Pebble mine construction now estimated at $6 billion
Construction costs for the proposed Pebble mine have topped $6 billion, the president of the company that would develop the project told the Alaska Support Industry Alliance Oct. 9.
Costs have been pushed up by inflation that is affecting all major industrial projects, as well as the increasing complexity of the project. It is $1 billion higher than was estimated last year and about three times the initial estimate made when mining companies began serious work on Pebble.
Pebble is a copper-gold-molybdenum deposit located about 18 miles north of Illiama. If a mine were developed, it would be one of the largest of its kind in the world.
John Shively, CEO of the Pebble Partnership, the mine development company, told the Alliance that the project also requires a 95-mile road to a new port that would be built on the west side of Cook Inlet. The mine would also need a pipeline to carry a slurry, a mixture of ore and water, from the mine to the port and a second pipeline to return recycled water from the slurry back to the mine for re-use.
A small pipeline may also be needed to ship diesel fuel for mine equipment, he said.
The Pebble Partnership, formed to develop the mine, is owned 50 percent by major mining company Anglo American Mines and mine developer Northern Dynasty Minerals. Mining company Rio Tinto owns some 20 percent of Northern Dynasty Minerals.
Shively told the Alliance that the electricity requirements for the mine have now been estimated at 600 megawatts to 700 megawatts, an amount of power that would provide enough new baseload demand to build substantial new generation capacity for the state’s railbelt power grid.
Shively said power for the project may be generated elsewhere, most likely on the east side of Cook Inlet, and sent to the mine through long-distance transmission lines, including a submarine cable crossing the inlet.
The amount of power required could provide enough new baseload electricity demand to justify substantial generation capacity additions in the main railbelt power grid and benefit the entire system, he said.
“This could help justify a bullet line to bring gas from the North Slope, or a major geothermal project,” such as one being discussed near Mount Spurr, west of Anchorage, Shively said.
However, until that happens the company is also considering short-term options, including gas-fired power generation using imported liquefied natural gas, he said.
Substantial work is continuing at Pebble this year, with a goal for the company to file permit applications with government agencies in late 2009 or early 2010.
About $140 million is being spent this year on drilling, engineering and environmental work, Shively said. The project employed 200 to 240 people at periods of peak activity this year. Many of the workers were hired from communities near the project or in the Bristol Bay region.
“Our constraint is not resources,” Shively said.
The challenge is how and where to store waste rock after minerals are extracted from the existing ore reserves.
“The tailings containment facilities will be the constraint in how much we can mine,” he said.
Some 99 percent of what is mined will remain, with only about 1 percent extracted as metals.
Although large quantities of ore have been identified, it is still not known if a mine at Pebble can pass muster with state and federal permitting agencies and be economically developed, Shively said.
The new ore body is about 7,000-foot deep into the ground. It was found through one of the deep test holes drilled into Pebble East, one of the two previously known ore bodies that is itself at the 1,500-foot depth.
Further testing of the deep ore will be difficult with the mobile, lightweight drill rigs now being used for test drilling at Pebble, Shively said. However, it appears to be of a higher grade similar to that of Pebble East.
Pebble West, the other deposit that was initially explored, is a shallow, low-grade deposit that is located virtually at the surface.
The initial plan was to develop Pebble as an open-pit mine when only Pebble West was known, but when the deeper, richer Pebble East was discovered, the plan changed to envision an underground mine combined with a surface mine.
Shively said there is enough ore at Pebble to conduct mining for 50 to 80 years. At Pebble West, 569 million tons of ore have been identified in the “measured and indicated” category, a measurement of resources determined by closely spaced drill holes to demonstrate continuity of mineralization in the ore body, and another 143 million tons in the “inferred” category, an estimate based on more widely spaced test holes.
The quality of the ore was 7 percent copper-gold equivalent in both estimates. Copper-gold equivalent is a way of combing the values of all metals in the mine into one measurement.
In Pebble East about 1.52 million tons or ore have been identified as “inferred resources” as of February 2008. Results of the 2008 drilling had not yet been included in the figures.