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Power to the mine: what it takes to keep the lights on and the cogs moving in remote operations.

In a resource-rich state, it's often not a matter of whether enough of a resource exists to warrant mining it, but whether the mineral can be mined in a cost-effective way. Deposits might be hundreds of miles from a road, rail line or power supply.

Provision of power to mines can be a healthy chunk of an operation's budget. Just ask the folks at Donlin Gold LLC, who--after penciling out costs of shipping diesel to their mine in Western Alaska--have opted instead to build a 300-mile pipeline to bring in natural gas to fuel their power plant.

Economical and Esteemed

It's a roughly $900 million project, about 13 percent of the projected $6.7 billion total project cost, says Kurt Parkan, Donlin's manager of external affairs.

Donlin just entered the permitting process, Parkan says. Scoping sessions were scheduled to begin in January, the start of a three- to four-year effort to obtain about 100 permits.

Building an natural gas pipeline from Cook Inlet to the mine, located about 10 miles north of the village of Crooked Creek on the Kuskokwim River, wasn't Donlin Gold's first choice.

Asked if Donlin based their power model on other mines in operation, Parkan says each mine is a standalone process. The company's engineers studied power supply options "from the ground up," he says. They considered coal, diesel, nuclear, peat and even running a power line to the Railbelt Intertie.

Parkan says company officials initially planned to use diesel generators to supply the roughly 150 megawatts needed to operate the mine and nearby mine community.

The diesel would have to be barged up the Kuskokwim River from Bethel, Parkan says.

"We looked at that a little closer and there was concern expressed from folks in the region," he says.

Residents were concerned about so much diesel being hauled on the river and through their communities. So Donlin Gold representatives considered running a natural gas line and found that option to be cheaper.

"It takes about 80 million gallons of diesel off the river per year if we do that," Parkan says.

He says the pipeline will tap into the existing Enstar pipeline at Beluga, across Cook Inlet from Anchorage, and will run roughly parallel to the Iditarod Trail in some sections, crossing over the Alaska Range and veering west to the project site. It will be buried along most of its route, he says, but will jut above ground in two locations where it crosses earthquake faults.

Parkan says the pipeline will be built using temporary access roads.

Parkan says it might be possible for communities along the route to tap into the 14-inch pipeline, which is sized to carry more gas than the project will need. It's not yet clear who will own and operate the pipeline, he says, and Donlin Gold won't be in a position to assist communities that want to tap into the line.

At the mine, the fuel will fire a dual-fuel turbine that can be switched to diesel if necessary. Most of the power will be used to operate the grinding motors, which will grind the ore down into a powder-like consistency, Parkan says. The mine will also use autoclaves, which are used to oxidize the ore and make capture of the gold more efficient. Additional power will be needed for the community, which will be set up a few miles from the mine site. As many as 3,000 workers are expected to be needed during construction, and up to 1,400 workers to run the mine at peak operations.

"Our size is similar to what Golden Valley Electric Association provides for the Fairbanks area," Parkan says.


Rick Solie, manager of community and government relations for International Tower Hill Mines, says his company hopes to tap into Golden Valley's power line for the Livengood gold mine.

The mine is about 70 miles northwest of Fairbanks and Solie says ballpark estimates show the mine will likely need 80-100 megawatts of power. The mine would be similar in operation to Fort Knox, a surface mine where rock is ground to extract the gold, so the mills will be the largest power draw. Solie says the mine, estimated to operate more than 20 years, will likely employ 500 workers and about double that during construction.

Solie says the mine is still in the early phases; feasibility studies are expected to be complete by summer. So there's a lot of work left to do before an agreement can he worked out with Golden Valley. He estimates it would cost between $30 and $50 million to build a line roughly 50 miles from Golden Valley's existing line to the mine. A total project cost for the mine isn't available yet, Solie says.

Tower Hill will analyze a range of power supply options, including producing its own power, when it begins its feasibility phase. But he says the company prefers to purchase power from Golden Valley.

"If we end up in a self-generation situation, we build (a power plant) on our site and have our own facilities ... but you may end up with stranded power out there," he says.

The challenge, according to Solie, will be whether Golden Valley can produce enough power to support the mine, and whether it can do so in a cost-effective way for the mine without impacting the community.

"Fairbanks is suffering from high energy costs," Solie says. "Down the road, we see a potential opportunity to create some synergies with the community and with our project. A key driver for any kind of solution, for us and for the community, is to get a more cost-effective source of power."

Solie says Tower Hill supports the Fairbanks community's efforts to truck LNG from the North Slope as a source of power. Fairbanks leaders have asked the state to fund an LNG plant on the North Slope where gas could be converted to liquid for trucking the roughly 400 miles to Fairbanks. Then the liquid would be converted back to gas at a plant and used to offset fuel oil now used to generate power.

In December, Gov. Sean Parnell proposed a $355 million financial package to help the project move forward. Golden Valley and its partners are pushing to de liver the first truck of gas in late 2015. The package must be approved by the Legislature before funding will be available.

If the project moves ahead on schedule, it could be in place before Tower Hill's Livengood Mine begins production. Solie says his company plans to submit permits in 2014 and begin construction in 2017. He says the company has characterized its timeline as "aggressive but achievable."

Greens Creek

In Southeast Alaska, there's a tradition of mines using hydroelectric to provide power. Early owners of Juneau-based power provider Alaska Energy Light and Power were connected to mines in Juneau and set up its first hydroelectric project to supply area mines before 1900.

The tradition continues today. Greens Creek Mine spokesman Mike Satre says the mine is an interruptible customer of AEL&P, using hydroelectric power when the supply is abundant.

Greens Creek is a silver-gold-zinc-lead mine on Admiralty Mine south of Juneau.

Greens Creek has been a customer of AEL&P since 2006. Satre says it's not a perfect situation; power to the mine is interrupted frequently and is unavailable when water levels at Dorothy Lake and other AEL&P hydroelectric projects drop.

Sometimes the power is unavailable for three to five months, he says, and Greens Creek must generate its own power using costly diesel fuel. AEL&P gives the mine as much notice of disconnections as possible, he says, so the company can purchase more diesel fuel for its generators.

"We burn 75 percent less diesel when we're on hydroelectric power. It's a significant savings, especially as diesel costs go up," Satre says.

A statement from Hecla Mining Co. shows fuel costs spiked to 13 percent of Greens Creek Mine's operations in 2011, when lower precipitation levels meant the cheaper hydroelectric power was not available.

"Diesel fuel expense at Greens Creek increased by $7.7 million in 2011 compared to the same period in 2010 ... due to an increase in fuel consumption of 97 percent and 15 percent compared to 2010 and 2009, respectively, as well as an increase in the cost of diesel," according to Hecla.

"From a mining perspective, the cost of power is one of the largest single cost items out there. Ultimately, it's one we do have some control over," Satre says.

To that end, the mine has implemented energy-saving measures aimed at reducing power demand, he says. It's not clear how much hydroelectric power Greens Creek can count on in the future. According to Satre, power needs in Juneau are outpacing capacity.

"You can certainly do some conservation; the hope is that, once we do get back on power, we maintain those conservation methods," Satre says.

Rindi White is a freelance journalist living in Palmer.
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Title Annotation:MINING
Comment:Power to the mine: what it takes to keep the lights on and the cogs moving in remote operations.(MINING)
Author:White, Rindi
Publication:Alaska Business Monthly
Geographic Code:1U9AK
Date:Feb 1, 2013
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