Alaska 2015: mining in review.

• Author: Freeman, Curtis J.
• Position: SPECIAL SECTION: Mining

What started out looking like a strong recovery year for Alaska's mining industry turned into another year of treading water, if not actually ingesting a bit of it. Precious and base metal prices plumbed multi-year lows, affecting cash flow and profit margins at Alaska metal mines. That said, the large metal and coal mines in Alaska weathered the storm well and continued to produce coal, zinc, lead, silver, and gold. Advanced exploration continued at Donlin (gold), Bokan-Dotson Ridge (rare earths), and Arctic (polymetallic), while several other advanced projects were either on hold or advancing with more limited budgets. The mineral exploration sector was once again hit hard by lack of venture capital and lackluster commodities prices. As a consequence, of the nearly sixty exploration projects with budgets in excess of $100,000 that were active in Alaska just two years ago, only about 20 percent of them are active in 2015. Of these, over half were gold projects and a third were base metal projects. Total expenditures out of this lot will be lucky to break $75 million in 2015, the lowest level since 2004. Despite these negative vectors, major companies have once again started acquiring interests in Alaska mineral properties, a clear sign that at least some of the producing companies feel we have reached the bottom of the current cycle and wish to acquire high quality Alaska projects before the inevitable price inflation sets in.

Western Alaska

* Teck Resources Limited and partner NANA Regional Corporation announced year-end 2014 and first-half 2015 results from its Red Dog mine. For 2014 the mine produced a record 596,000 tonnes of zinc in concentrate from ore grading 16.7% zinc with recoveries of 84.6%. The mine also produced 122,500 tonnes of lead in concentrate from ore grading 4.3% lead with mill recoveries of 78.9%. Gross operating profit for 2014 was $574 million, and mill throughput was a record 4.3 million tonnes due in part to softer ore, both of which contributed to the better zinc and lead recoveries. During 2014 the mine paid partner NANA Development Corp. and the State of Alaska royalties of $215 million. The 2016 concentrate shipments totaled 1.025 million tonnes of zinc concentrates and 205,000 tonnes of lead concentrate. Production for the first quarter of 2015 included 145,900 tonnes of zinc in concentrate from ore grading to 16.5%, with mill recoveries 83.4%. The mine also produced 30,700 tonnes of lead in concentrate in the first quarter from ore grading 4.6%, with mill recoveries of 62.2%. For the second quarter of 2015, the mine produced 154,700 tonnes of zinc in concentrate from ore grading 16.5%, with mill recoveries of 85.8%. The mine also produced 31,000 tonnes of lead in concentrate from ore grading 4.8%, with mill recoveries of 58.8%. The mine posted operating profits of $108 million and $84 million for the 1st and 2nd quarters of 2015, respectively. Royalty costs were $36 million and $6 million during the 1st and 2nd quarters of 2015, respectively. The mine's production of contained metal in 2015 is expected to be 540,000 to 565,000 tonnes of zinc and 90,000 to 95,000 tonnes of lead.

* Graphite One Resources, Inc. announced final 2014 drill results, new mineral processing test results, and an updated resource estimate for its 100% owned Graphite Creek project located near Nome. The results of the final ten diamond core holes from 2014 include 42.81 meters of 6.27% graphite carbon in hole 14GCH102, 24.56 meters of 6.76% graphite carbon in hole 14GCH120, and 38.80 meters of 7.80% graphite carbon in hole 14GCH016. All ten holes intercepted significant widths of near surface graphite mineralization along 700 meters strike, and drilling continued to show good continuity along strike and down dip. The company also updated its resources which now include indicated resources of 17.95 million tonnes at 6.3% graphite carbon and inferred resources of 154.36 million tonnes of 5.7% graphite carbon, both at 3% cutoff grade. This resource is 14% higher grade than the previously announced resource and makes the Graphite Creek deposit the largest published graphite resource in the United States. The results of additional mineral processing test work revealed the existence of distinctive properties of the mineralization described as Spheroidal, Thin, Aggregate, and Expanded, or STAX. This recent work on drill-hole concentrate samples revealed that naturally occurring graphite occurs in the shape of spheres and close to the size ranges of interest for lithium ion battery-grade graphite. Screening analysis and optical microscopy also demonstrated significant proportions (7-10% or more) of thin, coarse, large flake graphite (+20 mesh, +25-30 mesh). As a result of this new information, the company suspended work on its Preliminary Economic Assessment in order to evaluate and incorporate the findings from this new work.

* Northern Dynasty Minerals Ltd. got some welcome legal news at its Pebble copper-molybdenum-gold project in 2015. Early in the year a federal court rejected an EPA motion to dismiss the Pebble Partnership's law suit that accuses the EPA of violating the Federal Advisory Committee Act in advancing its Bristol Bay Watershed Assessment study and a subsequent pre-emptive veto under Section 404(c) of the Clean Water Act. This leaves in place a Preliminary Injunction granted in November 2014 that forbids the EPA from advancing any action under 404(c) affecting the Pebble project until the case in question runs its course. Later in the year, the Alaska Supreme Court ruled that the Lake and Peninsula Borough's 2011 initiative seeking to restrict large-scale mining in the Bristol Bay region seriously impedes a regulatory process set out in state law and is therefore unenforceable. The initiative would have prevented development and mining at the Pebble project and other large scale projects. In its decision, the Supreme Court found the initiative impedes implementation of state law that place Alaska's Department of Natural Resources in charge of matters affecting the exploration, development, and mining of state mineral resources because the initiative "purports to give the borough veto power over mining projects on state lands within its borders."

* Millrock Resources, Inc. announced that First Quantum Minerals Ltd. has exercised its option to joint venture the Alaska Peninsula copper-gold project from Millrock. The 2015 exploration budget of $2 million was focused on an eight-hole, 2,400-meter drilling program on the Dry Creek and the MDB porphyry copper-gold prospects. Surface and airborne surveys conducted by partners in 2014 identified and characterized zoned rock alteration and metallic mineral distribution patterns typical of this deposit type. Drilling will be carried out on surface lands owned by Far West, Inc. and Chignik Lagoon Native Corporation, two Alaska Native corporations with which Millrock has made surface access agreements. Bristol Bay Native Corporation, with whom Millrock has an exploration agreement, owns the subsurface mineral rights and surface rights at certain locations. Results for the 2015 exploration program are pending.

* In late 2014 Redstar Gold Corporation announced that it had agreed to assume the obligations of Full Metal Minerals Ltd. under its agreement with Aleut Corporation in the Unga gold project near Sand Point. In 2015 the company completed new exploration work on the project including an eight-hole drill program completed at the Shumagin zone, one of two large epithermal vein systems on the project. The first phase of drilling consisted of eight diamond drill holes totaling approximately 1,450 meters. Highlights included hole 15SH011 which intersected 1.9 meters grading 202 grams of gold per tonne and 82 grams of silver per tonne, hole 15SH012 which intersected 2 meters grading 35.3 grams of gold per tonne and 209 grams of silver per tonne and an additional 3 meters grading 16.95 grams of gold per tonne and 183 grams of silver per tonne, drill hole 15SH013 which intersected 4 meters grading 11.62 grams of gold per tonne and 95.6 grams of silver per tonne, and drill hole 15SH018 which intersected 5 meters grading 9.35 grams of gold per tonne and 27.62 grams of silver per tonne. Overall the precious metal-bearing Shumagin vein system has a strike extent of over 1.2 kilometers and a depth of at least 330 meters as outlined by drilling and surface trenching. Drill results indicate that the thickest portions of the Shumagin vein system consists of a zone of coalesced veins and vein breccias comprising an "internal breccia vein" that ranges from approximately 7-10 meters in true thickness and is fringed on both the hangingwall and footwall by stockwork and subsidiary breccia veins that expand the width of the vein system in areas to approximately 12-20 meters in true thickness. The internal breccia vein normally exhibits the highest gold-silver grades and the highest overall grade thicknesses, but high-grade mineralization has also been observed to be associated with syn-mineral dikes within the vein system. Overall, the system exhibits evidence of multiple hydrothermal events with distinctive mineralization associated with each event. Additional work was planned for 2015, including continued step-out drilling towards the northeast for an additional 350 meters where exposures of the Shumagin vein system returned high-grade intercepts at shallow depths from drilling during the 1980s.

Interior Alaska

* Kinross Gold announced year end 2014 results and first-half 2015 results from its Fort Knox mine. During 2014 the mine produced 379,453 ounces of gold at a cost of $712 per ounce. During the year, mill-grade ore ranged from 0.50 to 0.86 grams of gold per tonne...