Ketchikan eyed to process Niblack metals

Heatherdale Resources Ltd. plans to initiate a pre-feasibility study for its Niblack multi-metal underground mining project on Prince of Wales Island in Southeast Alaska later this year, leading to a final feasibility study and permit applications possibly in 2013, company officials said in interviews.

Niblack is a copper-gold-zinc and silver project, with the copper and gold values being the most important within the deposits found so far, according to Patrick Smith, Heatherdale’s CEO.

Heatherdale is based in Vancouver, British Columbia, and is one of a group of companies associated with Hunter Dickinson Inc.

If Niblack moves to development, Smith said Niblack could produce and process about 1,500 tons to 2,000 tons of material daily and, based on initial work by previous operators make a concentrate with about 30 percent copper and containing the majority of the recoverable gold and silver, and a second zinc concentrate of 60 percent to 65 percent zinc, and also containing gold and silver.

“We have taken the project to the engineering stage based on our latest resource estimate completed last November, and have initiated mine and mill planning,” Smith said.

Based on other projects of this size that have been developed, capital costs for Niblack construction could be in the range of $150 million to $200 million.

An unusual aspect of Heatherdale¹s project is the opportunity for the company to barge raw ore from the site, which is at tidewater, to a process mill. Initial investigations by Heatherdale indicated the most likely site would be near Ketchikan, 38 miles away. The advantage of lower-cost hydro power near Ketchikan would offset the barging cost, the company believes.

Similar sized mills require about 8 Megawatts of power, Smith said.

The alternative is costly oil-fired generation at the site, he said.

Two other mill sites are being considered in Southeast Alaska but Ketchikan is the preferred alternative at this point, Smith said.

The state of Alaska strongly supports Niblack development and is discussing a plan to help Heatherdale finance energy facilities and other infrastructure through the Alaska Industrial Development of Export Authority, the state’s development corporation, a spokesman for the authority said.

“We are working with the local communities and mine developers on the kinds of infrastructure they need, including for energy. We think these mines and a mill could create a significant number of jobs,” said Karsten Rodvik of AIDEA.

AIDEA typically helps finance infrastructure but can also make equity investments in projects.

Heatherdale pegs Niblack resources at 5.6 million tonnes (6.2 million short tons) of measured-and-indicated resources and 3.4 million tonnes (3.75 million short tons) of inferred resources.

Smith said Heatherdale initiated an aggressive drilling program after taking over management of the project in 2009 and has more than doubled tonnage of the estimated resources. The company acquired 100 percent of the project last January after increasing its share through exploration investment since 2009.

Smith said Heatherdale has invested $28 million in Niblack. Previous owners had invested about $41 million.

Underground drilling so far has been done through a 2,800-foot adit, or tunnel, at the site. Healtherdale has permits to extend the adit to 6,000 feet in length if needed. A limited above-ground drilling program is planned for this year and next with the goal of adding to the existing resources, Smith said.

The mine would be very similar to Hecla Mines’ Greens Creek Mine on Admiralty Island near Juneau, also an underground multi-metals project. Greens Creek has operated since 1989.

Smith said the company is making a special point that Southeast Alaska community leaders and Alaska Native tribes in the region have shown wide support for its project, and that no particular issues have emerged so far.

“We just attended the three-day Prince of Wales Island Wide Mining Symposium II put on by the Organized Village of Kasaan,” Smith said. “The level of local support for responsible mineral development is refreshing.”

The concern in the industry is that public opposition and publicity over the proposed Pebble copper-gold project in Bristol Bay, several hundred miles from Niblack, has is causing investors to worry about whether mining projects can be permitted in Alaska.

Smith pointed out that several Alaska mines have been permitted in recent years by federal and state agencies.

06/21/2012 - 6:39pm