| |
Alaska’s Mining Industry
Background
Historically, mining has been a cornerstone of Alaska’s economy. Many roads, docks and other infrastructure throughout Alaska were originally constructed to serve the mining industry. Major communities like Fairbanks, Juneau and Nome were founded on mining activity. Today, a rejuvenated mining industry brings a broad range of benefits to Alaska, offering some of the highest paying jobs in both urban and rural Alaska, as well as generating significant local government tax payments and royalties to Native corporations for activity on their land.
Alaska’s mining industry includes exploration, mine development and mineral production. The industry produces zinc, lead, gold, silver, coal, as well as construction minerals such as sand, gravel and rock. Alaska’s five operating mines (Ft. Knox, Greens Creek, Red Dog, Usibelli and Pogo) provided more than 1,500 full-time jobs of the nearly 3,500 mineral industry jobs in Alaska last year.
In addition to jobs, mining creates public revenue by paying state and local taxes. Mines help support local economies in both urban and rural Alaska with mining companies serving as the largest taxpayers in the City and Borough of Juneau, the Fairbanks North Star Borough, the Denali Borough and the Northwest Arctic Borough.
Industry interest in Alaska’s mineral potential is increasing, along with its accompanying spending. The State estimates the mining industry spent $285 million on exploration during 2007, a 56 percent increase over 2006. Driving exploration is demand for metals, primarily from Asian countries like China and India. Development spending in 2007 actually decreased from the prior year with the completion of the Pogo gold mine. But the value of metals produced dramatically increased.
Active mining claims currently cover 3.6 million acres of land in Alaska, less than two percent of the state’s total land mass. Alaska’s gold resources have grown from just a few million ounces in 1980 to nearly 140 million ounces. New resource estimates expected to come out of the Donlin and Pebble projects are likely to result in a significant increase to Alaska’s gold resource base.
The news is not all good. Alaska's two biggest logistical challenges, lack of electrical power grids and surface access (roads and railroads) to remote prospects, remain in place. In addition, drillings costs and fuel expenses (to transport workers and supplies by air) have risen sharply.
Perhaps the biggest challenge the industry faces in 2008 are two anti-mining initiatives proposed for the statewide ballot in Alaska. The initiatives are so broadly written that they would affect all major metal mining in Alaska – existing and future. They would prohibit the operations of new large scale mines, restrict operations of existing mines and could ultimately force the shutdown of existing large-scale mines throughout Alaska. These initiatives would threaten thousands of existing and future jobs, and risk the loss of up to $10 billion in state revenue. They would be especially damaging to Alaska Native communities, which depend upon revenue and jobs from natural resources.
Finally, the Alaska Minerals Commission warns that opposition efforts to new projects threaten the integrity of the land management process in Alaska, not only for mining, but future investment in other resource industries. In its annual report, the Commission said issues relating to the land management and permitting process must be addressed and resolved satisfactorily or the mining industry’s demonstrated ability to bring economic development to diverse, remote areas of Alaska will be compromised.
Facts & Economic Impact
- In 2007, the cumulative value of Alaska’s mining industry was approximately $4 billion, divided between exploration and development investments, and the gross value of the mineral products. This is a new record value and represents the 12th consecutive year Alaska’s mining industry topped $1 billion.
- The value of mineral production for 2007 was estimated at $3.4 billion, up from $2.8 billion in 2006. Minerals produced included zinc, gold, silver, lead, copper, coal, rock, gravel and sand.
- The industry spent an estimated $285 million in Alaska mineral exploration in 2007, compared to $170 million in the previous year. Exploration spending in Alaska accounted for 33 percent of the total exploration monies spent in the U.S. last year. There were 29 projects in Alaska that spent more than $1 million each in 2007.
- The industry spent $274 million on mine construction on at least nine developing and existing mines.
- Minerals are the state’s second largest export commodity. Mineral exports accounted for 30% of the state’s export total and consist primarily of zinc and lead from the Red Dog Mine. Relatively strong prices for zinc, while down from a year ago, have helped to sustain the high level of mineral export values over the past several years, as has the historically high prices received for lead. One quarter of Alaska’s mineral exports go to Canada, one-third are sold to Europe and 40 percent are bound for Asia, primarily China, Korea and Japan.
- Total direct and indirect jobs attributed to the mining industry in 2007 was 5,500 with a payroll of $340 million. The mining industry provided some of Alaska’s highest paying jobs with an average annual wage of $80,000, 90 percent higher than the state average for all sectors of the economy.
- Revenues to the State of Alaska from the minerals industry is growing quickly. Total state revenues from mining increased from $8 million in 2003 to $175 million in 2007, while operating and capital expenses incurred by the State for the benefit of the industry amounted to $13 million. In addition, mining industry payments to municipalities exceeded $14 million.
- The industry paid $15 million to the state-owned Alaska Railroad Corporation for shipments of coal and gravel, and $18 million to the Alaska Industrial Development and Export Authority for use of state-owned facilities. The industry also paid $1 million to the Alaska Mental Health Trust for rents and royalty payments and construction material sales.
- In 2007, Alaska’s mining industry provided $170 million in payments to Alaska Native corporations.
- Alaska’s three largest metal mines, Red Dog, Ft. Knox and Greens Creek, spend approximately $170 million annually in Alaska in support of their operations.
- Approximately 210 placer mines produced 70,000 ounces of gold in Alaska in 2007. In addition to Alaska’s active precious-metals mining industry, there were at least 37 rock quarries and 71 active sand and gravel operations throughout the state.
Major Production Sites
- The Northwest Arctic Borough is home to TeckCominco Alaska Incorporated and NANA Regional Corporation’s Red Dog Mine, a surface mine and mill that produces zinc, lead and silver in concentrates. Red Dog, the largest zinc mine in the world, both in terms of production and reserves, employs more than 475 people of which 56 percent are NANA shareholders. In 2007 it paid $48.9 million in annual wages and benefits and spent $130.7 million for services and goods purchased from Alaskan companies. In the same year, Red Dog milled 3,443,000 tons of ore to produce concentrates containing 575,400 metric tons of zinc and 136,200 tons of lead (metal value). Red Dog is the sole taxpayer to the Northwest Arctic Borough and the payment for 2007 amounted to $11 million. Strong metal prices resulted in $765 million in operating profit in 2006.
In the 3rd Quarter of 2007, the royalty payable to NANA increased to 25% net proceeds in accordance with the operating agreement that governs the Red Dog Mine. Previously, a royalty of 4.5 percent net smelter return was paid. The combination of strong metal prices and initiation of the net proceeds amounted to a record $58 million payment to NANA during their fiscal year. - Located 25 miles northeast of Fairbanks, Kinross Gold Corporations Fort Knox Mine has been the largest gold producer in Alaska since production began in 1997. The mine produces approximately 900 ounces of gold daily, with an annual production of 338,047 ounces in 2007. Fort Knox is an open pit mine using standard truck and shovel ore extraction methods. Gold is recovered using both gravity and carbon in pulp processes. A heap leach facility has been permitted and construction is scheduled to begin in 2008. The mine employs 421 people and all employees live and work in the Fairbanks area. Fort Knox is the second largest property tax payer in the Fairbanks North Star Borough.
- The Pogo Mine is now pouring gold at its new facility near Delta Junction. After 10 years of exploration, 3.5 years of permitting, and two years and $350 million for construction, the mine poured its first gold in February 2006 and has ramped up commercial production. The underground mine is expected to produce an average of 400,000 ounces of gold per year over a ten-year mine life. Approximately 250 people work at the mine, operated by TeckPogo.
- The Usibelli Coal Mine, a family-owned mine located outside Healy, is the only operating coal mine in Alaska. The mine has been in continuous operation since 1943 and celebrates its 65th year mining Alaskan coal in 2008. The mine produced 1.27 million tons of coal for export and in state consumption in 2007. Approximately 960,000 tons were used in local markets and 310,000 tons were shipped to Chile. The mine employs 105 Alaskans, including several second and third generation employees at Usibelli.
- Hecla's Greens Creek Mine, located on Admiralty Island, in Southeast Alaska near Juneau, is an underground polymetallic mine producing silver, gold, zinc and lead. The mine's reserves include 116 million ounces of silver, 908,000 ounces of gold, 860,000 tons of zinc and 320,000 tons of lead. In 2007, Greens Creek milled 732,100 tons of ore to produce 50,938 tons of zinc, 18,046 tons of lead, 62,784 ounces of gold and 8,168,000 ounces of silver. It currently employs 325 people. Greens Creek is one of the largest private employers in all of Southeast Alaska and is the largest private property tax payer in the City and Borough of Juneau.
- Nixon Fork, located 35 miles northeast of McGrath in Interior Alaska, is now owned by Mystery Creek Resources. Resources are indicated at 76,000 tons at 0.95 ounces per ton gold with total resources amounting to 160,000 tons containing 136,300 ounces of gold. The small multi-metal underground mine resumed production in 2006. It currently employs 86 people with a projected annual payroll of $5.9 million and an additional $1 million annually for contractual services. The mine is also expected to spend $4.8 million annually for supplies.
Selected Exploration and Development Projects
- Coeur Alaska continues development at the Kensington Gold Mine, located on the east side of Lynn Canal about 45 miles north-northwest of Juneau. Construction began in July 2005, but project completion has been delayed by litigation brought on by environmental groups regarding the Corps of Engineers Permit for the project's tailings facility. After a positive ruling for the mine in an Alaskan Federal Court upholding the Corps issuance of the permit, the environmental groups appealed to the Ninth Circuit Court in San Francisco. However, in March 2007 the Court announced its intention to rule against the company's proposed tailings plan. The case is currently being appealed to the Supreme Court. The company continued construction on all areas not in dispute, and approximately $270 million has been expended as of December 31, 2007 to construct the mill and crusher buildings, underground mine development to complete an almost three-mile tunnel connecting Comet Beach with the Jualin side of the project, Slate Creek Cove dock and ancillary facilities.
The company, through consultation with environmental groups and agency officials, developed an alternative plan for tailings placement. In February 2008, the company submitted to the U.S. Forest Service a Modified Plan of Operations utilizing paste technology for the tailings facility, which is currently awaiting approval. It will be necessary to obtain modified or potentially new permits for the alternative tailings site which Coeur Alaska believes could occur in 2008, which would allow for the completion of the tailings facility and commencement of commercial production in the second half of 2009. Coeur Alaska plans to spend approximately $25.2 million on the project during 2008. Kensington is currently expected to have a mine life of approximately 10 years, based on proven and probable gold mineral reserves of approximately 1.35 million ounces. The reserves have a grade of 0.31 ounces per ton.
- The Pebble Project is an initiative to develop a globally significant copper, gold and molybdenum deposit in the Bristol Bay region of Southwest Alaska, approximately 19 miles northwest of Iliamna/Newhalen. Its proponent, the Pebble Partnership, is a 50-50 partnership between a wholly-owned U.S. subsidiary of global mining company Anglo American plc and a wholly owned subsidiary of Canadian mineral exploration company Northern Dynasty Minerals Ltd.
The Pebble deposit is the largest known copper and the largest known gold resource in North America. To date, drilling programs have delineated an 8 billion ton deposit (all grades) containing 73.6 billion pounds of copper, 87.1 million ounces of gold and 4.2 billion pounds of molybdenum. The Pebble Partnership had invested $133 million on geological studies and project engineering by the end of 2007, and will invest an additional $92 million in 2008 to further delineate the Pebble orebody and advance project planning.
The Pebble Partnership had also invested $87 million on environmental and socioeconomic studies by the end of 2007, and will further invest $25 million in 2008 to finalize its environmental baseline document. Information from these environmental and socioeconomic studies will be used to evaluate various mine design alternatives prior to the submission of a proposed development plan for permitting.
The Pebble Project is currently at a pre-permitting phase. The Partnership does not expect to complete its technical and socio-environmental studies and submit a proposed development plan for the consideration of state and federal government agencies until 2009 at the earliest. At that point, a multi-year permitting process, involving 11 federal and state government agencies, 67 individual permit requirements, and multiple and ongoing opportunities for public input will begin.
A final permitting decision on the Pebble Project is unlikely prior to 2012. If the project is ultimately permitted, construction of mine facilities is likely to take two to three years, require a capital investment of between $3-4 billion and create 2,000 full-time direct jobs. Mine operations are likely to continue for 50-80 years, create hundreds of millions of dollars in annual operating expenditures, and generate tens of millions of dollars in annual tax payments to government.
About 700 people worked on the Pebble Project in 2007. Of this total, more than 80% were Alaskan and more than 20% from Bristol Bay communities.
- The Donlin Creek Gold Project in Southwest Alaska is a world-class gold deposit with an announced resource of 29.4 million ounces measured and indicated and 3.5 million ounces inferred. NovaGold Resources and Barrick Gold have formed the jointly-owned Donlin Creek LLC to manage and direct the project through its ongoing feasibility study, the permitting process, and into construction and operation. The project is situated on lands owned by the Calista Corporation (subsurface) and The Kuskokwim Corporation (surface). Currently, Donlin Creek LLC is reviewing and optimizing a draft feasibility study to ensure that the project is developed in an environmentally sound, safe and efficient manner.
With little to no infrastructure in the region, logistics and power are key concerns. The project is reviewing two scenarios for generating the power that will be needed to bring the property into production. The first is on-site generation utilizing a combination of wind and diesel. The second scenario would be to construct a power line from the project to the Alaska railbelt to tap power from the existing railbelt grid. Additionally, the Donlin Creek drilling program is continuing to explore both near the projected open pit and along the geologic trend in order to better characterize and expand the existing resource. Results of the review and optimization, and the ongoing exploration, will guide the project into finalization of the feasibility study and permitting.
Over the previous 13 years, Donlin Creek has worked to foster a good working relationship with residents of the region, and provide them with the opportunity to participate in the exploration and development of the project by providing local employment in well paying jobs and ongoing consultation. Donlin Creek has a local hire record of 90 percent and low employee turnover (less than eight percent). The Donlin Creek project was recently notified, for the second year in a row, that it will be recognized by Barrick Gold for its outstanding safety performance and presented with the Barrick Safety Merit Award for 2007.
- The Chuitna Coal Project, located in the Beluga Coal Field of Southcentral Alaska, consists of three major components, the Chuitna Coal Mine, a coal transport system and export terminal, and a supporting infrastructure component. The cornerstone of the development is 20,000 acres of State of Alaska leases with measured reserves of ultra low-sulfur coal in excess of 1 billion tons. The Chuitna Coal Project is currently in the permitting phase, preparatory to the start of development and construction as early as 2010. Approximately 300 million tons will be produced from the initial mining area over its 25-year life. At a peak production rate of 12 million tons per year, the project would employ approximately 350.
Web Links
Sources
- Alaska Department of Natural Resources
- Alaska Miners Association
- World Trade Center Alaska
|
|
