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Mining out the storm.

Despite Gold Slump, Industry Sets $11 Billion Record

The sounds of whirling helicopters and whining drills have once again returned to the hills and valleys of Alaska as the rough-and-tumble mineral exploration season hits its fall stride.

According to a report produced by the Alaska Minerals Commission, major developments in the state include the continuation of commercial production at Fort Knox gold mine near Fairbanks and Illinois Creek gold mine near Galena.

Additionally, the Red Dog zinc mine near Kotzebue perseveres with its $183 million expansion project; the Greens Creek mine near Juneau resumed full production; the Nixon Fork mine near McGrath expanded to allow continued production; and the Usibelli Coal Mine near Healy upgraded its major earthmoving equipment.

"The recent growth in the minerals industry is one of the shining stars in Alaska's healthy economy, setting new records in each of the past two years," said Gov. Tony Knowles. "This new investment, exploration and production has added several hundred well-paying, private-sector jobs, many in rural areas."

Last year nearly $51 million was spent in exploration, $152 million in development, and $855 million in production. That $1.1 billion surpassed the previous record of $1.03 billion set in 1996.

"With five world-class hard rock mines operating today - from Fort Knox in Fairbanks, to Kotzebue's Red Dog, to Greens Creek in Southeast-and others coming on line, the value of Alaska's mining industry has tripled in just the past 10 years," Knowles added.


Leading the pack in Western Alaska is Cominco Alaska, Inc., which operates the Red Dog mine, the largest zinc mine in the world. Red Dog is located approximately 90 miles north of Kotzebue in the DeLong Mountains, 55 miles inland from the Chuckchi Sea. It produces nearly 500,000 tons of zinc-ore each year.

Cominco recently announced an operating profit of $102 million for 1997, more than quadrupling 1996 profits of $25 million. Also noteworthy: Red Dog's expansion project is reported to be on schedule for a second-half 1998 completion. The $200 million infrastructure expansion includes construction at its port, as well as new housing and processing plant facilities. Port construction was recently completed.

Cominco, established in 1989, employs about 800 and is a subsidiary of Cominco Ltd, a Canadian-based mining and smelting company. Zinc and lead are exported worldwide out of Red Dog, which produced about 7 percent of the world's zinc in 1996. Last year, about 19 percent of the 50.6 million tons of ore removed was zinc-bearing.

Cominco also announced results from the Palaaq deposit, their newest ore body to be discovered. This deep extension of the Red Dog system is estimated to contain 14 million tons of zinc-bearing ore at depths ranging from 600 to 1,400 feet below the surface.

Red Dog is owned by NANA Regional Corporation, and has a 50-year mine life expectancy. Cominco, the only taxpayer in the Northwest Arctic Borough, provides about $2.5 million annually to the borough's $5 million budget.


Placer Dome, also in western Alaska on the Kuskokwim Delta, announced a revised resource estimate totaling 61 million tons of gold-bearing ore (equivalent to 6.7 million ounces of gold) at its Donlin Creek deposit. That total is up from 1996 figures of 44.6 million tons of gold-bearing ore (or 5.3 million ounces of gold).

The Donlin Creek exploration project, located about halfway between McGrath and Bethel, is on lands owned by Calista Native Corporation and is in its third year of operation. Calista, one of the state's largest private landowners, owns mineral rights on nearly 6.5 million acres. Most of the corporation's land is in the Kuskokwim Mineral Belt, noted for its rich placer gold deposits among other minerals.

Placer Dome spent about $7 million drilling more than 25,000 feet at Donlin Creek. The drilling, done at the invitation of Calista, is part of an early study of Placer Dome's copper/gold exploration project in Alaska. Continued drilling at Donlin Creek is a priority project, according to Placer Dome who spent more than $15 million last year on worldwide feasibility studies.

Joining Placer Dome is Ventures Resource Corporation who shares a nine-mile common boundary with Placer Dome. Ventures' 9,000-acre property, dubbed Donlin North, stretches for 4.4 miles along the projected mineralized trend of the Donlin Creek ore deposit, according to Ventures Resource. Ventures, along with Cominco and Placer Dome, have been actively acquiring properties surrounding Donlin Creek at Flat, a historical mining district located about 12 miles to the north of Donlin Creek.


In the Eastern Interior, Amax Gold (Fairbanks Gold Mining, Inc.) and Toronto-based Kinross Gold Corporation completed their merger making Kinross Gold Corporation owner of the Fort Knox gold mine near Fairbanks. First quarter 1998 production at Fort Knox totaled 87,232 ounces of gold at a cash cost of $189 per ounce. The company has also initiated a $4 million mill upgrade program that should see annual throughput increase by 12 percent.

The first gold was poured from Fort Knox in December of 1996. By the end of 1997, Fort Knox was the largest gold producer in Alaska. Its approximate 250 permanent employees are expected to pull out about 350,000 ounces of gold each year.


Greens Creek Mine, which began operation in 1989 as the first lode/hard-rock mine in Alaska since WWII, posted an operating profit in 1997 despite depressed gold, silver and lead prices. The silver/zinc/gold/lead mine, located near Juneau on Admiralty Island, is owned by Kennecott Greens Creek Mining Company/Kennecott Juneau Mining Company (70.3 percent) and Hecla Mining Company. Greens Creek is the largest silver mine in North America.

About $4 million was spent last year on exploration activities at the mine, with the bulk of it taking place underground. According to Hecla, exploration efforts uncovered a "very important extension to the high-grade Southwest ore zone, and early results indicate it could be a major addition to the mine's reserves. The goal is to bring that resource into the "proven and probable reserve category by the end of the year," said Hecla.

First quarter 1998 production from the mine totaled 2.1 million ounces of silver at a cash cost of $3.55 per ounce. The operation also produced 3,993 ounces of gold, 1,412 tons of lead, and 3,574 tons of zinc.


Nixon Fork Gold Mine, an underground gold/copper mine located about 30 miles northeast of McGrath, is the highest grade gold mine the U.S., with ore averaging more than 1.5 ounces per ton. Intercepts included values as high as 2.5 ounces per ton, according to the Del Monte Mining Corporation.

Nixon Fork poured its first gold in October of 1995, and full production of about 50,000 ounces of gold per year was reached about a year ago. By the first quarter of this year, about 12,259 ounces of gold were produced at grades of 1.3 to 1.7 ounces per ton.

The mine is located on lands owned by Doyon Limited. Doyon has also partnered with Ventures Resource Alaska Corporation, ASA/Montague Gold NL Joint Venture and North Star Exploration, Inc. Doyon, which has entitlement to about 12.5 million acres in Alaska, is the largest private property owner in the state and one of the largest land owners in North America.


Near Delta Junction, Pogo Teck Corp. and partner Sumitomo Metal Mining Co. are continuing their $8 million surface drilling and underground exploration program on the Pogo gold deposit in the Goodpaster River country. The deposit contains resources of 10.9 million tons of gold-ore (0.41 ounces per ton), which will produce about 4.47 million ounces of gold. The gold is located in two flat-lying quartz veins with an average thickness of 24 feet. Permitting is continuing on the underground exploration portion of the program.


Dakota Mining, which operates in the Galena District, faced financial woes recently when its Alaskan subsidiary and operator of the Illinois Creek gold mine, USMX of Alaska Inc., filed for Chapter 11 bankruptcy protection. Interim financing measures designed to avoid this event failed to materialize leaving USMX of Alaska with $12.1 million in debt.

The Illinois Creek heap leach mine recovered 20,111 ounces of gold through year-end 1997 while an estimated 52,500 recoverable ounces remained in the heaps. (Dakota expected to produce 65,000 of gold in 1997.) Cash costs at Illinois Creek for 1997 were $195 per ounce.

Dakota Mining explores, develops and operates gold properties throughout North America, however recently ceased all operations except those at Illinois Creek because of environmental compliance issues and low gold prices, the company said.

The Illinois Creek mine is on lands owned by Cook Inlet Region, Inc., the largest private landowner in the Cook Inlet region. CIRI owns a royalty interest in the mine. According to CIRI, "technical problems with the project, low gold prices, and financial circumstances of the operator all contribute to a less than optimistic outlook for this project."

Illinois Creek poured its first gold in June of last year. Illinois Creek is located about 325 miles north-northwest of Anchorage.

Curtis J. Freeman of Fairbanks contributed to this article.
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Title Annotation:Alaska's gold mining industry
Author:Freeman, Curtis J.
Publication:Alaska Business Monthly
Article Type:Industry Overview
Date:Sep 1, 1998
Previous Article:Leading Alaska's natives: the 13 regional corporations.
Next Article:From the ports of Tacoma.

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