finance the mine.

Under the agreement, which was approved by the State Legislature, AIDEA owns the road and port and Teck pays a toll for its use and is also the contract operator. AIDEA's original investment has now been paid back and the operation of the road and port is now a source of profit for the state authority. The money is used to finance other infrastructure projects around the state, including for mines.

Southwest

The Donlin Creek gold project, near Crooked Creek village on the Kuskokwim River, could become one of the largest gold mines in North America if it is developed. Donlin Gold is a 50-50 joint-venture of Barrick Gold and NovaGold Resources. The project is on land owned by The Kuskokwim Corporation, a consortium of village corporations, with subsurface mineral rights held by Calista Corporation.

Exploration has been underway at Donlin Creek for many years and the project is now in its permitting phase, with an Environmental Impact Statement process now underway. If a mine is developed at Donlin Creek it would be a large employer, creating 600 to 1,400 jobs, and a major economic stimulus in the Yukon-Kuskokwim region.

Another large mine in development planning is Pebble, a large deposit of copper, gold, and molybdenum near Iliamna, southwest of Anchorage. Pebble Partnership, a company owned by Northern Dynasty Minerals, has done substantial exploration and development planning at Pebble. If developed, Pebble would create 800 to 1,000 production jobs.

There is strong opposition from sports and commercial fisheries groups, however, who fear contamination of salmon-bearing streams from the mine. The US Environmental Protection Agency has also initiated an action to preempt large-scale mining in the Bristol Bay region, but this is on hold after having been challenged by the Pebble Partnership. The company is now waiting for legal issues to be cleared before proceeding to an application for development permits.

Mike Bradner is publisher of the Alaska Legislative Digest.
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Title Annotation:MINING
Comment:Mining districts in Alaska: a geographically diversified economic base.(MINING)
Author:Bradner, Mike
Publication:Alaska Business Monthly
Geographic Code:1U9AK
Date:Feb 1, 2015
Words:2328
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