Pebble project spending declines: Anglo American, northern dynasty seek geological, environmental insight.

• Author: Liles, Patricia
• Position: MINING

[ILLUSTRATION OMITTED]

Progress continued at a slower pace this year on the Pebble Project, the large-scale, undeveloped copper-gold-molybdenum deposit in southwest Alaska that continues to spark public opposition from environmental protectionists.

Spending at the advanced exploration project will end up totaling $65 million to $70 million this year, according to John Shively, president and CEO of the Pebble Partnership, which is a joint venture between global mining giant Anglo-American plc and Northern Dynasty Minerals Ltd., a junior exploration company that acquired the Pebble property from Teck Cominco in 2002.

That's a little higher than earlier budget projections of $59 million, announced in mid-March by Northern Dynasty.

"The main expansion is some additional drilling and geophysical work, further work to refine our understanding of the resource," Shively said, in early September.

But spending this year will be significantly lower than the $140 million spent in 2008, and 2007's $95 million budget.

"Obviously, last year was a big push. It was Anglo's first full year of looking at the project and also there was some duplication as we transferred management of the project from Vancouver to Anchorage," Shively said. "Then there was the collapse of metal prices and in that kind of situation, you can expect a reduction."

Copper prices fell in late 2008, hitting a five-year low for the base metal, remaining below $2 per pound during the early part of 2009. Since then, market prices for copper have rebounded, trending slightly below $3 per pound in September.

With the majority of mineral value at Pebble contained in copper, the project's economics may be more sensitive to changes in base metal prices, compared to gold prices, which topped $1,000 an ounce again in early September.

Metal prices "do not really affect the project as a whole. In the short term, it may impact our spending. We have to assume long-term prices for the project, which is unlikely to be in production before the second half of the next decade, so what it is today is not going to be what it is then," Shively said. "Even if metal prices had stayed up, I'm positive we would not have spent $140 million again this year."

By the end of this year, cumulative exploration spending at Pebble by Northern Dynasty and its partners since 2002 will exceed $400 million, all without capturing a single ounce of gold or pound of copper as any payback or return on the investment.

[ILLUSTRATION OMITTED]

Comparatively, construction costs at the Fort Knox open pit gold mine near Fairbanks, completed in late 1996, were about $350 million.

FIELD SEASON

The goal of this year's field...