Draft EIS nearly ready for Donlin, in the works for Chuitna

Mining companies involved with several important projects aren’t ready to press the button on construction just yet, but they are positioning things to be ready to go when metals and commodity prices tick up, as they surely will.

One large project being watched closely is Donlin Gold in the mid-Kuskokwim River region west of Anchorage, a potential $6.7 billion surface gold mine.

After years of work the U.S. Army Corps of Engineers is expected to publish a draft environmental impact statement, or DEIS, later this month, James Fueg, Donlin Gold’s technical services manager, told the Alaska Miners Association at its annual convention in Anchorage Nov. 5.

Publication of the DEIS would be followed by a series of community meetings in the Yukon-Kuskokwim region, including one hearing in Anchorage. If things proceed as hoped, the final EIS would be published in early 2017 following by a Record of Decision later that year.

The big question following that is whether the mine will be economic and profitable enough for its developers, Barrick Gold and NovaGold Resources, to commit to spending several billion dollars on construction.

Communities in Southwest Alaska have a lot riding on the decision. Calista Corp., the Alaska Native regional corporation for the Y-K delta, is the subsurface minerals owner. The Kuskokwim Corp., a consortium of local village corporations, owns surface lands at the mine site.

If Donlin Gold is developed it will be a major employer in the region, now one of the state’s most economically-depressed areas.

The prospect itself has 34 million ounces of gold in the measured-and-indicated reserve category, a classification that means companies have a high degree of confidence in the estimate, and another 11 million ounces that are “inferred” resources, or gold estimated to be present but requiring more definition.

Chuitna

Another large mine project closer to Anchorage that is inching along in its regulatory approvals is the Chuitna coal project, on the west side of Cook Inlet. The mine is planned by PacRim Coal, the owner of coal leases on state-owned lands.

Dan Graham, manager of the project, told the Alaska Miners Association convention that the U.S. Army Corps of Engineers expects to have a draft EIS by late April or early May 2016, a milestone in a regulatory process that has taken several years.

Graham said the Corps recently completed its internal review of a draft of the document, an important step, and has turned the draft over to other federal and state agencies that are cooperating in the EIS.

“We also received our first permit Sept. 25, a minor air quality permit from the state,” Graham told the conference.

If the Chuitna project receives final regulatory approval and is approved by its owners for development, construction would require two to three years and the mine itself would have a 25-year production life, Graham said. It is likely that would be extended by new resource additions, which is common with mines.

Chuitna has been in the news recently because of an active opposition campaign by environmental groups who protest the company’s plan to mine through a creek that is salmon habitat.

Graham said the company plans to create alternative habitat and in any event to restore the habitat along the creek when mining is complete, a procedure that has been used elsewhere in Alaska in disturbed areas.

Also, PacRim can work with a decision by the state Department of Natural Resources to award a water rights application to a nongovernmental organization in a lower area of creek outside the mine area, Graham said.

The principle of the DNR’s decision, the first award of water rights to an entity other than a government agency, is disturbing as a precedent, he said, but PacRim will ensure that adequate water is flowing through the lower part of the creek.

The Chuitna project has had a long and tortured history and not all of the problems and delays can be laid at the feet of government agencies and opposition groups, Graham told the miners.

Some of the blame is shared by the company, he said, which made several changes in scope and design. While these are overall improvements, the result has been delays and complications for the regulators, he said.

“There are lessons to be learned from this,” Graham said,

The state coal leases were originally awarded in 1968 to the Wilson-Bass-Hunt group, who were exploring in Alaska at the time. In the 1980s the Bass-Hunt group, which now owns PacRim Coal (Wilson has dropped out) entered a joint-venture with Diamond-Shamrock.

The groups did substantial development work for a large surface coal mine. Major permits were granted in 1987 and an environmental impact statement was approved in 1990.

However, the Pacific coal market had meanwhile slumped. Diamond-Shamrock exited the project and Bass-Hunt regrouped to continue working.

There were changes in the project design and a relocation of a proposed port, all which meant changes to the permit applications. A major event occurred in 2010, however, when the U.S. Army Corps of Engineers took over as lead agency on a new EIS effort, replacing the Environmental Protection Agency.

That was in the ninth year of planning under the revamped development plan, Graham said, and it also meant the Corps had to gear itself up to supervise a major Alaska mining project, which it had previously not done.

“We had a situation where we were working with two different lead agencies, and over nine years there were 21 changes in key personnel associated with the project,” Graham said.

It took some time, but the Corps rose to the challenge.

“They scrambled to get up to speed on coal mine permitting. They were able to bring in specialists from other coal-mining states and to send Alaska personnel outside for training,” he said.

The draft EIS is now in its final stages.

Long lead times

Donlin Gold has had an incubation period almost as long. The mid-Kuskokwim has been a historic placer mining area, which meant that explorers knew it was a good place to look for gold, mainly the lode gold sources of the placers.

The gold prospect at Donlin Creek was actually discovered in the 1970s by prospecting crews working with Calista Corp., which had just selected lands under its Alaska Native Claims Settlement Act entitlements.

After gold was found, Calista worked to get a mining company interested and after several unsuccessful attempts succeeded in attracting Placer Dome, a mid-sized mining company, for a more extensive exploration.

Exploration drilling began in the 1980s and a very large gold resource was defined. However, a plunge in gold prices caused the company to suspend exploration.

A small “junior” exploration company, NovaGold Resources, stepped in with a plan to invest and continue exploration in return for a share of the project. Placer Dome accepted, and NovaGold’s work resulted in more gold being located. Eventually the smaller company earned a 50 percent share.

Meanwhile, in 2006, Barrick Gold, a major mining company, acquired Placer Dome and took over as operator and as NovaGold’s partner.

Barrick poured in more funds for exploration and in 2006 and 2007, at the peak of exploration, the project was spending $2 million a week, Fueg told the AMA.

Local hiring and contracting was a priority and even in its exploration phase the project became an economic stimulus for villages in the region.

The engineering and design efforts were substantial and an initial capital cost estimate of $4 billion grew to $6.7 billion as the project scope changed, including the addition of a 314-mile 14-inch pipeline from Southcentral Alaska that would bring natural gas to the project.

Energy costs were always a major concern and the project team investigated alternatives like wind and peat-fueled power generation along with barging large volumes of diesel up the Kuskokwim River. Finally the gas pipeline was decided on as the most practical alternative.

Livengood

Another big mine project is making progress, although it has been under the radar for a while. This is International Tower Hills’ Livengood gold project, a potential large surface gold mine on the Elliot Highway 70 miles north of Fairbanks.

There are 15 million ounces of measured-and-indicated gold resources, a category in which mining companies have a great deal of confidence, and another 4 million ounces of inferred gold resources, where further exploration is needed.

“We are one of North America’s largest known, undeveloped gold resources, and we’re right on a paved, all-weather highway,” said ITH President Tom Irwin.

Irwin is a mining veteran who led the development of the Fort Knox mine, and who is also a former state Natural Resources commissioner.

If it were developed the Livengood mine would be similar to the Fort Knox gold mine also near Fairbanks but larger, Irwin said.

ITH is reworking a plan for a mine the company developed in 2013 but which proved too expensive for current gold prices.

The cost estimate was in the range of $2.8 billion to $2.9 billion for a mine that would process 100,000 tons of ore per day.

The project team went back to the drawing boards and is now reworking the plan to fit a lower gold price environment.

“We’re looking at everything, the ore body, our mining procedure, water management and tailing disposal, and a one-stage as well as two-stage mill. We’re looking at how to optimize value,” Irwin said.

Among two areas of focus in the new planning, Irwin said, is a possible acceleration of processing of higher-grade ore, leaving lower-grades until later, a plan also followed at Fort Knox in its initial production.

Another area of scrutiny is how to manage water most efficiently and minimize its on-site storage, which would reduce capital costs as well as environmental risks.

Energy is a major cost for the mine and ITH is still looking at two options, purchasing power from Golden Valley Electric Association, the Interior power cooperative, or generating power at the mine.

If a North Slope natural gas pipeline is built it would pass nearby, and could possibly supply the mine with gas.

Meanwhile, metallurgical testing and engineering is still underway to find an optimal mine process, Irwin said.

What may emerge is a somewhat smaller, more efficient mine that could be profitable even at today’s gold prices, he said.

ITH expects to release its revised mine plan in the first quarter of 2016, Irwin said.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

Updated: 
11/11/2015 - 12:27pm

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