Alaska 2018--Mining in Review.

AuthorFreeman, Curtis J.
PositionMINING SPECIAL SECTION / OVERVIEW

Although the Alaska mineral industry is in better health in 2018 than it has been in the last five years, the spirited recovery that was in progress in the first quarter of the year turned into a dead-cat bounce, a minor unsustained recovery after a long down trend extending back to 2012. Hindsight says the cause was threat of a global tariff war that introduced uncertainty and angst into the natural resource sector. Metal prices soon reacted as demand softened, and by the end of the second quarter virtually all of the precious, base, and strategic metals had declined in price significantly or were showing signs of doing so in the near future. Alaska's producing mines are feeling the pinch of declining metals prices, and--not surprisingly--the mineral exploration sector had budgets slashed in response. With exploration funds shrinking for many explorers, their previously approved work programs had to be downsized or eliminated completely. To be sure, companies are spending 10% to 15% more on exploration than they did in 2017 but the prognosis for the mining industry in 2019 remains murky.

Western Alaska

* Teck Resources and partner NANA Regional Corporation announced year-end 2017 and first-half 2018 results from Red Dog mine. For 2017 the mine produced 541,900 tonnes of zinc in concentrate at a mine grade of 15.5% with mill recoveries steady at 82.1%. The mine also produced 111,300 tonnes of lead in concentrate for 2017 at an average grade of 5% with mill recoveries of 52.3%. Year on year, zinc production was 13% higher in 2017 while lead production was 29% lower. Gross operating profit for the year was $874 million, compared with $668 million in 2016. Mill throughput for 2017 was up slightly at 4,270,000 tonnes. During 2017 the mine paid royalties of $412 million versus royalties of $282 million in the year-previous period. In the latter part of 2017 the company began a $110 million mill upgrade designed to increase average mill throughput by about 15% over the remaining mine life, helping to offset lower grades and harder ore in the Aqqaluk pit. For the first half of 2018 the mine produced 275,100 tonnes of zinc in concentrate at an average grade of 16.2% with mill recoveries at 83.9%. The mine also produced 45,400 tonnes of lead in concentrate at a grade of 4.6% with mill recoveries of 48.9%. The mine posted a $342 million operating profit for the first half of 2018, up significantly from the $245 million profit in the year previous period. Royalty costs for the first half of 2018 quarter were $96 million versus $70 million in 2017 The expected 2018 production of contained metal is now estimated at 525.000 to 545,000 tonnes of zinc contained in concentrate and 95,000 to 100,000 tonnes of lead contained in concentrate.

* Solitario Zinc Corporation announced that a wholly owned subsidiary of Teck Resources commenced a field program on the Lik zinc project with both companies sharing the exploration costs. The work program will consist of geologic mapping, relogging of existing core, and conducting a gravity geophysical survey over a substantial portion of the 6,075-acre property. The project has an indicated resource of 17.3 million tonnes grading approximately 12% zinc equivalent and an additional 2.9 million tonnes of inferred resource at approximately 11% zinc-equivalent.

* Graphite One Resources commenced a field program at its Graphite Creek graphite project. The planned work consists of continued community engagement, 2,000 meters of core drilling to tighten drill spacing within the identified mineral resource, collection of core samples to be used for additional metallurgical test work, assessment of various alternative project access routes, and reconnaissance level fish and wildlife surveys.

* The big news was the announcement that 50/50 partners NovaGold Resources and Barrick Gold received major permits from two federal agencies on the Donlin gold project. The project is on land owned by mineral estate owner Calista Corporation and surface estate owner The Kuskokwim Corporation. The US Army Corps of Engineers and Bureau of Land Management issued a joint Record of Decision for the project four months after the publication of the Final Environmental Impact Statement, marking the completion of the multi-year federal environmental review process through the National Environmental Policy Act. The Corps of Engineers issued a combined Clean Water Act Section 404 and Rivers and Harbors Act Section 10 permit while the US Bureau of Land Management issued the Offer to Lease for the right-of-way for those portions of the natural gas pipeline that would cross federal lands. The Alaska Pollutant Discharge Elimination System Wastewater Discharge permit was issued earlier in 2018. Other key state and federal permits and approvals are scheduled to be finalized in the near future, while the partners continue optimization work aimed at improving capital efficiencies. This new information will be needed to update the 2011 feasibility study. Total budgeted project costs for 2018 are $28 million.

* Earlier in 2018 Northern Dynasty Minerals announced a sweeping series of new development considerations for its Pebble copper-molybdenum-gold project near Iliamna. The company also filed a technical report on the deposit with a revised resource estimate. At a 0.3% copper equivalent cut-off, the deposit contains 6.455 billion tonnes in the combined measured and indicated categories at a grade of 0.4% copper, 0.34 gpt gold, 240 ppm molybdenum, and 1.7 gpt silver, containing 57 billion pounds of copper, 71 million ounces of gold, 3.4 billion pounds of molybdenum, and 345 million ounces of silver. In addition, the deposit contains 4.454 billion tonnes in the inferred category at a grade of 0.25% copper, 0.25 gpt gold, 226 ppm molybdenum, and 1.2 gpt silver, containing 25 billion pounds of copper, 36 million ounces of gold, 2.2 billion pounds of molybdenum, and 170 million ounces of silver. Shortly after that, the company announced that the US Army Corps of Engineers accepted the project's permit application, commencing the permitting process under the National Environmental Policy Act. The permit application entails a significantly smaller mine plan and numerous environmental safeguards including the consolidation of most major site infrastructure in a single drainage, the North Fork Koktuli, the absence of any primary mine operations in the Upper Talarik drainage, a fully lined tailings storage facility, no permanent waste rock piles, and no cyanide use. The mine plan calls for four years of construction activity followed by a twenty-year mine life. The mining rate will average 90 million tons per year, with milling of 58 million tons per year (160,000 tons per day). Life of mine stripping ratio is an extremely low 0.1 to 1. Mineralized material will be processed via conventional froth flotation. On average, the mine would produce 287 million pounds of copper, 321,000 ounces of gold, 1.6 million ounces of silver, and 13 million pounds of molybdenum per year. Mine infrastructure includes a 230 megawatt power plant located on-site, an 83-mile transportation corridor from the mine site to a port site on the west side of Cook Inlet, a permanent, year-round port facility near the mouth of Amakdedori Creek on Cook Inlet, and a 188-mile natural gas pipeline from the Kenai Peninsula to the project site. The project will directly employ about 2,000 workers during its four-year construction phase and approximately 850 full-time workers during its twenty-year operations phase.

* Riversgold announced an update on its 2018 exploration at its Luna/Quicksilver and Gemuk projects. The field efforts clude...

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