Alaska mining in review for 2008: the money and tonnage look promising.

• Author: Freeman, Curtis J.
• Position: MINING

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While nobody likes to admit it, there is mounting evidence that the mining industry has slipped into a valley, hopefully between peaks, in the current economic "supercycle." If we have already witnessed the only peak in the cycle, it was not very super! On the other hand, mining industry pundits have also observed that a correction in the over-zealous markets, both commodity and equity, were overdue and in the long run, healthy for the long-term interests of the mining industry.

What nobody can deny is that the torrid pace of activity experienced in 2007 slowed noticeably in 2008. Factors affecting this deceleration include the soft U.S. dollar, the housing market crash, decreasing commodities prices, increasing inflation rates, the bloated price of crude oil and ever-increasing political and regulatory uncertainties around the globe. On the positive side for Alaska is the recent defeat of Ballot Measure 4 at the polls and strong mine production, development and exploration results from Alaska so far this year. All in all, 2008 is turning out to be nothing like we predicted, but exactly what we should have expected.

WESTERN ALASKA

Teck Cominco American reported its stellar, year-end 2007 results from the Red Bog Nine totaled 575,000 metric tons of zinc in concentrate. The mine also produced 136,000 metric tons of lead in concentrate for the year. Red Dog posted a healthy $819 million operating profit for the year, significantly down from the $1.079 billion profits reported for 2006. In the first quarter of 2008, the mine produced 138,500 metric tons of zinc in concentrate. Zinc ore grade increased to 21.3 percent while mill recoveries remained steady at 83.8 percent. The mine also produced 35,500 metric tons of lead in concentrate. Lead ore grade increased to 7.2 percent while mill recoveries decreased to 63.5 percent. The mine posted an $82 million operating profit for the quarter, down significantly from the $182 million profit in the same period in the previous year. The decreased operating income was attributed to lower zinc prices, higher royalty payments to NANA Inc.--$25 million in first quarter 2008--and decreased seasonal sales volumes.

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NovaGold Resources and partner Barrick Gold U.S. Inc. announced new resource updates, drilling results and a decision to complete a feasibility study at the Donlin Creek project by the first quarter of 2009. Total gold resources have increased to 35.83 million ounces of gold and incorporate an additional 20,000 meters of drilling from the 2007 drill program. The new measured and indicate resources stand at 393.8 million metric tons grading 2.50 grams of gold per metric ton for 31.67 million ounces of gold. Inferred resources added an additional 55.4 million metric tons grading 2.33 grams of gold per metric ton (4.16 million ounces). If you are in doubt about the world-class status of this deposit, try this on for size: assay results from all 2006 and 2007 drill holes averaged 67 meters grading 3.61 grams of gold per metric ton! This information comes from more than 82,000 meters of drilling in 2006 and an additional 70,000-plus meters drilled in 2007. The company also released drill results from the 2008 drilling campaign, including hole DC08-1686, which intersected 256.9 meters of 3.25 grams of gold per metric ton in 19 mineralized intervals. Additionally, Hole DC08-1689 intersected 42.1 meters of 6.97 grams of gold per metric ton in eight mineralized intervals and hole DC08-1695 intersected 302.6 meters of 3.97 grams of gold per metric ton in 13 mineralized intervals. Drilling in the East Acma area underscores the upside potential still remaining on the project: drill hole DC07-1556 returned 299 meters of 5.26 grams of gold per metric ton and DC07-1564 returned 308 meters of 4.60 grams of gold per metric ton--the two best holes for contained gold yet drilled on the property. These holes targeted the shallowly plunging Donlin anticline, which contains the rhyodacite porphyry intrusive bodies that host the majority of the gold mineralization at Donlin Creek. Similar geology projects roughly 1,000 to 1,200 meters further to the east and south from this new East Acma drilling. The company also announced that it identified a preferred design for the project and plans to complete and approve a feasibility study by the first quarter of 2009. The project is expected to have a capacity of 50,000 metric tons per day using on-site diesel and wind co-generation for it electrical power needs. The mine would operate for 25 to 30 years and produce 1 to 1.5 million ounces of gold annually. Permitting would start in early 2009 with construction targeted for 2012. Previous cost estimates released by Barrick Gold indicated that capital costs at Donlin were likely to be in the range of $3.8 to $4 billion.

Zazu Metals Corp. announced 2008 initial drilling results from its LIK zinc-lead-silver deposit near the Red Dog Mine. The company employed two drill rigs to complete approximately 10,000 meters of drilling in 2008. Significant drill intercepts include 9.45 meters grading 5.57 percent zinc, 2.03 percent lead and 69 grams of silver per metric ton in hole 150, 9.14 meters grading 10.95 percent zinc, 4.36 percent lead and 70 grams of silver per metric ton in hole 153, 17.37 meters grading 9.62 percent zinc, 2.40 percent lead and 95 grams of silver per metric ton in hole 157 and 26.8 meters grading 7.86 percent zinc, 2.75 percent lead and 88 grams of silver per metric ton in hole 159. The company also reported metallurgical work that yielded recoveries for zinc of 87 percent in a concentrate grading 52 percent and lead recoveries as high as 81 percent reporting to a concentrate grading 57 percent. Test results indicate that lower lead recoveries of approximately 70 percent would yield a concentrate grade of 70 percent, which would be more marketable to smelters. The Lik property was drill tested in the late 1970s and early 1980s and sporadically through the early 1990s. During the 2007 summer field season, Zazu completed a diamond-drilling program of 11 holes with an aggregate depth of 1,394 meters. The two, most-recent historic resource estimates on the project date to 1985 and include 10.85 million metric tons grading 10.51 percent zinc and 3.42 percent lead on the South deposit and 4.73 million metric tons grading 10.59 percent zinc, 3.50 percent lead and 53 grams of silver per metric ton on the North deposit.

NovaGold Resources announced that is has completed the tailings storage facility and significant testing of the mill and processing facilities at its Rock Creek Mine and is completing some alterations to the water-recycle pond. In the mill, both dry- and-process facilities have been commissioned. As part of the commissioning process, the operations crew has operated the mill and circulated slurry through key concentrator, flotation, gravity and leach circuits, with a test gold pour completed during commissioning of the refinery. No material issues were identified through the commissioning process that could potentially impact commercial start-up activities. In addition, the company has drilled 1,300 meters of the 9,000 meters of exploration drilling planned for 2008, with the goal being extension of the mine life. Adverse weather conditions and unusually high rainfall events have resulted in delays in commencement of production at Rock Creek and have required an increase in the capital construction cost by $25 million. The revised feasibility study envisions a 7,000 metric ton per day operation producing 111,000 ounces of gold at a cash cost of $467 per ounce. Average strip ratio will be 2:26 to 1 with estimated capital costs of $183 million.

Alix Resources and JV partner Millrock Resources Inc. announced drilling has begun at its Divide Gold Project near Nome. Total drilling of 3,300 meters in 25 drill holes is planned. Primary targets are located at the intersection zones of the two main structural trends in the Stoneman, Saddle and South zones. Recent trenching, mapping and sampling have revealed a strong east-west trending, structurally controlled vein system that intersects the northeast trending system that has been the focus of most of the prior exploration effort. Additionally, a fiat-lying structural trend with strong arsenopyrite mineralization has been identified. The company intends to conduct additional blast trenching at the Stoneman prospect and collect a bulk sample if preliminary results are encouraging.

Millrock Resources announced that it planned to complete a 1,800 meter core-drilling program at the Bluff Gold Project under a joint venture with Bering Straits Native Corp. The program is designed to confirm and expand on the 505,000 ounce gold resource in the Saddle, Daniels Creek and Koyana zones that was outlined by BHP Utah Minerals in the 1980s. The gold-bearing veins occur within an anticline and are preferentially hosted by graphitic, calcareous schist or quartzite. The prospective arcuate structure is mineralized over a distance of 6.4 kilometers. Prior drilling by BHP in the late 1980s resulted in several significant intersections including 5.48 grams of gold per metric ton over 10.9 meters, 4.19 grams of gold per metric ton over 4.5 meters, and 1.93 grams of gold per metric ton over 16.3 meters. Ungalik is situated along a major fault system that sutures the older Seward Peninsula rocks to the rest of Alaska.

Northern Dynasty Minerals and partner Anglo American PLC released year-end 2007 revised ore reserves at their Pebble Easl deposit. The 2007 drill program consisted of 157,000 feet of core drilling in 36 holes. The new inferred mineral resources stand at 3,860,000,000 metric tons grading 0.58 percent copper, 0.36 grams of gold per metric ton and 0.033 percent molybdenum that equates to a 0.99 percent copper-equivalent grade. The new resource estimate contains 49 billion pounds of copper...