DNR ordered to rule on Chuitna apps

A state Superior Court judge ruled Oct. 14 that the Department of Natural Resources cannot ignore water reservation applications filed by the Chuitna Citizens Coalition. The coalition applied for three instream flow reservations on the Western Cook Inlet Chuitna River for fish and wildlife protection in 2009. After more than two years of inactivity on the applications, the Chuitna Citizens Coalition and environmental advocator group Cook Inletkeeper filed a joint lawsuit against DNR in November 2011. Third District Judge Mark Rindner wrote in his ruling that “DNR has unreasonably withheld agency action on Chuitna’s IFR (instream flow reservation) applications.” He added the court could only require DNR action on the applications if the agency has a “non-discretionary duty,” meaning it has freedom to approve or deny the applications. The coalition requested the water reservations as part of an effort to block a surface coal mine in the Chuitna River drainage proposed by PacRim Coal LLC. An Oct. 17 Coalition press release regarding the court ruling said the PacRim project would be the first mine in the state operate through a wild salmon stream. “(The Oct. 16) ruling is a victory for every Alaskan who wants to protect wild salmon and the Alaskan way of life,” Coalition founder Ron Burnett said in the release. “Time and again, the state of Alaska has put the interests of Outside mining interests ahead of the rights of Alaskan residents. This decision should help restore the balance.” The instream flow reservations protect specific water uses such as transportation, recreation and fish wildlife habitat, according to the Division of Mining, Land, and Water branch of DNR. Rindner ruled in favor of the coalition on a second count, stating that “DNR has violated Chuitna’s right to due process” under the Alaska Constitution. The state agency had argued that the coalition did not have a protected property interest in its applications and that DNR has not shown prejudice toward the coalition because its applications were receiving the same process as other, similar applications. In his explanation, Rindner wrote frankly that the coalition has been “stuck in limbo” since its applications have gone unprocessed. He gave DNR 30 days to begin adjudicating Chuitna’s claims. Chuitna paid DNR $4,500 in nonrefundable fees when it submitted its applications. The first application was filed in June 2009 along with a $1,500 payment and was rejected for being too broad and Chuitna was given 60 days to revise it, the court filing states. The original application was revised and two subsequent applications were filed for different portions of Chuitna’s namesake river in August 2009. DNR denied Chuitna’s request to cover all three applications with the one $1,500 fee, so the coalition paid another $3,000. At the time, the agency said it was not appropriately staffed to process the applications, according to the ruling. Claiming a lack of resources delayed processing of the applications would be reasonable for “weeks or months, but cannot excuse DNR’s four-year delay,” Rindner wrote. Rindner questioned why Chuitna was required to pay $4,500 in administrative fees meant to cover up to 40 hours of staff time needed to process the three applications if they were never going to be acted upon. Because the Chuitna Coalition was forced to put up the money with the applications, it has an interest in the applications that has been prejudiced, he determined. “Were DNR requiring payment once it was going to take action on the application, the circumstances might be different,” Rindner wrote. “However, DNR charged Chuitna a $4,500 nonrefundable fee as part of its application and that fee, along with Chuitna’s application, has disappeared into DNR’s files and the state’s treasury. There is no excuse for DNR’s charging an application fee and then take no action on the applications.” Any Alaskan is eligible to apply for an instream flow reservation, and hundreds have, according to Rindner’s ruling. Of the 52 applications approved, 51 were filed by the Alaska Department of Fish and Game. A determination has never been made on a private party’s application, Chuitna claims, and the inter-agency flow reservation applications take up to 15 years for DNR to process. In the time since Chuitna filed its instream flow applications, DNR has approved several temporary water use permits to PacRim Coal. The temporary use permits do not grant water rights and are good for up to five years. Fish and Game also has a flow reservation application pending with DNR for the Chuitna River that it filed in 1996. DNR has stated that it will probably process the two applications together. Simply filing an application does not give a party an appropriation priority or right to water, Rindner determined. That ruling threw out Chuitna’s first allegation that DNR’s adjudication delay violated its “first in time, first in right” claim. However, an approved application does grant priority, which furthers Chuitna’s interest in having its applications processed expeditiously, Rindner stated. Additionally, if its applications would be denied on first ruling and review, the coalition would not need to dedicate further resources to its cause. Elwood Brehmer can be reached at [email protected]

Major discovery at Bornite prospect

Minerals companies exploring the western Brooks Range say they have identified as much as 9 billion pounds of copper in high-grade ores and additional resources of zinc. The Arctic and Bornite copper deposits have been explored for decades but a new discovery at Bornite by Vancouver,B.C.-based NovaCopper Resources this summer may push the known higher-grade copper resource to up to a critical mass where development may be possible. “It’s not hard to see how a 10 billion pound copper resource could be identified in this district soon,” said Rick Van Nieuwenhuyse, CEO of NovaCopper Resources, the company most active in the region. There are also 9 billion pounds of zinc and 2.3 billion pounds of lead resources identified. Van Nieuwenhuyse briefed the Alaska Industrial Development and Export Authority’s board Oct. 30 on the exploration. AIDEA could play a role in developing a road to the mine area, much like the state development corporation did in the 1980s to aid development of the Red Dog zinc and lead mine north of Kotzebue. Copper was discovered at Bornite in 1957 and exploration by Kennecott Resources, which acquired rights to the property, continued for several years. Kennecott defined a large resource and but one that was still economic. In 1964 Kennecott built an exploration shaft down to 1,075 feet but never explored below that level, Nieuwenhuyse said. The mineshaft flooded, which caused Kennecott to turn its focus to exploring other areas nearby, resulting eventually in the Arctic discovery. Last year NovaCopper, working in a joint venture with NANA Regional Corp. of Kotzebue, which owns Bornite, decided to explore deeper. In 2012 the companies announced discovery of a new, larger and richer ore deposit at about 1,500 feet. Where the shallower deposit found by Kennecott had ore values with about one percent copper the deeper deposit has richer ore with drill test results that ranging from 2 to over 5 percent, Nieu told AIDEA’s board. NovaCopper and NANA are also exploring the Arctic deposit about 25 miles northeast of Bornite, which was discovered and also explored by Kennecott, and acquired by NovaGold Resources (now NovaCopper). In 2011 NovaCopper and NANA formed their joint-venture and merged the minerals lands owned by both. The region, known as the Ambler Mining District, has several other promising deposits. One is the Sun deposit, east of Arctic and Bornite, that is being explored by Andover Resources. Ted Leonard, AIDEA’s executive director, told the authority board that he expects Andover to soon announce positive results of its new exploration at Sun. Another deposit in the area is Smucker, to the west, which is owned by Teck Resources, which also owns and operates the Red Dog Mine. Van Nieuwenhuyse said the Arctic deposit looks attractive on its own. A preliminary economic assessment has outlined the potential for a 4,000-ton-per-day mine that could be built with a $262 million initial capital investment. Another mine developed nearby at Bornite would allow for the sharing of critical infrastructure, particularly an access road from the Dalton Highway 200 miles to the east. Over several decades several mining companies including Kennecott and firms that no longer exist as companies, like Anaconda, Noranda and Cominco, spent about $150 million in exploration in the region. NovaCopper itself, however, accounts for about half of this, or $75 million, including the amount paid to Kennecott to acquire the Arctic deposit and other properties, Van Nieuwenhuyse said. NovaCopper spent $15 million in its 2012 exploration, Van Nieuwenhuyse said. A road is key to development, however. “Without a road there will be no mine,” Van Nieuwenhuyse told the authority’s board. NovaCopper and NANA need about three years of further exploration to define an initial project. Another one to two years would be needed to complete a feasibility study and prepare the project for permitting, Van Nieuwenhuyse said. Permitting the project, which would include a federal environmental impact statement, and construction, depending on the mine developed, would require about two years. There is also the 200-mile access road built from the Dalton Highway that would likely total $300 million to $500 million. Van Nieuwenhuyse said the mines developed in the area would ultimately pay for the road similar to the way the Red Dog Mine road was paid for, although it was built by AIDEA, the state authority.

Gold operations in rural areas pick up the pace

High gold prices have stimulated Alaska mining projects including several in remote areas. The small Nixon Fork underground gold and copper mine near McGrath on the upper Kuskokwim River continued operations in 2012 according to its owner, Canada-based Fire River Gold Corp. In late October the mine was producing 3,800 tons of ore daily, twice the rate from earlier in the year, and had reached a stable production rate, according to Fire River spokeswoman Kimberly Ann. What is encouraging is the performance of the ore mill at the mine, which is now achieving about 85 percent recovery of gold, she said. Nixon Fork produces both a gold concentrate and gold bars, with the copper as a byproduct. Concentrates and gold bars are flown from the remote site. Fire River began operations at Nixon Fork in mid-2011. The mine had produced previously but there was a history of operating problems. The target rate for gold production is 30,000 ounces by the end of 2012, according to information on Fire River’s website, with a projected increase to 40,000 ounces in 2013 and 50,000 ounces in 2015. The company will attempt to replace reserves that are mined with new resources added by exploration drilling, extending the life of the mine. There are now two drill rigs working on exploration drilling at the mine, on underground as well as above-ground targets, Ann said. Nixon Fork has a long history. The mine was previously owned by Nevada Goldfields Inc., from 1993 to 1999, and St. Andrew Goldfields until 2008. From 2004 through 2008 the previous owners spent over $50 million in upgrades to processing facilities, mine infrastructure, permits and bonding. In 2008 Fire River Gold purchased the project in 2009 for $3.1 million in cash and shares. The company moved to reevaluate 9,381 meters of definition drilling that had been done in 2007 and 2008, but which was never fully evaluated. The property encompasses 11,000 acres. The land, facilities and infrastructure have an approximate replacement value of $150 million, Fire River said on its website.   Terra could produce 1M ounces Another remote gold mine project in Interior Alaska is in advanced exploration. WestMountain Gold Inc. of Denver reported it has concluded its summer 2012 exploration program at the company’s Terra gold project in Alaska, with four diamond-drill holes involving 3,782 feet of core drilling. The project is about 125 miles northwest of Anchorage in the Alaska Range. “The Terra project continues to produce bonanza gold intercepts and we are confident that the resource will reach 1 million ounces. We are also enthusiastic about the positive gold intercepts and the completion of the on-site gold plant,” WestMountain CEO Greg Schifrin said in an Oct. 25 press release. The drilling has extended the known vein system 200 meters north, WestMountain said. The company also said a bulk sample mill at the site is now operational and that concentrates were produced in a one-week test run this summer. Production of bulk samples will be expanded next summer with ore from several vein systems at the deposit, Schifrin said. Bulk concentrate samples will be flown from the site from an airstrip that has been constructed. In other developments, Gustavson & Assoc., a consulting firm, will complete a third party independent technical report on the project when assay work from 2012 drilling is completed. The report will include an updated resource estimate. The Terra Gold project is being developed in a partnership with Corvus Gold, Inc. Terra Gold has the right to earn 51 percent of the project by spending $6 million on exploration and related work by December 2013.

Doyon to spend $37M on exploration

Doyon Ltd., the Interior Alaska Native regional corporation, says it will spend $37 million this year on several oil and gas projects in Interior Alaska and will drill second a test well in the prospective Nenana Basin, west of Fairbanks, this winter. Doyon will also be the first explorer to take advantage of a new Alaska exploration incentive that will have the state pay for 80 percent of the well and extend preferential state tax treatment, Doyon CEO Aaron Schutt said in a Aug. 27 briefing in Fairbanks. The new well will be Doyon’s second in the Nenana Basin. The first well, Nunivak No. 1 drilled in 2009, found evidence of hydrocarbons but was not a commercial discovery, said Jim Mery, Doyon’s vice president for natural resources. Doyon is based in Fairbanks. Permit applications for the ndew well have been made, Mery said. Its location is about 11 miles west of Nenana and about 8 miles west of the Nunivak No. 1 well drilled in 2009, Mery said. Doyon is also interested in the northern part of the basin following seismic work done there last winter, and more seismic testing is planned for this winter. Applications for permits for two potential wells are being prepared for that area but they will not be drilled this winter, Mery said. Doyon had four partners in the 2009 well including independents Rampart Energy Co. of Colorado and Minnesota-based Cedar Creek Oil and Gas Co., and two Alaskan firms, Usibelli Energy and Arctic Slope Regional Corp., another Alaska Native corporation. Those companies have an option to join in on the second well but for now Doyon is proceeding on its own, Mery said. In the Aug. 27 briefing, Schutt said Doyon’s board has approved $37 million for Interior oil and gas exploration projects this year that include the well and additional seismic in the Nenana Basin as well as seismic exploration in the Yukon Flats basin north of Fairbanks. “These projects show a lot of promise. If successful, they could provide substantial benefits not just to our shareholders, but also to all Alaskans in terms of jobs and helping alleviate the energy crisis in Interior Alaska,” Schutt said. The initial target is for natural gas that would serve Fairbanks, about 60 miles east of the exploration site, but there is oil potential as well. Flint Hills Resources operates an oil refinery near Fairbanks and the Trans Alaska Pipeline System, which is operating below its capacity, runs near the city. The Nenana Basin program is on state-owned lands but in the Yukon Flats Doyon will explore its own lands and lands belonging to nearby village corporations, Mery said. An area near Stevens Village, on the Yukon River, is of particular interest, Mery said. It is also very near the TAPS pipeline, he said. Doyon and its partners now hold a state exploration license in the Nenana Basin, which gives the corporation rights to explore across approximately 500,000 acres of state lands and to convert some of the license area acreage to leases. This year Doyon will convert 400,000 acres, most of the land now held under the exploration license, to conventional state leases with seven-year terms. Besides the Nenana Basin in the Interior the state has issued four other exploration licenses in the Copper River and Susitna River regions, but Doyon is the first to convert areas in the licenses to state oil and gas leases. Schutt credited the new state incentives with allowing Doyon to proceed with the well. A change in state tax law approved by the Legislature in 2012 extended to Alaska frontier basins special incentives enacted for Cook Inlet three years ago that has now attracted new companies to the Inlet, and that have resulted in new discoveries of natural gas. The incentives provide for the state to pay directly for 80 percent of well costs and 75 percent of seismic, Schutt said, and also to extend to frontier basins a low state production tax that applies to Cook Inlet rather than a higher tax that applies to the North Slope. That would previously would have applied in frontier basins. “The recent state legislation expanding exploration incentives and a change in the oil production tax regime in frontier basins including Interior Alaska, were essential for us to move forward with these substantial projects,” Schutt said. Senate Bill 23, approved by state lawmakers in the 2012 session, included sections creating the new frontier basin incentives. Schutt gave credit to State Rep. Steve Thompson, R-Fairbanks, and state Sen. Tom Wagoner, R-Kenai, who took the lead in extending the new incentives to the frontier areas. Thompson, who attended the Doyon briefing in Fairbanks, said, “Doyon is the Interior’s biggest player in oil and gas today and when they talk, we listen. The potential for jobs, lower energy costs and a more positive future outlook is amazing.” Besides the Nenana Basin the incentives cover the Yukon Flats, the Selawik Basin near Kotzebue where NANA Regional Corp. of Kotzebue hopes to promote exploration, the Copper River basin near Glennallen, and Emmonak, Egegik and Port Moller in southwest Alaska. Doyon owns about 11 million acres of Interior Alaska lands and its one of the nation’s largest private landowners. It has about 18,500 shareholders, mostly Interior Alaska Athabascan Indians. Doyon also owns several operating companies including Doyon Drilling, one of state’s major drilling contractors, and pipeline and utility service and operating companies. Besides conducting oil and gas exploration on its lands and state lands, the corporation also has a substantial minerals exploration program underway on lands.

With six drill rigs at work, it's a busy summer at Livengood

FAIRBANKS — International Tower Hills Mines is continuing development planning on the company’s Livengood gold project on the Elliott Highway north of Fairbanks. Engineering and other work continues on a development plan for the mine that is now due in mid-2013. Normally, a mining company does a “pre-feasibility” study to initiate permitting, followed by a “feasibility” study following the obtaining of permits. But at its Livengood project, ITH is combining the two into one feasibility study. “This study will provide our first good look at the project we would like to take to permitting,” said Karl Hanneman, the company’s general manager for Alaska. No figures are available yet on the required capital investment, but Hanneman said it will be, “substantial.” To gather information necessary to support permit applications, ITH is doing baseline environmental monitoring and is now in its fourth year of that, said Rick Solie, ITH Community and Government Relations manager. Six drill rigs and about 85 people are working at the Livengood project site this summer on additional drilling, Solie said. Hanneman said ITH also selected 11 tons of ore samples from core last January and shipped it out for metallurgical tests, the results which will help the company design an optimal process for milling the ore to extract gold. The Livengood project is on about 50,000 acres of mining claims but the known deposit covers just a few hundred acres, Hanneman said. If it is developed, Livengood would be a large surface mine with a mill to extract gold from the mined rock. It would be similar to the Fort Knox mine that is now in production near Fairbanks, although probably larger. Recent developments In a June 21 press release, ITH board chairman Don Ewigleben said the company has postponed its district-wide exploration drilling program to focus on the development plan. However, 18 condemnation and exploration holes and additional geotechnical holes are still being completed in the “Gertrude Basin” area of the mine. The primary purpose of the condemnation program is to define site facility locations, but it also has the potential to outline additional resources immediately east of the currently proposed mining operation. “While exploration programs have been deferred this year so we can focus on the more important goal of completing a feasibility study that would greatly de-risk the Livengood project technically, there still exists tremendous exploration potential in the Livengood district,” Ewigleben said in the company’s statement. On Aug. 12, ITH announced drill results for 45 geotechnical and condemnation drill holes at the Livengood project, and assay results from four of the holes showed intersections with multiple grams of gold content. The location of the intercepts do not affect the current conceptual plan for the locations of mining-related infrastructure contemplated in the ongoing feasibility work, but they do show the potential for new discoveries in the area. Another target is potential resources below the known ore body. “Exploration holes in the Money Knob deposit were generally terminated at 200 meters to 300 meters below the surface due to limitations of the drilling technology used,” Ewigleben said in the June 21 press release. “To date, almost all the drill holes in the Money Knob have bottomed out in the gold deposit and six holes extending below the proposed pit bottom at the 300 meter depth penetrated intervals with similar gold grades to the main deposit.” Additional resources in this area, below the proposed pit bottom, may be identified by drilling done as the mining operation proceeds,” the release said. Irwin to lead project In an important personnel announcement, ITH named former state Natural Resources Commissioner Tom Irwin as Alaska vice president and president of Tower Hill Mines Inc., the U.S. operating subsidiary. Separately, Hanneman was named as the company’s Alaska General Manager, taking over the position previously held by Irwin. The appointments were announced Aug. 16. Irwin has 35 years of experience in natural resources in Alaska, Nevada and Colorado, and played a major role in the development of the Fort Knox mine near Fairbanks for Kinross Gold Corp. He also served as state resources commissioner for six years. Hanneman has 30 years of experience in Alaska mining and was regional manager for Teck Alaska during the development of the Pogo gold mine, then operated by Teck, and in the resolution of permit issues on the expansion of the Red Dog lead/zinc mine in northwest Alaska, which is operated by Teck. In one other development, ITH announced Aug. 3 that it closed a $29.6 million private equity placement to finance its continued exploration and development work. Significantly, the purchasers in the offering include existing institutional investors who are now shareholders but also AngloGold Ashanti (USA) Exploration Inc., an existing shareholder that is also an operator of major mines. “We’re very pleased that our investors are showing continued confidence in the project,” by participating in new rounds of investment, Solie said.

Both sides of Pebble find fault with EPA study

Scientists and attorneys on both sides of the Pebble mine controversy are voicing starkly different opinions of the U.S. Environmental Protection Agency’s Bristol Bay watershed study. A panel of 12 independent scientists concluded three days of meetings on the study in Anchorage Aug. 7. A report to EPA by the group will be made late this fall, the scientists said. Bill Riley, a retired EPA mining specialist asked by Bristol Bay Native Corp. to review the agency’s assessment, said that a key challenge facing Pebble is a very large flow of wastewater, many times the volume of other Alaska mines. “There will be no opportunity for dilution, unlike all other Alaska mines, prior to discharge,” to the environment, Riley told the independent review panel. The receiving waters, where the wastewater would be discharged, have wild salmon, he said. Riley also said the annual precipitation, from rain and snow, is what will drive the water management problem at Pebble, and that there is evidence from others that the EPA review document may have underestimated precipitation by 50 percent. “The design of wastewater collection, conveyance and treatment facilities must be designed to handle extreme flows,” but the assessment document only considers average flows, Riley said. A key problem is whether, given the lack of dilution, the state standard for water quality can be achieved for water discharges at the “end of the pipe.” “Can such treatment be sustained and maintained in perpetuity?” Riley asked. Riley is very familiar with Alaska mines and their permitting requirements. At EPA he was involved in all major mines successfully permitted by the agency from 1984 to 2004, including the Red Dog, Fort Knox, Kensington, Greens Creek and Pogo mines. Another scientist weighing in was Susan Luetters, a senior environmental scientist and project manager for Bristol Engineering Services Corp., a subsidiary of Bristol Bay Native Corp. “In my professional opinion the (EPA) watershed assessment is a well thought-out and presented document with its conclusions carefully stated,” Luetters told the review panel. “It is also my opinion that EPA has underestimated the potential impacts from mining, including the direct and indirect impacts to wetlands and aquatic systems.” EPA estimates of its mine scenario impacts on wetlands were based on aerial photo interpretation of high altitude imaging in National Wetland Inventory maps and had very little, “ground-truthing,” Luetters said. Pebble Limited Partnership field studies indicated the reach and extent of wetlands in the mine area as shown in the National Wetland Inventory maps were too low. Luetters said she believes the Pebble Partnership’s own studies put the wetlands figures too low. The groundwater flow through a wetland system is “critical to maintaining water temperature, flow and chemistry which are key to supporting the benthic organisms that are major food sources for rearing salmon,” Luetters told the review panel. On the other side of this were comments critical of the EPA’s assessment. These included remarks by Michael Kavanaugh, with Geosyntec Consultants, a consulting firm. Kavanaugh was retained by Northern Dynasty Minerals to review technical aspects of the EPA assessment. Northern Dynasty is one of the mine owners, and a partner in Pebble Limited Partnership with Anglo American. Kavanaugh told the review panel that the assessment “fails to meet widely accepted quality standards that must be satisfied to produce a credible scientific and technical assessment. The report both significantly exaggerates both the probabilities of failures of all engineered mining components and the environmental consequences of these failure scenarios.” Three specific shortcomings were pointed out by Kavanaugh: • Erroneous assumptions based on literature data not relevant to a modern mining scenario, such as culvert failure statistics developed from culverts that were never permitted in the first place; • Inaccurate calculations that significantly overestimate consequences of those hypothetical system failures, such as using inappropriate geometry in a dam breach analysis, that over-predicts velocity and distance of sediment transport. • General lack of any attention to mitigation measures for all engineered systems which would be designed with appropriate safety factors, be accepted by regulators, and be designed to minimize the consequences of unlikely failure events, such as placing pipeline shutoff valves immediately before stream crossings instead of 14 kilometers away, thereby limiting the amount of material that would escape if there were a failure. In his remarks to the review panel Tom Collier, an attorney retained by Northern Dynasty, said the EPA included scenarios of possible tailings dam failures based on 135 past incidents. “Yet 126 of them involve dam construction of a type not now contemplated by Pebble,” he said. Of the remaining nine incidents, state-of-the-art technological, engineering and construction improvements have made them “irrelevant,” as examples to use, Collier said. He also criticized EPA for not considering any data from Pebble Partnership’s $120 million program to gather environmental data.

Gold find adds 1.2M ounces at Pogo

FAIRBANKS – Drilling crews are busy on new exploration this summer at the Pogo gold mine near Delta, east of Fairbanks. It is the biggest exploration season since the mine opened, says Lorna Shaw, external affairs manager for Sumitomo Metal Mining, which owns and operates the mine. Efforts this summer are focused on defining the new “East Deep” discovery, a gold ore deposit discovered last year that is near the main Pogo ore body. The new discovery has added an estimated 1.2 million ounces of new gold resources to Pogo, a major increase from the current 2.6 million ounces of reserves. There could be more gold, too. ”East Deep has very high potential and we’ve really only touched part of it. We’re looking for the limits this summer,” Shaw said. The discovery is not likely to result in increased production but would instead extend the operating life of the time. This summer, three drill rigs are at work drilling from the surface and three rigs are drilling from underground locations in the mine, testing the East Deep deposit. Sumitomo plans to do 94,000 feet of exploration drilling this year, with 86,000 feet drilled from the surface and 8,000 feet drilled underground. Last year the company did 79,672 feet of exploration drilling. In other developments, Pogo reached a milestone recently in exceeding the two-million-ounce production threshold. The mine produced 325,708 troy ounces of gold in 2011, a bit below the annual production average of 350,000 ounces to 380,000 ounces in recent years. Typically, 2,545 tons of ore per day are mined and processed at Pogo. Based on the current reserves the mine is expected to operate through 2019, but with new discoveries like East Deep the mine life could be extended. Pogo employs 335 workers directly and there are about 150 contractor employees at present, Shaw said. Bed space at the camp is tight this summer. “We have 376 beds on site and we are near capacity this summer,” Shaw said. “Making sure there is room for everyone, with increased construction and exploration, can be a bit of a jig-saw puzzle.” Sumitomo is now building added camp capacity, with 79 new beds, that will be available by the end of the summer, Shaw said. In operations, Pogo experienced high turnover rates among its employees after the mine first started in 2007, but turnover is now reduced to levels that are normal for the industry, Shaw said. “Things have stabilized, but it’s still an issue,” the company is concerned about, she said. “Experienced underground miners tend to be transient,” Shaw said, because there is a high demand for them. The company likes to hire in Alaska, but the Alaskan recruits tend to come in with entry-level skills for undergoing mining. Underground crews must all include some experienced miners. “We can’t have an underground crew with all entry-level people,” she said. Sumitomo is considered several ideas in training including possible programs with the University of Alaska Fairbanks similar to those operated by in Juneau by University of Alaska Southeast for the Greens Creek and Kensington underground mines. Pogo is the only operating underground mine outside of Southeast Alaska except for the small Nixon Fork mine near McGrath. Other producing mines like the Fort Knox Mine near Fairbanks, the Usbelli coal mine at Healy and the Red Dog Mine north of Kotzenue, are surface mines. While the skill sets for miners in underground and surface mines are different – surface mines require experience and skill in operating heavy equipment – many jobs are similar in the mines, such as operators in the ore processing mills, mechanics, maintenance and other support people, Shaw said.

Mineral exploration spending tops $300 million in 2011

Mining is growing fast in its economic punch in the state, new studies by the industry show. In 2011 the industry employed 4,500 in producing mines exploration, up from 3,500 in 2010 in terms of equivalent full-time jobs, according to studies by McDowell Group, the Juneau-based consulting firm. The average annual pay for a worker in mining reached $100,000 in 2011, up from an average of $95,000 the previous year. State revenues from mining totaled $148 million in 2011, 170 percent up from $58.9 million in 2010, which was also 40 percent up from 2009. Tax payments to local governments, through property taxes or payments-in-lieu of tax, increased from $13 million in 2010 to $17 million in 2011. The research was commissioned by the Alaska Miners Association and the Council of Alaska Producers, two industry associations. Other highlights from the McDowell Group reports: • Exploration spending reached $300 million in 2011, up 13 percent from 2010. • Sixty exploration projects spent more than $100,000 on their prospects in 2011, up from 50 in 2010. Of those explorers, 30 projects spent more than $1 million on their prospects in 2011, up from 24 in 2011. • Including 2011, minerals companies have spent a cumulative $2.8 billion on exploration since 1981. Seven mines were producing in 2011, one more than in 2010. The new producing mine is Nixon Fork, a small underground mine near McGrath, west of Anchorage. Other producing mines include the Usibelli coal mine at Healy, south of Fairbanks; the Fort Knox gold mine northeast of Fairbanks, a surface mine; the Red Dog Mine in the DeLong Mountains north of Kotzebue, a large surface mine; the Pogo Mine, a medium-sized undergroud mine near Delta, east of Fairbanks; and the Kensington and Greens Creek mines near Juneau. Kensington is an underground gold mine at Berner’s Bay, north of the capital city, while Greens Creek in an underground multi-metal mine, mainly zinc and silver, on Admiralty Island west of Juneau. Work was also under way in 2011, as well as in 2010, on a number of medium-to-large size mines still in the advanced exploration phase. These include the large Pebble gold/copper mine near Iliamna southwest of Anchorage; the large Donlin Creek gold mine on the middle Kuskokwim River west of Anchorage; the large-to-medium size Livenood gold project north of Fairbanks; the Niblack multi-metals prospect and the Bokan Mountain rare earths project near Ketchikan in Southeast Alaska; and two coal projects, the large Chuitna coal project at Beluga, on the west side of Cook Inlet, and Wishbone Hill, a medium-size coal project north of Palmer, in the Matanuska-Susitna Borough. In addition to the large producing mines there were about 200 medium and small-sized placer gold mines operating in both 2011 and 2010, the McDowell Group report said.

Miners busy with expansions, new projects

From far Southeast Alaska to the far Northwest, minerals companies are busy with projects. Alaska has seven producing mines now, one more than last year. The new producing mine is Nixon Fork on the upper Kuskokwim River, a remote location where fuel and supplies must be flown in. Several new mines may move into production the coming years, all in different parts of the state. Here’s a review of the producing mines and prospects around Alaska: Southeast The new Kensington underground gold mine north of Juneau has completed its first year of production. Coeur d’Alene Mines, the owner, has temporarily cut back production this year so that additional capital improvements can be made, essentially to de-bottleneck of the production process and increase efficiency. When those are completed, gold production will resume according to the company’s plan. At the Greens Creek Mine, on Admiralty Island west of Juneau, owner Hecla Mining is engaged in securing permits for an expansion of the tailings storage facility at the mine. If the plan is approved, Greens Creek will have the capacity to handle tailings for another 30 to 50 years of production. Greens Creek is an underground mine that has been producing a mix of silver, zinc and gold for more than 20 years. Two potential new mines in Southeast are near Ketchikan. One is the Niblack project, a copper-gold-zinc-silver deposit that would be similar to the Greens Creek Mine if brought into production. Niblack Mining Corp. is the developer. The second is Bokan Mountain, a rare earths project that has attracted national attention because it has a type of heavy rare earth mineral that is relatively scarce. Rare earths are a type of mineral used widely in high technology applications including defense technology. The developer at Bokan Mountain is Ucorp, a company that specializes in rare earths projects. Southcentral Two possible coal projects are in the permitting stage. One is the Chuitna project in the Beluga coalfields where the owners, the Bass-Hunt group, are developing a supplemental environmental impact statement. This would be a surface mine that would tap large subbituminous coal resources in the Beluga coal fields. Coal would be mined and moved to coal ships loading at a planned new offshore loading terminal in Upper Cook Inlet with a gondola system. One of the central points of concern at Chuitna is the disruption of several miles of salmon-bearing streams as the coal deposit is mined. The company is working on a mitigation and restoration plan for the salmon streams, but it must have the approval of state agencies. Another potential coal project in Southcentral is Wishbone Hill north of Palmer that is proposed for development by Usibelli Mine Inc., operator and owner of a larger coalmine at Healy. Unlike the Healy subbituminous coal and similar coal at Chuitna, Wishbone Hill has high quality bituminous coal that has attracted the attention of a Japanese company as a customer. Like the present Healy mine and the planned project at Chuitna, Wishbone Hill would be a relatively smaller mine with its coal trucked to facilities where it could be shipped, either to a rail line for shipment to Seward or trucked to the Port Mackenzie dock on Upper Cook Inlet. Interior At Healy, on the Parks Highway about 90 miles south of Fairbanks, Usibelli Mines continues to operate the Usibelli mine that has produced coal for decades. There are substantial untapped coal resources near the mine sufficient to allow the mine to produce for decades more. Usibelli sells to coal-fired power plants in Interior Alaska and also exports coal through Seward to Pacific rim buyers. The company has recently been setting records for coal exports and increased production. Coal is shipped by rail from Healy to Seward, where it is stored and loaded on ships. There are two major producing gold mines in Interior Alaska, the Fort Knox Mine northwest of Fairbanks, a surface mine, and Pogo, an underground gold mine northeast of Delta and east of Fairbanks. Sumitomo Heavy Metals, the owner at Pogo, continues to make incremental capital investments to improve efficiencies at the mine, and has also initiated new exploration nearby in an effort to expand resources and extend Pogo’s operating life. The Fort Knox mine has been in production for some years and is now supplementing its producing and processing of conventional gold ore with a heap leach, a process use to extract gold from low-quality ore. Both Pogo and Fort Knox purchase power through the regional power grid from Golden Valley Electric Association, the Interior electric cooperative, and the large power purchases help stabilize the cost of electricity for residents and businesses in the Fairbanks area. International Tower Hills, developing its planned new Livengood gold project on the Elliot Highway north of Fairbanks, also plans to purchase power from Golden Valley via a new transmission line that would be built from Fairbanks. The Livengood project is now at an advanced stage of exploration. It would a surface mine with low-grade ore, similar to Fort Knox, except that it is likely to be larger. The company additionally plans to mine placer gold deposits near the planned surface mine. Northwest The Red Dog lead and zinc mine in the western Brooks Range north of Kotzebue is once again the world’s largest zinc producer. Red Dog held that title for many years after its startup in 1989, slipped to second place at one point, but has now reclaimed its title. Zinc and lead concentrates are made at the mine, which is a surface mine, and shipped by road about 60 miles to a port facility on the Chukchi Sea coast. The concentrates are stored through the winter and shipped during the summer, when the Chukchi Sea is ice-free for three months or so. NANA Regional Corp. owns the land at the mine, which is operated by Teck. NANA receives 25 percent of the net profits from the mine as a royalty, which will increase in increments over the years until the corporation is receiving 50 percent of the profits. The land was obtained under the Alaska Native Claims Settlement Act of 1971, so a major percentage of the resource revenues from the mine are shared with other Alaska Native corporations. More than half of the mine workforce are NANA shareholders, many who live in nearby villages. The corporation is also engaged in several joint-ventures to provide support services to the mine, such as in camp operation and maintenance and transportation of the ore by truck. Red Dog was also developed in a partnership with the state, where the Alaska Industrial Development and Export Authority, the state development corporation, financed and owns the road and port facility supporting the mine. Teck pays AIDEA a toll for use of the road and port, and over the years the transportation of ore has been a significant source of income for the state authority. Teck has continued to make improvements at the mine to increase efficiency and moved to a new mine site last year that is adjacent to the first pit that was mine. This will allow mining to continue for two more decades. For the longer term there are other known lead and zinc deposits nearby that can be developed including one a few miles east that another company, Zazu Minerals, is working to develop. The company is also talking with AIDEA on a plan to finance a road to connect with the mine at Red Dog. The region is considered to be a major zinc province and will likely see decades of activity. NANA is also engaged in a new mining venture in the northwest region, in a partnership with NovaCopper, an affiliate company with NovaGold. The companies are working in the Ambler Mining District east of the villages of Ambler and Kobuk, on the upper Kobuk River. The prospect is mainly copper, although there is also gold present. NovaGold, now NovaCopper, has been working for some time exploring the Arctic deposit, a high-grade copper deposit originally discovered by Kennecott Minerals. NANA meanwhile acquired Bornite, a nearby copper discovery also found originally by Kennecott. The two companies have now formed a joint-venture to explore and possibly develop the projects together. The state of Alaska is also working on a planned industrial-type road into the area from the Dalton Highway, which would enhance exploration. Southwest On the middle Kuskokwim River, a partnership of Barrick Gold and NovaGold Resources are in an advanced stage of planning for a large new surface gold mine at Donlin Creek near Crooked Creek village on the Kuskokwim. DonlinGold, the joint-venture company formed to develop and operate the mine, may be applying for development permits this year. The landowners are Calista Corp., the Native regional corporation for the Yukon-Kuskokwim delta, which owns the subsurface rights, and the TKC Corp., a company owned by several villages in the Kuskokwim region, owner of surface lands at the mine. The companies have been working on the project for years and just the exploration work at Donlin Creek has provided significant employment for people in the region, which is one of the most economically depressed parts of Alaska. If the mine is developed it would be a major source of employment in the area. Interestingly, it was geological work by geologists hired by Calista that resulted in the gold discovery. Calista then worked for several years to bring in mining companies to explore and develop the project. No review of mining in Alaska would be complete without mentioning Pebble, a very large copper/gold/molybdenum deposit near Iliamna southwest of Anchorage. The mineral ore body has been explored over several years with both a large, deep resource being located that could be mined with an underground mine, and an adjacent deposit at the surface that would be mined with a surface mine. The developers at Pebble, Anglo American and Northern Dynasty Minerals, have been working on development planning and environmental studies. The Pebble Partnership, the company formed to develop the project, may be applying for permits to build the mine this year after releasing its long-awaited environmental baseline document.

Pebble debate breaks out between BBNC shareholders

JUNEAU — Sharp opinion differences over the proposed Pebble mine within the Bristol Bay community spilled out in Juneau March 19. The occasion was an informal “lunch and learn” noon session for legislators and staff in the state capitol where Bristol Bay Native Corp., the regional Alaska Native corporation for the area, gave a presentation on its activities, finances and dividends paid to shareholders. Jason Metrokin, BBNC’s president and CEO, used the occasion to announce that revenues will cross the $2 billion threshold for its fiscal year ending March 31. That’s up from $1.7 billion last year. Another 2011 milestone is that the corporation will have paid out $100 million in dividends to its shareholders since BBNC was formed in 1972 along with other Alaska Native corporations. The corporations’ share of the original $962 million cash settlement paid by the government was $30 million. Metrokin also wanted to explain BBNC’s reasons for opposing the big Pebble mine project, and that didn’t sit well with a handful of the corporation’s shareholders who were in the audience along with legislators. Metrokin said it is the sheer scale of the Pebble project and a distrust of the state’s permitting process that led BBNC’s board to twice pass resolutions opposing the mine, once in 2009 and again in 2011. However, Lisa Reimers, of Iliamna, a village close to the Pebble prospect, said communities in her part of the Bristol Bay region who stand to benefit from the mine, have no representation on BBNC board and were not a part of that decision. “We have no voice,” she said. Another dissenting voice was Abe Williams, another BBNC shareholder, who said communities in the eastern part of the region support the project being allowed to proceed to the permitting process. He objected to actions that would “short-circuit” the process by preventing the mining companies working on Pebble from filing permits. Williams said it is when the permits are filed that local people will be able to understand how the companies plan to develop the mine, safeguard put in place, and the overall risks and benefits. Metrokin said the corporation understands some shareholders’ opposition to the position taken by the board, but that a survey of shareholders in 2011 showed 81 percent opposed to the mine, an increase compared to 69 percent opposed when a similar survey was taken in 2007. “We have not yet seen the project plan but have seen enough elements of the project that we know there will be risks,” he said. If the project does proceed to permitting, “we’ll be there at every step of the way, to protect the fish.” Of 31 villages within BBNC’s regional boundaries, 26 have expressed opposition to Pebble, Metrokin said. Reimers and Williams said that communities more open to the project are those nearest it and where economic conditions are bad, population is being lost and schools are closing because of the lack of students. Metrokin replied that BBNC supports resource development that is responsible, but Reimers shot back: “You support development as long as it’s not in your back yard?” Not so, Metrokin said. BBNC is working with mining companies on evaluation of prospects on lands in the region owned by the corporation, and the it even owns a small piece of the Greens Creek Mine in Southeast Alaska, a legacy of its prior ownership of Peter Pan Seafoods, which had owned the Greens Creek share. Greens Creek, an underground mine that operates within a protected area on Admiralty Island west of Juneau, is an example of responsible development, Metrokin said. Reimers said this was still a contradiction – supporting some mines but not wanting one particular project to proceed to permitting. Teal Smith, the corporation’s vice president for lands who was with Metrokin, said there is a significant difference between “working with a company to assess what could be possible and what the corporation might support,” or not support. Metrokin said there is a lot of mineral potential in the Bristol Bay region but also a lot of fish, which the corporation wants to protect. “We’ve got to find a balance,” he said. The salmon fishery contributes $500 million a year and 3,500 jobs to the Bristol Bay regional economy and supports regional subsistence, which is valued at an additional $180 million. “We don’t own this resource, but it benefits our region,” he said. Williams agreed that fisheries need protection – he’s a fishermen himself – but pointed out that only 15 percent of the salmon fishing permits in the Bristol Bay fishery are owned by Alaska residents. “We don’t really have much of a voice in this fishery,” he said. Metrokin agreed this is a problem and that ways have to be found to help local people buy back salmon fishing permits held by nonresidents. Williams went on: “I’ve fished for 26 years and I value that resource, but I also believe (over dependence on) fisheries can be our demise,” Williams said. Other options for sustaining the economy should not be blocked by a “pre-emptive” strike to prevent Pebble from applying for permits, he said. Metrokin said BBNC is working to strengthen its regional economy through a board policy to invest 10 percent of its corporate assets within the region and 20 percent of its assets in other parts of Alaska in ventures that support its activities. On Pebble, Metrokin said there is fundamentally a distrust of the state’s permitting process and whether it would really be rigorous. “We worry about this when we hear the governor talking about ‘streamlining’ the permitting process for resources projects,” he said. “Streamlining may not be in the best interest of local people. We want the process to be robust. Our concern is that rural people will not have much of a voice at the table.”  Actions by the state administration and the Legislature last year to allow the state coastal zone program to die has added to concerns felt by people in the region, Metrokin said. Coastal management was a way people in many coastal communities felt they had a role in decisions on permits and other actions on major resource projects that affect coastal areas. A proposition reinstating the coastal management program, brought by citizen initiative will appear on the November election ballot unless the Legislature passes a similar law by its April 15 adjournment, which is unlikely. If Pebble is developed it would almost certainly be an underground mine with possibly an adjacent surface mine. The concern people have in the Bristol Bay region is that any pollution from the mine, such as from tailings stored above ground, could affect surface waters that drain into salmon-bearing streams.

State sues Lake and Pen Borough over initiative aimed at Pebble

The State of Alaska has filed its challenge to the recently enacted ordinance in Lake and Peninsula Borough aimed at stopping the Pebble mine. Alleging the ordinance unconstitutionally usurps the state’s role in managing natural resources for the maximum benefit of all citizens, the state filed its lawsuit against Lake and Peninsula Borough in the Alaska Superior Court 3rd District Oct. 28. The straightforward complaint numbering barely five pages alleges that the ordinance is preempted by state law, and that while home rule boroughs such as Lake and Pen may pass some ordinances governing natural resource development those rules may not conflict with state law. As enacted, the “Save our Salmon” initiative passed by a 280-244 mail-in vote that was certified Oct. 17 would require a project to receive approval from the borough before it could apply for state and federal permits. The ordinance, which applies to developments greater than 640 acres, is meant to stop development of the Pebble mine. The Pebble prospect situated west of Iliamna, which includes an estimated $400 billion worth of copper, gold and molybdenum, is on state lands. In addition to arguing the measure is invalid for usurping the state role in permitting, the complaint alleges the ordinance should also be declared invalid because it, “purports to prohibit development of State land and State-owned minerals.” In a statement released by his office, Attorney General John Burns said, “This case is not about state support for or against a Pebble Mine project. It is about upholding the State’s constitutional authority and responsibility to evaluate whether, on balance, development of Alaska’s resources is beneficial to all Alaskans. This administration has consistently maintained that the State will not sacrifice one resource for another. “In the case of Pebble, we haven’t yet even considered the pros and cons of any development that may be proposed. But the Alaska Constitution requires the State – not the borough - to fairly and completely conduct this evaluation.”

Alaskans know very little about the real process of mining

Except for TV commercials, which are laden with mixed messages and misinformation, most Alaskans know little about the mining process and have seldom seen the inner workings of a mine. Until World War II, for example, mining was the state’s largest employer, and the industry operated under few environmental regulations. With the advent of the Clean Water Acts of 1977 and 1987 and new mining technology, most operations contain the water or leave it cleaner than before the mine opened. Mine owners also spend millions of dollars to prevent such contamination as acid rock drainage. They place millions more dollars as a bond in the event of an accident, and they set up accounts to pay for upkeep and maintenance long after the mines cease production. The folks in the middle Kuskokwim River drainage could use this kind of information, since the developers of the proposed Donlin Creek mine, Barrick Gold Corp. and Nova Gold Resources Inc., are nudging toward the years-long permit process. With that thought in mind, Bob Gorman of the University of Alaska Fairbanks Mining Extension invited a handful of elders and community leaders on an intensive workshop and tour of Fort Knox, an open-pit gold mine outside Fairbanks, and Pogo, a remote, underground gold mine near Delta Junction. Over two days, the participants rolled up their sleeves and absorbed a hands-on education. They watched conveyors and 240-ton trucks transport rock from the mines. They suffered the ear-deadening racket as giant mills ground the chunks to the size of a quarter. They observed the cyanide and carbon tanks slowly retrieve the gold and then reprocess the tailings and water. Unlike the nuggets of mythological mother lodes, most of this bounty sizes up to microscopic flecks - 100 microns or 0.1 millimeters, thinner than notebook paper - and hides in fractures and shear zones in the granite. Fort Knox, for instance, processes about 900 ounces a day. As part of the bargain for this training, these Lower Kuskokwim residents shared this knowledge with their communities so they could effectively participate in the Donlin mine permitting process and help determine their social and economic destiny, Gorman said. “We’re not trying to convince anyone about the right thing to do. Communities need facts to determine what they want to do. They need the right information without a lot of passion, a lot of emotion.” Learning about the mineral extraction process is all fine and dandy, but the most important issue for any mine, according to workshop and tour leader Bob Loeffler, is to protect the water. With this imperative in mind, mining companies collect data for years, and every drop of water involved in the process requires a permit and must pass state and federal regulations. That process can include up to 60 permits, ranging from food service to a toilet flush, and an environmental impact statement. In fact, the public tells the government what to study to understand a mine’s environmental effects, said Loeffler, the former director of the Alaska Department of Natural Resources’ Division of Mining, Land and Water. Basically, the developers identify the risk of something happening, the consequences if something happens and a back-up plan. In the case of Fort Knox, a sump or water fence floats downhill into a tailings lake and not a drop escapes the mine. And 12 interceptor wells to pump any seepage back into the tailings lake, Loeffler said. Similarly, Pogo engineers diverted water around or under the site so drainage and storm runoff from mill, camp, shop, site roads and tailings is collected, treated and tested under 30 different parameters to meet the state’s water quality standards prior to discharge into large mixing ponds. Other safety measures include groundwater monitoring wells, annual fish studies on the river for at least 10 years and a seven-member stakeholder group. “Fish act as a great monitoring tool. And in many cases the fish standards are higher than human standards,” Loeffler said. Given the rules and regulations and the back-up plans and all the other hands-on details, Greg Roczicka of Bethel was still concerned - rightfully so - about the chemicals in the extraction process. But more importantly, he said, people need to understand the process so they can decide how mines will affect their future. “This trip actually broadened my perspective and raised my level of comfort that it (mining) can be done in a much safer manner . . . but mining companies are in it for the profit, and it’s part of our responsibility to make sure they conform to the regulations. And that’s a pretty tall order.” J. Mark Dudick is the media services editorial assistant for the University of Alaska Fairbanks’ Mining Extension Service.

Barges on the move for Tulsequah Chief Mine

JUNEAU — Three ocean and river barges were headed toward Southeast Alaska last week as part of a plan to haul construction supplies up the Taku River to the Tulsequah Chief Mine. The conventional barges aren’t part of mining company Redcorp’s contentious proposal to use amphibious hoverbarges on the Taku to service the mine, roughly 40 miles northeast of Juneau in Canada. The barges were expected to arrive as soon as June 27 and will be temporarily stationed in deep water at the mouth of the Taku to ship supplies for temporary camps for construction crews, to install a sewage system, and to mark boundaries and construction areas for a temporary access road on the company’s mining claim. A smaller barge will be maneuvered via tugboat up the river to the mine site on the Tulsequah River, said Salina Landstad, a spokeswoman for the Vancouver-based mining company, Redcorp. The first trip was slated for 1 a.m. June 30 and the operation is expected to take roughly 10 days, depending on weather and river conditions, Landstad said. “I don’t know the exact size” of the vessels, Landstad said. Redcorp has hired Wainwright Marine Services of Prince Rupert, British Columbia, to handle the job. Landstad said the conventional barge plan did not require permits from Alaska or U.S. agencies, and that the company has alerted the agencies and cabin owners who might be affected. Jackie Timothy, a biologist who has worked on the hoverbarge aspect of the plan for the Department of Natural Resources, said she doesn’t believe her department requires permits for the conventional barges because they would be operating in “navigable” waters. The tugs and barges would not be moving over shallow waters, as would the “Amphitrac” vessel proposed for the hoverbarge operation. Redcorp met in recent weeks with cabin owners to notify them of the plan. Errol Champion, who owns a cabin up the Taku, said he still has unanswered questions about the operation. He said, however, “We are not totally in the dark.” He doesn’t believe Redcorp intends to damage to the river, but he worried about the maneuverability of the barges. “The river has been running very, very high,” he said, and high wakes could cause additional erosion. “It is not going to be easy. It is not easy for any of us to run the river,” said Champion, who frequently runs the tidal waterway. Landstad said that Wainwright has spill prevention plans in place and carries insurance in case of damage to property. Redcorp Ventures is a Vancouver-based mineral exploration and development company with projects in British Columbia and Portugal. 


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