On the Alaska Peninsula west of Anchorage, the Pebble minerals project keeps getting bigger.
Northern Dynasty Mines Inc. is considering a larger mill for copper, gold and molybdenum production that would process 200,000 tons of ore daily - twice the size of the 100,000 ton-per-day mill originally considered. A larger mill means, in effect, a larger mine. Both size mines are now being examined.
If a larger mill is built it could require an investment of up to $1.5 billion, compared to up to $1 billion estimated for a 100,000 ton-per-day mine, according to Bruce Jenkins, the company's chief operating officer.
In making a decision between the two, Northern Dynasty must weigh the superior economies of scale of a larger mill capacity against the larger capital costs.
Whether or not the larger mill is built, Jenkins said the company is also investigating the option of building a 56-mile concentrate slurry pipeline to transport ore concentrates to a new deepwater port on the west side of Cook Inlet, as an alternative to trucking the concentrates to the port.
If a mill were built to process 200,000 tons per day, Jenkins said about 40 to 60 trucks could be needed daily to move the concentrates by road to a concentrate loading port at Iniskin Bay, on the inlet.
A road will be needed for the mine in any event, Jenkins said, but a small-diameter buried concentrate slurry pipeline built parallel to the road would significantly reduce truck traffic and the nuisance it would create for small communities in the area, like Pedro Bay.
Monstrous mine would need abundant power, workers
Everything about the Pebble project is big, and either of Northern Dynasty's plans would dwarf other large open-pit mines now operating in Alaska. Fort Knox, a large gold mine near Fairbanks, processes about 50,000 tons of ore daily. The Red Dog Mine in Northwest Alaska, now the world's largest lead and zinc mine, processes about 9,000 tons of ore per day.
Red Dog is unusual, however, because the grade of ore is so high that a lot of zinc metal can be extracted from a smaller volume of ore, according to Bob Jacko, president of Teck Cominco Alaska Inc.
Mines of the type proposed by Northern Dynasty at Pebble are typically large, Jacko said. With a 200,000 tons-per- day mill capacity, Pebble would be a large mine but there are others like it and even larger, Jacko said.
If Pebble moves ahead into construction, about 2,000 workers would be employed in building the mine over two years, according to information materials Northern Dynasty has prepared.
Once production begins, about 600 to 1,000 people would be needed for the operations work force. Pebble would become one of the state's largest employers.
The mine will also need 150 megawatts to 200 megawatts of electricity to power the mill that processes ore. Finding a way to supply the power to the remote mine site is one of the key challenges facing the project, Jenkins said.
The power needs for the mine has focused a lot of interest on the project within Alaska. Northern Dynasty put out a request for proposals for its power needs earlier this summer and is expecting responses soon, Jenkins said.
One of the prime options under consideration is a submarine cable crossing the inlet to Homer, where the mine could be linked to the existing "railbelt" power grid. Another option is an overland transmission line up the west side of Cook Inlet to connect with the power grid at Chugach Electric's Beluga power station.
North America's largest gold deposit
Pebble is located among gently rolling hills about 17 miles north of Lake Illiamna and is about 236 miles west of Anchorage. Northern Dynasty holds 55,800 acres of mining claims on about 87 square miles of land.
The company's claims cover extensive areas of mineralization.
Cominco Ltd., now Teck-Cominco, made the original Pebble discovery in 1988 and explored the prospect until it entered into a purchase agreement with Northern Dynasty in 1998. Cominco explored the prospect and identified about a billion tons of ore containing gold, copper and smaller amounts of molybdenum.
Northern Dynasty spent $6 million on exploration in 2002 and 2003, and more than doubled the resource estimate that Cominco had made. The company's drilling in two years resulted in the current resource estimate of 2.74 billion tons of ore containing 26.5 million ounces of gold and 16.5 billion pounds of copper.
Drilling in 2004 will allow the company to further refine and possibly add to the resource total, as well as take much of the deposit into the more definitive measured and indicated resource categories. Pebble published resource estimates are now "inferred" from the previous drilling.
"Measured and indicated" are terms accepted in the mining industry that means an ore deposit has been drilled more extensively so that there is more confidence in the estimates.
However, the work Northern Dynasty did in 2002 and 2003, combined with Cominco's exploration, has shown Pebble to be the largest gold resource in North America contained in one deposit, and the second largest contained copper resource. More important, the 2002 and 2003 exploration identified areas of higher-grade mineralization where a mine could be developed and then expanded.
Jenkins said the company is working on a mine plan that would involve three phases of pit development.
Site 1, the first phase of the pit, has resources of about 430 million to 450 million tons of ore. Site 2 has about 1.5 billion tons of ore, and Site 3 has an estimated 2.2 billion tons of ore.
One of the big attractions of Pebble is the very low "stripping ratio" for an open-pit mine, Jenkins said. The ore bodies now planned for development are virtually at the surface, with little surface material having to be moved.
"It has an exceeding low strip ratio of only 0.23:1, indicating the likelihood of a low-cost mining operation," Jenkins said in a written statement. The amount of dirt that must be moved to reach the ore is critical to the economics of open-pit mines.
Northern Dynasty is now completing its 2004 field program. The program involved seven drill rigs working on about 200 core holes spaced at 70-foot to 80-foot intervals, which are being drilled to further define the ore deposit. About 140,000 feet of core hole has been drilled this summer.
The company also has a full season of environmental field work under way. Further meetings were held with state and federal agencies in late October to go over the 2004 environmental study program and to plan the 2005 program, according to Ella Ede, Northern Dynasty's project manager in Alaska.
Of the $25 million the company is spending on its 2004 work, 82 percent is being spent in Alaska, he said. At the peak of activity, about 100 people were working on the project, 70 of them residents of Alaska. Northern Dynasty also opened an office in Anchorage last summer.
Results of the 2004 drilling will be reported late in the year or early 2005 and will be incorporated into a feasibility study now underway, Jenkins said. The feasibility study should be complete in mid-2005. Depending on how it comes out, the company may apply for state and federal permits in mid to late 2005. Work is already underway on conceptual engineering, metallurgy and a range of other issues, Jenkins said.
Jenkins said many Alaskans are having trouble understanding the potential of Pebble and the fact that such low ore grades could be profitably mined. That's because many aren't familiar with copper-gold porphyry deposits, he said. These are a type of igneous rock. Alaskans have had more experience with vein-type mineral deposits containing gold, silver or other metals.
Low ore grades are typical with copper-gold porphyries, and large mines are usually built to mine them. "There are many examples of profitable, successfully mined porphyry deposits in the Pacific Rim, many of which have metal grades equal to or less than Pebble," Jenkins said.
"Our team has substantial experience in developing these kind of deposits, Jenkins said. The group has been involved in more than 15 major exploration ventures since 1985, resulting in the discovery or acquisition of three major mines in British Columbia. All three of these are now in production.
At some point Northern Dynasty will probably bring in another mining company to be a partner in developing Pebble, but not just yet, Jenkins said.
The company's goal is to get Pebble planned and permitted before taking on a partner, Jenkins said. "We want to control the project through the development phase to make sure it's done according to our strict corporate responsible mineral development code," he said.
