Placer Dome opts for on-site power for potential mine, researches potential for wind power

By Patricia Liles

For the Journal

After spending the last two years working on logistical mine development scenarios for the remote Donlin Creek gold deposit in Southwest Alaska, Placer Dome has decided to investigate using wind generators as an additional alternative electric power source.

Part of the company's $11 million budget in 2005 for Donlin Creek will include collecting wind data at the hard rock gold deposit, a relatively low-grade, large mineralized area located about 12 miles from the upper Kuskokwim River village of Crooked Creek, roughly 175 miles northeast of Bethel.

"We think there is the potential for wind energy resource," said James Fueg, acting project manager for Placer Dome, a major mining company that has been working since early 2003 to resolve the power supply issue as well as other infrastructure needs at Donlin Creek.

After first considering 11 options, then narrowing those to three scenarios for power generation, Placer Dome has identified its preferred alternative: on-site electrical generation, Fueg said.

"The concept is we install 100 percent generation capacity from thermal sources," he said, referring to the use of diesel or liquid propane gas. "We would also install enough wind generation capacity to run the mine when the wind blows."

Current mine development scenarios will require between 75 to 80 megawatts of electric power, Fueg said.

Donlin Creek is a sulfide deposit, so extraction of the estimated 25 million ounces of gold would likely require an autoclave process, which adds oxygen and heat to crushed ore, increasing a mine's power demand.

Resolving that remote power requirement has been a key hurdle for advancement of Donlin Creek. Two other options Placer Dome considered included connection to Alaska's Railbelt power grid, which would require a transmission line several hundred miles across remote land, or construction of a coal-fired power plant near Bethel, which would also require a 191-mile transmission line. A subsidiary of Calista, the Alaska Native regional corporation in Southwest Alaska, proposed construction and operation of that coal-fired power plant.

Economic and reliability factors caused those off-site options to be ruled out, Fueg said.

"For permitting and environmental reasons, they were not as attractive," he added. "Wind has a lot of benefits, economically and from an environmental view. If it could be made to work out there, it will be an attractive option."

Fueg stressed that the company has yet to complete its due diligence in reviewing the potential use of wind generation. That will include collecting a year's worth of wind data from the site. "We're actively working to pursue this concept," he said.

Placer Dome recently made the decision to explore wind as an alternative power source, Fueg added. "What you're seeing is a reflection of the advancement in wind generation technology."

The company is working with consultants to further advance the wind generation scenario, he said. Should Placer Dome select wind generation as a power option, it could be a first for the mining industry. Fueg said he is not aware of any operating mine that utilizes wind as a power source.

Wind studies are just a part of the company's work plan at Donlin Creek for 2005.

A large portion of the $11 million budget will go to drilling contractors to complete additional infill drill work. More than 60,000 feet of drilling is planned at Donlin Creek. Fueg said work is scheduled to start in mid to late March and to run throughout the summer.

He expects on-site crews to peak between 40 to 50 workers, with multiple core rigs working on-site. The goal of the additional drilling is to convert some of the inferred resource to measured and indicated resources, a more certain geological estimate of the amount of gold in the hard-rock deposits.

Donlin Creek hosts a measured and indicated resource of 11 million ounces and an additional inferred resource of 14 million ounces of gold, making it one of the largest undeveloped gold deposits in North America, according to joint venture partner NovaGold Resources.

Also in 2005, Placer Dome will complete additional metallurgical work, continue baseline environmental activities, refine design concepts and complete more geotechnical work. "The object is that we're trying to complete a bankable pre-feasibility study by the end of the year," Fueg said.

Late in 2004, the company completed an internal scoping study, shared with partner NovaGold. Fueg declined to reveal specific results of that document.

"There was enough encouragement that we are willing to invest this amount of money to do additional drilling ... and to be moving other options forward," he said. "Donlin Creek is still not and is never going to be very, very profitable. It's a low-grade sulfide deposit, but it's extremely large.

"With some technology and the work we've done, we think the economics warrant further investigation," Fueg said.

In its agreement with NovaGold, Placer Dome has until 2007 to bring the property to a mine construction decision, earning a 70 percent interest in the project. To do so, Placer Dome must spend $30 million on the property, including producing a feasibility plan and acquiring necessary permits to operate a large-scale mine and mill.

Placer Dome began exploring Donlin Creek in the mid-1990s, spending some five years and more than $30 million to define a 13 million ounce gold resource.

Despite the size, record-low gold prices and substantial infrastructure hurdles deemed it uneconomic. Pulled out of Alaska in 2001 and Placer Dome optioned the property to NovaGold Resources.

A Vancouver, British Columbia-based junior exploration company with other Alaska properties, including the Nome-area Rock Creek gold project currently in the permitting stage, NovaGold earned its 70 percent interest in Donlin Creek in late 2002. NovaGold did so by completing a $10 million exploration program in 16 months. That drilling doubled the size of the estimated gold deposit.

Placer Dome's "internal study encouraged them enough, and they had success in a lot of areas they wanted to work on," said Greg Johnson, NovaGold's vice president of corporate communications and strategic development. "We're very pleased to see them commit one-third of their non-minesite global exploration budget on this development. It's staying right on track."

Potentially using "green energy" via wind generators at Donlin Creek is another plus, he said.

It's a remote electric generation option that NovaGold will research this year at its Ambler property in Northwestern Alaska, Johnson said. "Wind projects are being built all over the world ... we like the idea of green power and low impact."