Year in Review: Donlin, WOTUS, Ambler and Fort Knox

  • Kinross Gold Corp. announced June 12 that it has decided to move forward with a $100 million expansion to the Fort Knox gold mine about 25 miles northeast of Fairbanks. (Photo/Courtesy/Kinross Gold Corp.)

In August, after nearly 25 years of work, Donlin Gold LLC got one thing every major project developer in the country desires: a favorable record of decision from the federal government.

In this instance, it came as a first-of-its-kind joint ROD issued by the U.S. Army Corps of Engineers for the environmental impact statement and by the Bureau of Land Management for the project’s natural gas pipeline right-of-way authorization across federal land.

Donlin’s final EIS was published in April; the Corps of Engineers recommended the company’s preferred project plan for approval in its ROD.

Later in August the Alaska Department of Fish and Game approved a slew of Title 16 permits for development activity in salmon habitat.

Donlin Gold was also one of the primary players in the successful effort to defeat Ballot Measure 1, which would have greatly increased the state’s requirements for obtaining a Title 16 permit and would have seriously challenged development of the mine, especially under its current plan.

As envisioned, Donlin would be one of the world’s largest open-pit gold mines, extracting about 33 million ounces of gold over an initial 27-year life. The company is open to partnerships to help build out much of its support infrastructure — including 30 miles of road, ports and a 315-mile gas pipeline from west Cook Inlet to the Kuskokwim River mine site — which could help mitigate some of the high fixed costs the project faces, according to spokesman Kurt Parkan.

A 50-50 joint venture between Canadian companies Barrick Gold Corp., the world’s largest gold producer, and NovaGold, Donlin Gold LLC has spent roughly $500 million exploring and permitting the open-pit gold project over nearly 25 years, Parkan said to the Alaska Miners Association in November.

Still, that money is not factored into the $6.7 billion estimated construction cost calculated during a 2011 economic study of the project. Parkan said in an interview that the seven-year-old figure is what the company continues to work from; the focus now is on bringing it down.

As a result, Donlin’s owners are resistant to putting a definitive timeline on the project, according to Parkan.

While Donlin has its federal Clean Water Act Section 404 wetlands permit, the BLM right-of-way and a special permit from the Pipeline and Hazardous Materials Safety Administration, it still needs state approvals that will take several more years to acquire.

2. WOTUS revamped

President Donald Trump administration took a big step towards limiting which waters and wetlands the federal government has authority over Dec. 11 when a new, draft version of the waters of the U.S. rule was released.

The move is the final step in the Trump administration’s nearly two-year effort to replace an Obama-era version of the rule, oft referred to as WOTUS, finalized in 2015 but challenged in court by 12 states including Alaska.

Acting Environmental Protection Agency Administrator Andrew Wheeler and Assistant Secretary of the Army R.D. James signed the proposed rule Dec. 11.

The Corps of Engineers adjudicates applications for development permits in navigable waterways across the country on behalf of the EPA. The EPA has the final say over regulating development in and around navigable waters through is Clean Water Act authority.

The new WOTUS rule covers traditional, large navigable waters and their tributaries that contribute year-round or intermittent flow and wetlands adjacent to other jurisdictional waters. It focuses on wetlands and other areas with surface water connections as falling under federal jurisdiction. The 2015 rule had a broader scope, including areas with subsurface water flow.

Development in waters that fall under the Clean Water Act typically require some sort of mitigation or offset to the impacts of the activity, which development proponents often lament as being very costly.

The members of Alaska’s congressional delegation welcomed the announcement in statements from their offices.

In February 2017 President Donald Trump issued an executive order titled, “Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the ‘Waters of the United States’ Rule.” That order led to a lengthy public process to repeal the 2015 rule, which concluded earlier this year.

The rule had been suspended from taking effect by the 6th Circuit Court of Appeals in Alaska and the other mostly western states that sued to stop it in 2015.

3. Ambler cost drops; permitting on horizon as road advances

Early in the year Trilogy Metals CEO Rick Van Nieuwenhuyse said the overall cost to build and operate the company’s proposed copper, zinc and precious metal mine in the Ambler mining district was coming down.

By the end of the year Van Nieuwenhuyse was saying the company plans to start permitting the mine in the first half of 2019.

The pre-feasibility study for Trilogy’s Arctic deposit was released Feb. 20 with a development cost of $780 million, up about 9 percent from a 2013 estimate. However, a 60 percent drop in expected annual operating and 20 percent decrease in closure and reclamation costs — to about $65 million each — cut the all-in cost for the initial 12-year mine by 5.5 percent from $964 million in 2013 to $911 million today.

Trilogy executives said during a call with investors that the drastic drop in operating costs is due to changes in the plan for waste rock and tailings management, fuel and federal tax reform.

The Alaska Industrial Development and Export Authority is leading development of a 211-mile industrial road to access the mining district. The Bureau of Land Management is writing a separate EIS for the road and the first draft of that document is expected in March 2019, with a final EIS following late next year, based on the current schedule.

The National Park Service is also preparing an environmental and economic analysis that is also expected to be finished next spring.

At its core, the Arctic prospect is about as good as undeveloped metal deposits come these days, according to Van Nieuwenhuyse. With just more than 43 million metric tons of probable reserves averaging 2.3 percent copper, 3.2 percent zinc and smaller amounts of lead, gold and silver, it’s “about 10 times the average grade being mined in open pit copper mines today,” he said in October.

The Clean Water Act Section 404 wetlands fill permit from the Corps — large enough to trigger an EIS — is likely the only federal permit the mine will need, according to Van Nieuwenhuyse, noting the Environmental Protection Agency has oversight of the water and air quality permits issued by the State of Alaska.

4. Fort Knox expands

Interior business interests got welcome news in June when they heard one of the largest employers in the region should be open for 10 years longer than originally planned.

Kinross Gold Corp. announced June 12 that it has decided to move forward with a $100 million expansion to the Fort Knox gold mine about 25 miles northeast of Fairbanks.

A feasibility the Toronto-based Kinross conducted on the prospect, known as the Gilmore project, indicates it could yield 1.5 million ounces of gold and initially extend operations at Fort Knox to 2030. Milling at the mine is expected to stop in late 2020 without it, according to Kinross. Now, mining is expected to continue into 2027 with ore processing running to 2030.

The mine opened in 1996.

Gilmore also increased the proven and probable gold reserves at Fort Knox by 2.1 million ounces to 3.4 million ounces overall, according to a company statement.]

CEO J. Paul Robinson said the company will likely be able to fund the $100 million expansion with Fort Knox’s existing cash flow, which will help Kinross maintain financial flexibility.

Fort Knox is on land owned by the state Alaska Mental Health Trust Authority; the expansion, known as the Gilmore project, is on a recently acquired 709-acre parcel of state land just to the west of the existing mine pit that was previously held by the federal National Oceanic and Atmospheric Administration.

First gold from the Gilmore project is expected in early 2020.

Updated: 
12/21/2018 - 3:14pm

Comments