Fort Knox mine managers are currently considering adding a heap leach, a method of mining in which mineralized rock is placed on top of a containment liner, then sprayed with a cyanide solution that filters through the stack of rock. Gold attracts to the cyanide and the mineralized solution is captured at the bottom of the pile. Gold is pulled out for further refinement and the cyanide solution is either treated or reused in the heap leach.

Fairbanks Gold Mining Inc., operator of Alaska's largest gold mine and a subsidiary of Toronto-based Kinross Gold, is "currently evaluating a 160 million-ton capacity valley fill heap leach located at the far north end of the tails impoundment in the Walter Creek drainage," said Lorna Shaw, community affairs director. "We need to evaluate the economics to make sure this is a good business decision."

Walter Creek is the first drainage located to the northeast of the Fort Knox mill complex, visible from the existing access road leading to the mine's mill, administrative and shop facilities.

Fort Knox's tailings impoundment dam is located below the proposed location of the heap leach in Walter Creek, providing additional containment for drainage.

"Geotechnical studies were completed over the summer and all results indicate technical feasibility. The Walter Creek drainage is technically suitable for placement of a valley fill heap leach," Shaw said.

Preliminary estimates indicate operating costs will be approximately one-third of mill operating costs, she added. "The lower cost would allow us to process currently planned ounces at a greatly reduced rate," Shaw said.

Cash costs to produce at Fort Knox were $257 per ounce of gold during the second quarter of 2004, with total production costs reported at $356 per ounce for the same period, the most recent detailed information released by Kinross Gold. Detailed financial information about Kinross operations has not been released for more than a year, pending restatement of the company's financial statements for 2003 and 2004 that were impacted by acquisition of TVX Gold and Echo Bay.

Current plans call for continued operation of the Fort Knox mill, with the addition of the heap leach.

Currently, Fort Knox ore is crushed and then run through a semi-autogenous mill and two ball bills before it is treated by cyanide in leach tanks. Activated carbon is used to absorb gold from the cyanide solution, then the precious metal is stripped from the carbon, plated onto a cathode by electrowinning and melted into doré bars.

The mills, along with other electric power needs, draw up to 35 megawatts from the Railbelt electric grid. Unlike other Golden Valley Electric Association customers, the power flowing to Fort Knox can be interrupted or cut at any time, although the utility typically gives advance notice.

Even though Fort Knox power is classified as "non-firm," the mine still pays the same tariff rates as other large industrial users served by GVEA. Those annual costs have nearly doubled in 10 years, increasing from about $13.5 million in late 1996 to $22.9 million in 2005. GVEA is currently requesting an 8 percent rate increase. "In the latter half of 2005 we consistently hit about $2.2 million with our power bills. An 8 percent increase would be significant," Shaw said.

Currently, electricity is the mine's second largest expense. Only labor costs are higher, she said.

"Higher operating costs directly reduce the number of higher-cost ounces that can be produced at the end of a mine's life and thus reduce the length of time that a mine can operate," she said.

Higher operating costs also reduce cash flow, which can impact exploration spending. "New ore is found only through exploration, but exploration is unfortunately one of the first expenditures to be eliminated when operating costs increase," she said.

Including the lower-cost heap leach in Fort Knox processing could potentially allow recovery of more lower-grade material that is not currently included in the existing mine life, Shaw said. The mine is scheduled to run until 2010 and the mill until 2012.

"The project currently doesn't affect the mine life, it will just change the recovery process for currently planned ounces," Shaw said.

The decision to proceed with the heap leach depends on the metallurgy, which would determine how much of the gold could be extracted. Currently, Fort Knox is recovering about 86 percent of the gold through the mill process. Industry experts say typical heap leach recovery ranges from 50 to 70 percent, depending on the method and type of ore.