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Polishing plans: two Southeast gold mines await verdicts on development.

S Within the next year the jury should come in on whether two large gold mines will re open in Juneau mines that should about double the state's production of the glittering metal and add sparkle to Juneau's and the state's economies.

Officials of Echo Bay Exploration Inc. this spring unveiled revamped development plans for reopening of the giant Alaska-Juneau gold mine in dow-ntown Juneau, in hopes of removing two of three main environmental objections to the development. The changes, which have resulted in a year's delay in the project, mean that federal and municipal officials will likely be deciding at almost the same time on whether to approve reopening of the A- J and of a second smaller project, the historic Kensington gold mine, just north of Berners Bay 50 miles north of downtown eau.

"There's no question but things will be busy around here this winter and next spring. With both projects now on effectively the same approval track, there will be a lot for us to consider,' says Murray Walsh, director of community development for the Juneau City-Borough. Alaska,juneau Mine. The A-J gold mine is the project that has certainly drawn the most attention. Juneau city leaders and the town's electric utility made the decision in 1983 to lease the sites of the A-J and the related Treadwell mine on Douglas Island to a mining company (then Barrick Resources) for a feasibility study of reopening of the properties. But it wasn't until February 1989 that Echo Bay Exploration Inc., which had acquired Barrick's interests three years earlier, said it was interested in reopening the A-J, once the world's largest low-grade gold mine.

Last year the company unveiled plans to build a 16-acre processing site just south of downtown Juneau, a diesel electric generating plant to supplement the town's hydropower supplies, and a 345-foot-tall dam to flood Juneau's Sheep Creek Valley to both hold mine tailings and to generate still more hydropower needed by the mine. These elements were the keys to resuming production of 22,500 tons of ore a day from inside the mountains that frame downtown Juneau.

The plan immediately stirred up a hornet's nest of environmental opposition. To meet as many of the concerns as possible, Echo Bay delayed the approval process for a required federal environmental impact statement (EIS) and took its plans back to the drawing boards for redrafting.

In May, officials unveiled new designs, the company moving its surface facilities several miles to the south to dampen the project's scenic and noise impacts on downtown Juneau and to melt avalanche concerns. It also switched to liquefied petroleum gas (LPG) to fuel its electrical generators to largely eliminate air pollution worries.

We really wanted our project to be the best one possible for the good of the community, so we tried to meet as many of the community's concerns as possible,' says David Stone, a spokesman for Echo Bay. The changes boosted the project's price tag by $15 million, bringing its construction costs to $240 million, not counting the $30 million that will have been spent by year's end on planning, engineering and ore reserve definition.

The revamped plans, which likely will lead to issuance of a draft EIS by the federal Bureau of Land Management by late November, may solve a number of the initial concerns with the mine. But they don't solve the overriding concern of Juneau environmentalists:their opposition to the loss of Sheep Creek Valley, a popular hiking and bird-watching spot, under a 415-acre lake.

To me, until they can figure out some other place to put their tailings than in Sheep Creek they haven't solved their main problem,'says Skip Gray, a leader of the environmental group Alaskans for Juneau.

The mine, which produced 99 million tons of ore from 1897 to its closure in 1944 because of labor shortages and the territory's then new mining severance tax, could exceed that production in the future. Under current plans, based on continued ore sampling this summer, the mine now sports more than 100 million tons of proven and probable reserves, at last enough gold to keep the mine open for 15 years. That would result in 550 jobs in Juneau during the mine's two and one-half years of construction and generate 450 new direct jobs during operation, pumping $21 million in direct payroll a year into Juneau's economy.

The mine's expected output of 370,000 ounces of gold a year, coupled with the 200,000 ounces a year expected from the companion Kensington project, would nearly double the state's current annual gold production, estimated in 1989 at 297,900 ounces. According to the state's Department of Commerce and Economic Development, Alaska in 1988 produced 265,500 ounces of gold.

The mine would involve the construction of a new nearly three mile-long adit (one-way tunnel) into Mount Roberts to connect a proposed 40-acre surface facility north of the Sheep Creek delta with the ore vein. The revised project would involve a small relocation of Juneau's Thane Road to accommodate the new power plant. It would continue to involve construction of the mine's mill-ore processing plant in a cavern underground to cut noise, dust and scenic disruption.

And the new site plan is being designed to accommodate a related tourism complex. While its details are still under architectural design, the facility may allow tourists to walk into an underground cavern or view the actual pouring of gold bars.

Juneau could use one more major tourist attraction to keep visitors in town an extra day. With the additional space we're delighted to be able to put an architect to work to incorporate tourism into the design of the mine, not to consider it as an afterthought later on,' says Echo Bay's Stone. He notes formal plans for the tourism complex likely will be unveiled before the mine addresses the town's planning commission to win its key needed local development permit.

Echo Bay still was working on the mine's final economic feasibility study earlier this summer, after finishing up nearly 80,000 feet of core sampling to prove up reserve estimates. Preliminary figures were that the mine could produce gold at a cost of $206 per ounce - enough for it to be economically feasible, provided there are no major new costs.

The mine however, is not out of the woods on that score. Environmentalists have argued that the company should select any of four alternative tailing disposal sites, all in more remote valleys than Sheep Creek. While any of the sites would have less impact on Juneau's recreational offerings, some arguably would affect more wildlife. And all would cost more.

Disposal in Powerline Gulch, the likely preferred alternative of envirornmental groups, would cost $93.6 million more than damming Sheep Creek. Other alternatives range from being $41.2 million to $150 million more expensive.

Other potential costs could involve mitigating any water quality impacts on the existing Sheep Creek salmon hatchery, or paying even more to mitigate recreational losses if Sheep Creek is dammed. Echo Bay has proposed to rebuild an Alpine trail and install four miles of bike paths along Thane Road in return for winning municipal approval of its development plans.

The mine, while it has apparently solved its air pollution concerns, still faces debates about its effect on: water flows for the municipality, especially in winter; water quality to the hatchery and for passing fish in Gastineau Channel because of runoff from its tailings containment pond; the quality of life in Juneau, including its socio-economic costs; and residents who live along Thane Road.

Greg Sparks, Alaska project manager for Echo Bay, downplays most of the concerns. 'Our studies reconfirm that the water in our tailings pond is going to meet federal water quality standards for human consumption. That is almost unheard of and a clear sign that this mine is not going to be environmentally damaging to the community,' he says.

On the plus side, the mine would provide a backup source of electric power for the community in the event of line outages from the Snettisham and Crater Lake hydroelectric projects. By preliminary studies, it would pump between $3.3 million and $5.2 million a year more into city coffers than it would drain out because of needed new services.

The mine also could lead to underground mining of the old Treadwell gold deposit on Douglas Island. That mine closed early this century after a cave-in caused it to flood.

This summer Echo Bay was using a barge to drill into ore veins under Gastineau Channel to see if enough reserves are left at deep depths to make it profitable to tap the rich Neadwell veins by means of tunnels from the Juneau side of the channel. That would prevent surface activity in Douglas and allow the waste rock and tailings to be processed and stored in the A-J's processing and storage facilities.

While such development is highly speculative until more drilling is done, it could free up millions of additional ounces of gold and extend the mine's life for decades. A key to the A-J is that it is a huge deposit. The geology is such that there is no reason not to expect a lot more ore to be found than what has been proven already. I'm cautiously optimistic that it really is going to be developed,' says Al Clough, a geologist for the U.S. Bureau of Mines in Juneau. Kensington Mine. Far north of town lies the Kensington, a famed former mine with yields of ore about three times richer than the A,J's 0.05 ounces of gold per ton of rock. The current plan for the Kensington calls for Echo Bay and its partner in the project, Coeur d'Alene Mines, to possibly spend $150 million to place a 4,000ton-per-day ore mine in operation for at least 20 years. The latest plans call for the mine to produce a third more rock per day than did initial plans last year. The mine would employ 340 workers, who by current plans would work two weeks on and one week off, living in a camp near the mine during their shifts.

The Kensington, being a smaller project, would take two years to build and under the current time schedule could be in production in late 1992. The A-J is unlikely to be in production before winter 1993.

Kensington crews this summer largely finished their ore sampling at the mine. The company has built a 5,080-foot tunnel to cross-cut the ore vein and has drilled more than 60,000 feet of core rock samples. The project primarily is awaiting completion of its EIS, due to be finished by the U. S. Forest Service this fall.

The mine would produce a payroll of up to $15 million a year, but its benefits would depend on how many of the miners chose to stay in Juneau during their off week between shifts.

Although it has generated little environmental concern so far, the project isn't without potential concerns. The deposit is higher in arsenic than the A-J, prompting more concerns about its effect on water quality because of runoff from its tailing impoundment. A proposed breakwater and dock for the mine's ore terminal would be located in the prime Lynn Canal trolling grounds, a fact that hasn't been lost on Juneau area troll fishing groups. And already the plan has been amended to take out a proposed 3,800-foot runway to eliminate environmental concerns over the loss of wetlands near the mine. Now materials and crew will be ferried to the site by helicopter.

"The Kensington has been helped by the A-J. The larger project has attracted all the attention and the Kensington has kind of sailed along in its shadow," says the borough's Walsh. Possible Outcomes. While the two mines aren't the only ones under serious consideration in the Juneau area, they are by far the farthest along. Under current plans they could both receive approval of their environmental impact statements by late next winter, win approval of their municipal mining permits by late spring, and after likely administrative appeals - if not court challenges - be ready for construction to start by late fall of 1991.

If that happens Juneau will see considerable construction activity to soften the economic blow of possible state employment layoffs by 1991. But the future will depend on gold prices, on environmentalists being unsuccessful in winning any court injunctions to delay either project, and on financing being found for the developments.

Echo Bay's Sparks says he is convinced that both projects are sound ones and that both eventually will be built. 'Echo Bay has a stable of prospective mines and good exploration prospects, but the A-J and Kensington have risen to the top in the competition for capital. They are both very strong developments,' he adds.

Sparks notes, however, that gold prices and internal company decisions on debt level will determine whether the company will try to finance both at the same time, start one project sooner than the other, or delay both. Give me $400-an-ounce gold and both will be under way as soon as the permitting issues are settled,' he says. If prices next year are closer to the $300 an ounce mark, it's more likely that the Kensington, sporting a lower capital cost, would start into construction before the A-J, Sparks adds.

According to studies by The McDowell Group for the Juneau CityBorough about 400 residents currently work in Juneau directly in mining. The industry's employment would rise above the 1,000 mark, making mining Juneau's largest non-governmental employer, should the A-J and Kensington proceed, while it would rise above the 900 mark if the A-J and the proposed Jualin mines proceed.

When this started I didn't think any company would really want to risk all the money it would take to get these projects under way,' says Echo Bay's Stone, who formerly worked for the Alaska Electric Light & Power Co., the town's electric utility, that worked to entice mining firms to review the projects in the early 1980s.

He adds, Now it is very close to all coming together. If the mines don't happen, it won't be for lack of trying.' le
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Author:Kleeschulte, Chuck
Publication:Alaska Business Monthly
Date:Sep 1, 1990
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