Sharing the wealth: Red Dog boosts revenue-sharing funds for Native corporations.

• Author: Liles, Patricia
• Position: NATIVE BUSINESS

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When Alaska Native regional and village corporations receive their annual revenue-sharing checks for resource development that occurred on Native-owned lands during 2007, the increased dollar amount could be a shock.

That's because NANA's contributions to the resource revenue-sharing fund will more than double for 2007, thanks to the regional corporation's royalty income increase from the Red Dog zinc and lead mine in Northwest Alaska.

DOUBLING CONTRIBUTIONS

NANA, the regional corporation representing Natives in Northwestern Alaska, expects its net contributions from Red Dog revenue to the resource revenue-sharing fund to be more than $140 million for 2007, compared to nearly $70 million for 2006.

"We're the ones who have been blessed ... we've reached this point in NANA's lifetime to be able to share more," said Marie Greene, president and CEO of NANA, in a telephone interview in early March. "Since the operation started, we've been sharing 7(i) proceeds and believe me, it's appreciated by all Alaska Native corporations."

In recent years, NANA's royalty proceeds from Red Dog have risen steadily, thanks to increased production at the open-pit mine and climbing market prices for zinc. But the financial impact dramatically changed in mid 2007, as NANA's financial agreement with mine operator Teck Cominco shifted into net profit revenue sharing, from a netsmelter royalty payment.

That's because Teck Cominco finally recovered about a billion dollars worth of expenditures for initial and ongoing capital costs, as well as accrued interest and advance royalty payments.

BACK TO 1982

The original agreement between the mine developer and the Native corporation in 1982 called for NANA to initially receive a 4.5 percent net smelter return from Red Dog, until the mine's capital costs were recovered. Then, NANA received 25 percent of the net profits from Red Dog, a change in financial payments that began in the third quarter of 2007, 18 years after the mine first began production of zinc, lead and silver in 1989.

Terms of the mine development agreement call for NANA's percentage of net profits to increase 5 percent every fifth year until the two corporations reach an equal split of net profits.

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"We've come to realize that we've finally reached the point of what was the goal was from the original agreement we signed in 1982," Greene said. "We hope the mine continues to operate for a long time to come ... we're...