Alaska 2017 Mining in Review.

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

Over the course of the last year, the Alaska mining industry has seen significant changes as the industry moves out of a four-plus year depression and started into a recovery that was felt with increasing effect over the last nine months. Metals prices affecting Alaska producers have been relatively stable or increasing, particularly for zinc and gold, the two metals that generate the most revenue from Alaska's operating mines. In addition, copper prices surged above the magical $3 per pound mark, re-invigorating development of at least three advanced copper prospects across Alaska. On the exploration front, gold, copper, and polymetallic prospect continued to be the focus for this sector. The junior exploration sector remains somewhat depressed due to lack of risk capital investor interest; however, producing companies of all sizes have come back to Alaska in search of the elephant-sized deposits for which Alaska is justly famous. Stay tuned, there is more to come!

WESTERN ALASKA

* Teck Resources Limited and partner NANA Regional Corporation announced year-end 2016 and first half 2017 results from its Red Dog mine. For 2016, the mine produced 583,000 tonnes of zinc in concentrate at an average grade of 17.2% with mill recoveries steady at 84.7%. The mine also produced 122,300 tonnes of lead in concentrate for the year at an average grade of 4.9% with slightly lower mill recoveries of 56%. Gross operating profit for 2016 was $668 million. Mill throughput for 2016 was up slightly at 4,250,000 tonnes. During 2016 the mine paid royalties of $282 million versus royalties of $178 million in the year-previous period. In the first quarter of 2017, ore from the higher-grade Qanaiyaq pit was introduced to supplement declining grade ore from the Aqqaluk pit. First quarter zinc production was 120,500 tonnes of zinc in concentrate from ore averaging 14.7% with mill recoveries of 80.3%. The mine also produced 28,900 tonnes of lead in concentrate from ore grading 5.5% with mill recoveries decreasing to 51.6%. During the 2nd quarter of 2017 the mine produced 127,800 tonnes of zinc in concentrate from ore grading 14.2% with mill recoveries of 80.6%. The mine also produced 31,600 tonnes of lead in concentrate from ore grading 5.2% with mill recoveries of 54.7%. The mine posted a $235 million operating profit for the first half of 2017 and recorded royalty costs of $70 million in 2017. In accordance with the operating agreement between Teck and NANA, the mine currently pays to NANA a 30% royalty on net proceeds from production. This royalty increases by 5% every fifth year to a maximum of 50%, with the next adjustment to 35% occurring in the fourth quarter of 2017. The 2017 concentrate shipping season commenced on July 1, with expected sales of 145,000 tonnes of contained zinc in the third quarter and 165,000 tonnes in the fourth quarter.

* Solitario Zinc Corporation (formerly called Solitario Exploration & Royalty Corporation) completed its acquisition of Zazu Metals Corporation and with it the Lik lead-zinc-silver deposit near Red Dog. Solitario, (which changed its name following the acquisition of Zazu Metals) now holds a 50% operating interest in the Lik deposit with Teck Resources Limited owning the other 50%. Solitario acts as the project manager. At a 5% cut-off grade, indicated open pit resources at South Lik stand at 16.85 million tonnes grading 8% zinc, 2.7% lead, and 50 gpt silver. Indicated open pit resources at North Lik stand at 0.44 million tonnes grading 10% zinc, 2.8% lead, and 59 gpt silver. At a 7% cut-off grade, indicated underground resources at South and North Lik stand at 17.29 million tonnes grading 8.1% zinc, 2.7% lead, and 50 gpt silver. At a 5% cut-off grade, inferred open pit resources at South Lik stand at 0.74 million tonnes grading 7.7% zinc, 1.9% lead, and 13 gpt silver. Inferred open pit resources at North Lik stand at 2.13 million tonnes grading 8.9% zinc, 2.9% lead, and 46 gpt silver. At a 7% cut-off grade, inferred underground resources at South and North Lik stand at 5.34 million tonnes grading 8.7% zinc, 2.7% lead, and 38 gpt silver. The company initiated metallurgical testing to determine the potential to recover silver from the deposit. Previous work focused on zinc and lead recoveries, resulting in only 5% recovery of the average contained silver value of 50 gpt silver. With approximately 29.1 million ounces of silver in the Indicated Resource category, and another 6.5 million ounces in the Inferred Resource category, improved silver recoveries have the potential of contributing significant value to the project. Welcome to Alaska, Solitario Zinc!

* Graphite One Resources Inc. announced the results of its Preliminary Economic Assessment (PEA) for the project, which indicated the planned operations would have a pre-tax net present value (NPV) of $1.037 billion using a 10% discount rate, with an Internal Rate of Return on capital of 27%. On a post-tax basis, the NPV is projected at $616 million using a 10% discount rate, with an Internal Rate of Return of 22%. Annual production of coated spherical graphite and other graphite specialty materials is projected at 55,350 metric tonnes when full production is reached in year six. At full production rates, the project has a minimum of forty years of indicated and inferred resources grading 7% carbon as graphite already outlined. Payback on investment would be four years at a mining rate of 1 million tonnes per year grading 7% carbon as graphite. As might be expected, changes in the market price of graphite had the largest impact on operational economics. The company also announced that it has received a site assessment report for its advanced-materials graphite refinery facility prepared by the Alaska Industrial Development and Export Authority indicating that Homer, Kenai, Port Mackenzie, and Seward currently have year-round road-accessible ports with barge landings, docks, and container handling capacity and the in-place electrical generating capacity to meet the refinery's power needs.

* NovaGold Resources and Barrick Gold announced an $8 million budget for project optimization at their 39 million ounce Donlin gold project. The equal partnership project is largely on land leased from Calista Corporation. The partners determined that a more cost-effective project execution plan could substantially reduce upfront capital costs related to mine construction and have approved a drill program designed to collect geologic and geotechnical data this year to accomplish that goal. On the permitting front, the US Army Corps of Engineers is working with the cooperating agencies to complete the final Environmental Impact Statement, with anticipated publication in early 2018. In addition, the project completed an updated preliminary jurisdictional wetland determination, continued developing a compensatory wetland impact mitigation plan, and moved forward on issuance of major State permits, including air quality permits, integrated waste management permits, reclamation and closure plan approvals, and water discharge permits. The company also opened a docket for a special permit to construct the natural gas pipeline through the Pipeline and Hazardous Materials Safety Administration. The partners anticipate spending a total of $20 million in 2017 to advance the project.

* Northern Dynasty Minerals announced through its wholly-owned subsidiary Alaska-based Pebble Limited Partnership that the Environmental Protection Agency has agreed to terminate previously initiated pre-emptive actions that would have prevented future development of the Pebble copper-molybdenum-gold deposit. The agreement ends all litigation between the parties...