Gregg Bush, project manager for the Donlin Creek Joint Venture, which Placer now manages, also said capital costs for the large gold mine are now estimated at between $700 million and $800 million. The latest plan is for an open-pit mine that would process about 30,000 tons per day of ore. Donlin Creek could be one of North America's largest gold mines

Because of the type of gold ore found at Donlin Creek, a refractory-type process, which requires large amounts of electricity, will be needed to extract gold from the rock.

Ore processing will require, on average, about 61 Megawatts of power but for peak demand the project will need a power plant of 80 Megawatts or long-distance access probably at Healy to generating plants on the railbelt electric intertie, Bush told the Resource Development Council in Anchorage Oct. 16.

The current mine plan is being designed based on the 11 million ounces of measured and indicated ounces but with an assumption that at least part of the inferred resources will also be profitable to mine, Bush told the RDC.

Currently a mine at Donlin Creek is estimated to last 20 years, but there is potential for development of additional gold resources in the area, Bush said.

The leases held by Placer Dome and its partner, NovaGold Resources Inc., cover a large area. The current exploration covers only a small area of the land with mineral potential under lease to the two companies, according to Jeff Foley, senior geologist with Calista Corp., the Alaska Native regional corporation for Southwest Alaska that owns the land in which Placer and NovaGold are exploring.

Gold has been known in Donlin Creek since the early part of the century, but Calista promoted exploration after the Native corporation selected lands in the area.

Bush told the RDC that residents of the local region, who are also shareholders of Calista Corp. and TKC, have made up a large percentage of the project workforce during the exploration work.

Last year, 50 percent of workers on the project consisted of Calista shareholders, and 65 percent of supervisors on the project are shareholders, Bush said. The exploration work is mostly seasonal, but turnover has been very low, about 10 percent per year, he said.

Calista Camp Services Inc., a subsidiary of the regional corporation, coordinates shareholder hire and other support work for the exploration, Bush said.

The last two years have been an intensive drilling effort by NovaGold to better define the gold resource at Donlin Creek, but work on the project has now shifted to the infrastructure challenges facing Donlin Creek development, Bush said.

Chief among these is power supply. Several ideas are being examined, including a coal-fired regional power plant at Bethel that could supply electricity to villages in the region as well as the mine, over a 150-mile intertie.

Another option is an intertie connecting the mine with the existing railbelt electric grid. A northern route for this intertie would connect with the Fairbanks-Anchorage Intertie at Healy. An alternative is a southern route which would provide a connection with the large Beluga coal fields west of Anchorage, where a mine-mouth power plant could be built.

Either way, an intertie connection to the railbelt for Donlin Creek would stimulate development of new electrical generation capacity for Southcentral and Interior Alaska because the existing generation capacity is aged and may be insufficient to meet projected new power demand, according to reports for the new state Energy Task Force.

Donlin Creek is one of the world's largest undeveloped gold deposits, but exploration has had its starts and stops over the years. After discovering gold Calista brought in several mining companies to do further exploration. For various reasons the companies backed out.

Placer, one of the world's largest gold companies, signed a lease with Calista and began its work in 1996 with a significant drilling program. However, gold prices plummeted in 1999 and 2000 and Placer had to refocus priorities on its producing mines. NovaGold, a Vancouver-based exploration "junior" mining company, was brought it as a partner.

NovaGold had the right to earn 70 percent ownership of the project if it spent $10 million in further exploration, Bush explained to the RDC. NovaGold did additional drilling and added to the identified gold resource, and met its investment obligation by late 2002, Bush said.

Placer, whose ownership had declined to 30 percent, then exercised a "back-in" option to earn back 70 percent of the project if the company invested in feasibility studies and continued development, and made a decision to develop the project within five years, Bush said. The company also resumed management of the project, he said.

Placer still has rights to back out of the deal and keep a 30 percent retained working interest, which would leave NovaGold with 70 percent, Bush said.

That would still obligate Placer to pay its share of development costs. Alternatively, the company can back away from any further obligation to invest and would still retain 5 percent of profits if a mine were developed.

About $45 million has been spent so far on exploration at Donlin Creek by all companies including Calista, Bush said. Most of the investment has been by Placer and NovaGold.