Pebble touts economics as EPA moves to reinstate mine ‘veto’

The Pebble Limited Partnership continues to press ahead on pre-development work for its highly contentious mine, despite major roadblocks set by federal agencies under both the Trump and Biden administrations. The mining venture’s parent company, Vancouver-based Northern Dynasty Minerals, earlier this month released a summary of the preliminary economic assessment for its latest mine plan, which until recently was long demanded by the project’s opponents. According to Northern Dynasty, the 20-year mine plan Pebble submitted to the U.S. Army Corps of Engineers in late 2017 would generate an internal rate of return of nearly 16 percent and represents a 7 percent discounted net present value of approximately $2.3 billion, based on long-term metal price assumptions. At current prices for the prospect’s copper, gold and silver, the 20-year Pebble plan would generate returns of nearly 24 percent and holds a discounted net present value of $4.8 billion, the PEA states. The full report will be made public by late October, according to Northern Dynasty. Pebble last issued a formal evaluation of its project’s economics in 2011, which led opponents in recent years to demand updated economic estimates for its newer, scaled-back mine plan. They claimed the company avoided making its internal figures public because the smaller mine is not economically feasible on its own and would simply be a precursor to significant expansion. Northern Dynasty CEO Ron Thiessen said the report outlines the “robust economics” of Pebble in a statement accompanying the PEA. “It is a project that can be designed, built and operated with industry-leading environmental safeguards while generating significant financial returns over multiple decades,” Thiessen said. The 20-year economic forecast for the project is based on processing approximately 180,000 tons of ore per day from the open-pit mine and cumulative production of roughly 6.4 billion pounds of copper, 7.3 million ounces of gold and 37 million ounces of silver, along with ancillary production of other metals. An expanded mine capable of processing up to 270,000 tons of ore per day over 90-plus years would increase the project’s internal return to roughly 20 percent at forecasted metal prices and 25-30 percent at current prices, according to the PEA figures. The expansion economics are based on producing up to 60 billion pounds of copper and 50 million ounces of gold. For comparison, the proposed Donlin gold mine in the Kuskokwim region is forecasted to produce upwards of 33 million ounces of gold, which would make it one of the largest gold operations on Earth. At the same time Pebble and Northern Dynasty leaders were touting the moneymaking ability of their project, attorneys for the Environmental Protection Agency were indicating the Biden administration’s plan to resurrect a regulatory “veto” of Pebble in federal court filings. EPA attorneys filed a scheduling motion in U.S. District Court of Alaska on Sept. 9 outlining their intent to reverse the Trump administration’s 2019 withdrawal of a proposed determination to prohibit a large mine in the Pebble area through the agency’s Clean Water Act Section 404(c) authority. The withdrawal was partly rejected by the 9th Circuit Court of Appeals in June as part of a separate lawsuit filed against the EPA in 2019 by numerous Tribes and environmental groups opposed to the mine. The Appeals Court panel partly overturned a District Court ruling, finding that EPA regulations allow for a 404(c) withdrawal “only when an ‘unacceptable adverse effect’ on specified resources was not ‘likely,’” the June 17 order states. According to the order, the EPA under the Trump administration did not sufficiently justify its rationale for reversing the proposed determination, as required by the agency’s regulations. The EPA began the years-long veto process in 2014 under former President Barack Obama. But the settlement to a subsequent lawsuit by Pebble against the EPA was resolved by EPA leaders in the Trump administration, which allowed Pebble to move ahead with permitting its project. In a surprising move last November, the U.S. Army Corps of Engineers rejected the mine plan at the end of a nearly three-year environmental impact statement process, which resulted in a final EIS that broadly concluded the mine could co-exist with the area’s other resources and would cause “no measurable change” in the numbers of salmon returning to the Nushagak and Kvichak rivers, or in the long-term health of the commercial fisheries in the region. Pebble’s appeal of the Army Corps of Engineers Alaska District’s record of decision for the project EIS is primarily based on the perceived inconsistencies between the EIS and the agency’s final decision. Pebble spokesman Mike Heatwole wrote in an emailed response to questions that the company maintains its position that the withdrawal of the 404(c) veto by the EPA under the Trump administration “was sound and appropriate.” Heatwole emphasized that the EIS published last year concluded the project could be built without harm to the region’s fisheries or water resources and further represents a “tremendous economic opportunity” for nearby communities. “Our focus remains on working through the formal appeals process via the (Army Corps). As the Biden administration seeks lower carbon emissions for energy production, they should recognize that such change will require significantly more mineral production — notably copper,” he wrote. “The Pebble project remains an important domestic source for the minerals necessary for the administration to reach its green energy goals.” Pebble’s appeal of the record of decision to Army Corps Pacific Division leaders is ongoing. Elwood Brehmer can be reached at [email protected]

Native corporations slowly approach shared revenue ‘cliff’

Alaska Native corporations across the state face a “fiscal cliff” of their own that is still years off, but there are currently few options to avoid it. For decades, the 12 Alaska Native regional corporations and nearly 200 village corporations statewide have shared revenue generated from resource projects amongst themselves to the tune of roughly $3 billion since 1982, according to figures from a 2018 report on the revenue sharing program by the McDowell Group combined with more recent data. Generally known as the “Section 7(i)” program for its place in the Alaska Native Claims Settlement Act, the provision in the landmark legislation directs Alaska Native corporations to distribute 70 percent of the revenue originating from resource projects on their land to the other Native corporations statewide. The land or resource owner company keeps the remaining 30 percent. ANCSA Regional Association Executive Director Kim Reitmeier said the 7(i) program is a critical component of ANCSA “that truly reflects the Alaska Native values of unity and collaboration.” Revenue from the 7(i) program has been a significant source of funds for benefits each of the regional corporations have offered their shareholders, according to Reitmeier. The money is often used for cultural education, language revitalization, and scholarships, or is paid directly in shareholder dividends, but the individual corporations ultimately determine how it is spent. “There’s been trials and tribulations for the regional corporations and 7(i) revenue, and assistance from the other regional corporations has been paramount in the success of all of them,” she said. Revenue shared in the program — greatly influenced by commodity prices and production — totaled $246 million in fiscal year 2019 and $158.4 million last year, according to Reitmeier. She also noted it’s a model that flies in the face of the country’s traditional business principles. “It’s really something that baffles the mind. Ask Lowe’s and Home Depot and all those entities to share profits with each other. You take those concepts to Western business cultures and it blows people’s minds,” Reitmeier said. From 2015-2017 Bristol Bay Native Corp. collected between $5.6 million and $9.6 million per year in 7(i) revenue, net of what the company also turned around and distributed to village corporations in its region through the closely linked 7(j) program, according to BBNC’s 2017 annual report. Section 7(j) of ANCSA subsequently directs the 12 regional corporations to distribute half of the shared revenue they receive to the area’s village corporations. The 12 regional corporations are all involved in numerous industries and business sectors, from government contracting to oil field services to remote fishing lodges, typically through subsidiaries and partnerships. And while many village corporations are often more focused on a single industry, whether drilling oil wells or managing parking garages, Alaska Native Village Corporation Association Executive Director Hallie Bissett said that the 7(j) income accounts for all or nearly all of the revenue collected by approximately two-thirds of the 177 village corporations that are ANVCA members. Similar to Reitmeier, Bissett said the emphasis on spreading the benefits of natural resources across the state is one of the first socially responsible business models. “People often forget the Alaska Native piece of ANCs and just focus on the corporation,” Bissett said. “It’s very similar to the way we would share subsistence food,” she added. The problem lies in the fact that resource revenue from Alaska Native corporation-owned lands is generally declining and the fall is likely to accelerate in the coming years. As is the case with oil production across the North Slope, production from lands owned by Arctic Slope Regional Corp. or state leases to which ASRC holds an overriding royalty interest has been on a downward trend, with no outlook for an abrupt recovery. Shared revenue from the Red Dog mine in northwest Alaska — one of the world’s largest zinc producers — also has an expiration date, and it’s the one Bissett is most concerned with. “There’s a huge cliff coming for 7(j),” she said in an interview. Opened in 1989, the Red Dog mine is on NANA lands north of Kotzebue. However, the metal deposit Red Dog operator Teck Resources Ltd. has been mining from is projected to be exhausted by 2032, according to Teck, with a likely ramp-down of production in the years preceding closure. Teck leaders in 2018 announced a second major discovery in 2018 that company representatives characterized as another world-scale zinc prospect, but it is on nearby state land. A spokeswoman for NANA did not respond to questions about royalty and 7(i) revenue from Red Dog in time for this story. According to the Alaska Industrial Development and Export Authority, which owns the industrial toll road used to access the mine, royalty payments to NANA average greater than $130 million annually. Through 2016, Red Dog had generated more than $1.3 billion in royalties for NANA, of which $860 million was subsequently distributed to Alaska Native corporations through the 7(i) and 7(j) programs, according to figures in a 2017 AIDEA asset review report. “Awareness is the first big piece,” Bissett said in regards to addressing the looming dilemma. “Some (village corporation leaders) don’t even know where the money comes from.” She said Native corporation leaders attempted to get a 3 percent royalty from possible oil production from the Arctic National Wildlife Refuge but that was unsuccessful. Leaders of the Donlin gold project in the upper Kuskokwim region of Western Alaska tout their world-scale prospect — with the potential to produce upwards of 33 million ounces over a nearly 30-year planned mine life — as a possible solution to the 7(i) and 7(j) revenue outlook. The Donlin prospect is on land owned by The Kuskokwim Corp., a consolidated village corporation and, as is the case across the state, the subsurface rights and royalties are controlled by the regional corporation — in Donlin’s case, Calista Corp. A Donlin spokeswoman referred questions about royalties to Calista officials. Calista spokesman Thom Leonard noted via email that Donlin isn’t the only resource development opportunity on Alaska Native-owned lands, but it is the next major opportunity after Red Dog to contribute to the 7(i) program. “Like we can’t predict how many fish we will catch, we can’t speculate on the amount of 7(i)/7(j) revenue (from Donlin). It will depend on the price of gold and other factors. That said, if the Red Dog mine is any guide, we expect to be a significant contributor to 7(i)/7(j) distributions to all Alaska Native corporations,” Leonard wrote, also noting that Red Dog accounted for 70 percent of all 7(i) revenue between 2015 and 2018. Bissett concurred that Donlin could be a major source of shared revenue, but also added that it is several years from the start of a lengthy construction process, if the mine is ultimately built at all. She suggested it could be 20 years before significant 7(i) revenue is collected from Donlin. “As my chairman said, (shared revenue) is the difference between being in business and not in business” for many village corporations, Bissett said. Elwood Brehmer can be reached at [email protected]

Second busy summer wraps at Donlin Gold

Bursts of canary yellow on an otherwise deep green landscape indicated Alaska’s infamously fleeting fall had arrived to Western Alaska. At Donlin Gold’s camp in the upper Kuskokwim drainage, that meant wrapping up another busy drilling season before autumn departs. The last Donlin drilling crew was boring its final hole into the bedrock underlying a valley adjacent to the camp’s rather unique runway — more on that later — when the Journal toured the world-scale gold project with Sen. Lisa Murkowski Sept. 17. The drill was turning into what could end up being the bottom of the gold mine pit. “Ahead of schedule and under budget,” Donlin Gold General Manager Dan Graham said of the 2021 summer work season. Crews drilled approximately 80 holes totaling about 24,000 meters after originally planning to do about 20,000 meters of work at the outset. Mining major Barrick Gold Corp., the world’s second largest gold producer and a 50 percent owner in Donlin with junior Vancouver-based NovaGold, has been the driving force behind two consecutive drilling-intensive years at the Donlin prospect. About 23,000 meters of core was drilled last year. A little more than 400,000 meters of drilling has been done at Donlin since major exploration started, according to Graham. The latest core samples are largely needed to improve the companies’ understanding of the ore body before making a final investment decision on the massive mine project, last priced at nearly $7 billion back in 2011. Other geotechnical-focused drilling is informing work on the mine’s tailings storage dam. As proposed, the open-pit mine in the upper Kuskokwim River drainage would be one of the world’s largest, producing more than 33 million ounces of gold over an initial 27-year life. A 315-mile natural gas pipeline from the west side of Cook Inlet would supply a power plant at the mine and fuel storage tanks would be built at Dutch Harbor, in addition to the very large-scale operation at the mine site. Donlin representatives have long said the project generally needs sustained, high gold prices because of the extensive network of support infrastructure that needs to be developed but have declined to specify what parameters they believe are needed to green-light development. The last two active drilling seasons came after a period of general dormancy at the camp from 2013 to 2018 while the company focused on permitting and gold prices were at their lowest. Spot Gold prices hit a recent peak of nearly $2,100 per ounce in mid-2020 and since have been largely in the range of $1,700 to $1,900 per ounce after bottoming out at less than $1,100 per ounce near the end of 2015. To that end, Graham said at this point the outlook is for another full season next year. Executives for Barrick and NovaGold said in a joint statement earlier this month that they are working towards an updated feasibility study, which would likely include a new cost estimate, before deciding whether or not to start construction. That decision could come in two or three years if Donlin Gold can secure its remaining requisite permits. The company received a favorable record of decision from the Army Corps of Engineers in 2018 on its environmental impact statement following a roughly six-year review. Donlin still needs approvals from state Dam Safety officials in the Department of Natural Resources for its large tailings facility. Located on land owned by The Kuskokwim Corp., the area’s consolidated Alaska Native village corporation, the Donlin Gold project exemplifies the disconnect that often occurs between local Tribes and Native corporations when it comes to development projects. More than a dozen Tribes in the region have formally opposed Donlin since the project got its overarching federal approval largely over concerns the project will harm the Kuskokwim’s salmon runs, which have already been in a general state of stress in recent years. Leaders for Donlin, TKC and Calista Corp., which holds the subsurface and royalty rights to the land and gold, insist locals’ fears often stem from being misinformed; the company will be expected to discharge water treated to a higher quality than it would be if the mine were not there at all, Donlin External Affairs Manager Kristina Woolston said. “My focus is on the region and Barrick is on board with bringing the benefits (of the project) to the region,” Graham later added. Those benefits start with up to 3,000 construction jobs during the multi-year development phase and another 1,400 expected during the life of the mine, according to Donlin Gold, but the financial benefits of Donlin would also extend statewide through the Alaska Native Claims Settlement Act Section 7(i) and 7(j) resource revenue sharing programs for regional and village Native corporations, company leaders note. Currently, Donlin employs more than 100 workers at the camp when activity is high. As an example of the work the company is doing to understand and minimize the environmental impacts of the project, Graham said Donlin commissioned first-time studies of the Kuskokwim’s Rainbow smelt run — an important spring subsistence resource — this year to get a better understanding of when and how barges supplying the mine should be sent upriver to avoid out-migrating smelt fry. For her part, Murkowski tries to talk with workers from the region when visiting projects such as Donlin to get their perspectives on how it is viewed locally, she said. It was Murkowski’s third attempt to reach the project; the first two were weathered out. Upon approach to the camp, it was easy to grasp why the senator had previously been unlucky. The broken ceiling Sept. 17 allowed for safe travel; however an 8 percent incline to the Donlin camp runway means planes are limited to one-way in and one-way out with few options to account for wind direction or other considerations. The ridges surrounding the project — similar to the one the camp is perched on — also prevent flying in low cloud cover. The uphill landing at Donlin provides a sensation this reporter had not previously experienced. “The third time’s the charm,” Murkowski remarked prior to the morning flight from Anchorage, which was held up only briefly on a “weather.” Elwood Brehmer can be reached at [email protected]

Weather scuttles Ambler drilling plans

An unusually gloomy summer has so far scuttled more than half of drilling work planned at the most advanced metal prospect in the remote Ambler mining district, according to the owners of the project. Leaders of Vancouver-based Trilogy Metals said in a field season update provided Sept. 7 that as of late August, approximately 6,450 meters of core had been drilled during a season that began with expectations to collect more than 14,600 meters. Just more than half of the drilling was originally planned for within the Arctic multi-metal deposit with another 7,000 meters scheduled for targets nearby and elsewhere in the prospective Ambler region, according to the company. Trilogy Metals is a joint owner with Australian South 32 Ltd. in Ambler Metals LLC, the operating company for the Arctic and Bornite prospects first owned by Trilogy. Ambler Metals spokeswoman Shalon Harrington wrote via email that the 2021 work season has been impacted by persistent overcast and rainy conditions that hamper the ability to safely conduct helicopter flights, which are needed to access nearly all of the drill sites. While overcast and wet weather is typical in the Ambler region as it is across much of the state, Harrington wrote that this is the first year since the notoriously cool and dreary summer of 2011 that it was a season-long issue. The village of Bettles east of the remote upper Kobuk metal prospects has seen about 45 percent more precipitation than normal since the start of June, according to National Weather Service data. Most recently pegged as a $1.2 billion open-pit mine with a 12-year life, the Arctic deposit was first known as primarily a copper prospect, but subsequent drilling tapped into substantial zinc and precious metal resources as well. Located in the middle of the Ambler mining district on the southern edge of the Brooks Range, the Arctic mine project is the most advanced prospect of more than a dozen in the roughly 75-mile long district. It also would likely be the first mine serviced by the state-sponsored Ambler access road, which has drawn the ire of many area residents and conservation groups. Trilogy CEO Tony Giardini said in the update that the company was still able to complete the metallurgical drilling at Arctic and keep advancing pre-permitting work as well. Drilling work at Arctic is done for the year. “We are now well into our regional drilling program with two drills following up on targets within our Ambler belt and the greater Bornite area,” Giardini said. “We are looking forward to seeing the regional drilling results, which should be available within the next couple of months and in commencing mine permitting once we have completed the permitting review process.” Drilling at the regional targets will continue as long as the weather allows, according to Trilogy. Donlin does more Work at the Donlin gold prospect to the southwest has been busier than originally planned, with the company expecting to drill roughly 80 holes totaling approximately 24,000 meters, according to figures provided Sept. 2. The company originally planned to drill about 65 holes totaling 20,000 meters but the additional work should help fill in the remaining gaps about mineralization continuity in the pit and aid feasibility work, according to a statement from NovaGold, a 50 percent partner in the $6.7 billion Donlin project with mining giant Barrick Gold. The best core intervals surveyed so far from this year’s drilling include 92 meters of core with an average grade of 7.8 grams of gold per ton of ore and 41 meters of core averaging 10.5 grams per ton, according to NovaGold. “As with last year’s program, drilling has delivered multiple examples of outstanding gold intercepts,” NovaGold CEO Greg Lang said in a formal statement. “Excellent results, such as those reported (Sept. 2) reinforce our belief in the uniqueness of an asset like Donlin gold, whose combination of outstanding size, quality, and exploration upside are clearly among the only answers to an industry defined by an era of declining reserves, lackluster gold grades and ever-increasing jurisdictional risk.” Donlin representatives have long said the project generally needs sustained, high gold prices because of the extensive network of support infrastructure that needs to be developed but have declined to specify what parameters they believe are needed to green-light development. Gold was trading for about $1,796 per ounce on Sept. 7. The $6.7 billion construction cost estimate was developed from the last feasibility study done on the project in 2011. Elwood Brehmer can be reached at [email protected]

DNR keeps ‘quiet period’ with water rights revisions pending

Mum’s the word from Department of Natural Resources officials regarding their plan to fundamentally change the state’s water rights system. House Fisheries Committee chair Rep. Geran Tarr, D-Anchorage, said DNR representatives declined to attend a July 27 hearing on the agency’s proposed changes to in-stream flow reservations and other water regulations because she was told they are in a “quiet period” while they respond to public comments from the extended period that closed April 2. Tops among the changes first suggested by the Division of Mining, Land and Water in mid-January is adding new language to water reservation regulations stating that water reservation certificates currently issued to private parties would instead be held by DNR, which adjudicates water rights and reservation applications. Resource development advocates insist the change is needed so control of a public resource is kept within a public agency and to prevent opponents of a given project from attempting to impede development by chasing water rights. For their part, conservation groups insist the change would strip Alaskans of their rights to protect the fish — another public resource — in waters vulnerable to development. Alaska’s current system of water rights is generally viewed as one of the most open in the country; it allows anyone to apply for temporary water use authorizations as well as water reservation, or in-stream flow, rights to maintain sufficient stream flows for fish and other wildlife. Reviewing water reservation applications often takes DNR years in coordination with the departments of Fish and Game and Environmental Conservation, a situation Bob Shavelson, advocacy director for the Homer-based conservation group Cook Inletkeeper, said in the hearing is the result of traditionally pro-development state administrations prioritizing water rights, or use, authorizations over flow reservations to protect habitat. Currently, the Department of Fish and Game holds the vast majority of flow reservations; another handful is held by federal resource agencies such as the U.S. Fish and Wildlife Service. The Nature Conservancy is one of the few private entities to hold water reservations. It secured four flow reservations near the Pebble deposit in 2017. DNR officials also said during the public comment period that they could not comment specifically on the proposed regulations. At the time, they cited a section from the Administrative Procedures Act that state’s agency officials proposing a regulatory action “shall make a good faith effort to answer, before the end of the comment period, a question that is relevant to the proposed action, if the question is received in writing or at least 10 days before the end of the public comment period.” The section of the APA goes on to state that common questions can be answered in a consolidated form on the Alaska Online Public Notice System. State officials have historically discussed proposed regulatory changes and officials in other agencies have as well during the Dunleavy administration. Water Section Chief Tom Barrett said more broadly that flow reservations are “significant” in that they can impact other water users in a January interview. He added that the state is not trying to withhold water rights for any one group, noting the DNR commissioner — who approves water reservations — currently has the discretion to discontinue them as well. According to such answers posted by Mining, Land and Water officials, the changes are meant to better distinguish water reservations from more traditional water right appropriations. “Traditional water right certificates are issued to persons for a specific beneficial use. Reservations of water are a reserved level or flow that is reserved for a specific public purpose, not the sole use or benefit of the applicant.” Barrett wrote via email to the Journal on July 27 that it’s unclear exactly when DNR leaders plan to finalize the water regulations but it probably won’t happen for several months. The proposed regulations are a continuation of an attempt by former Gov. Sean Parnell’s administration to overhaul the water reservation structure, according to Shavelson. House Bill 77, which drew strong public opposition and died in the Senate in early 2014, would have limited water reservations to public agencies among many other revisions to state resource policies. While development advocates have long advocated for changes to Alaska’s water use regulations and statutes, one of the state’s largest pro-development lobbying groups is against the current regulations proposed by the Dunleavy administration because they don’t go far enough. Natural resources attorney Eric Fjelstad testified on behalf of the Resource Development Council for Alaska that the new proposed language also gives the in-stream flow reservation applicant legal standing to manage the reservation, even if DNR is technically the certificate holder. “We think (in-stream flow reservations) should be a limited tool held by DNR and state subdivisions,” Fjelstad said. The state’s multilayered process for permitting large development projects addresses the concerns of many who are concerned about the impacts of development on water bodies and fish, notably salmon and the place for instream flow reservations is in a more subtle situation, according to Fjelstad. He suggested several small water withdrawals along a stream or river is a more likely scenario to result in cumulative damage to the watershed and its inhabitants. “If you don’t have that large project permitting you can have water withdrawals that aren’t accounted for,” he said. RDC Executive Director Marleanna Hall wrote in official comments to DNR that giving legal standing to private parties potentially managing in-stream flow reservations “an even more powerful tool for those who oppose development from Alaska. This provision should be removed from the regulations.” Shavelson contended the insistence by RDC and other development advocates that private parties should not be able to hold in-stream flow reservations as a means for protecting fish habitat is inherently hypocritical because developers, and other private groups, can hold water rights and temporary water use authorizations to divert water out of a lake or stream. “A Canadian mining company could hold rights to take water out of a salmon stream but Alaskans couldn’t hold the reservation to keep water in the stream and that’s the crux of it,” Shavelson said. “The DNR proposal really takes a government knows best approach to water reservations.” He urged lawmakers to amend the Alaska Water Use Act to mandate DNR to apply a corresponding water reservation sufficient to preserve fish and wildlife populations — which varies in each water body — to counter each water withdrawal authorization. “This would be the Alaska Legislature looking at the Water Use Act and making some simple but common sense changes,” Shavelson said. Elwood Brehmer can be reached at [email protected]

Greens Creek helps generate $41M cash flow for Hecla

Production at the country’s largest silver mine was down to start the year despite strong metal prices due to processing lower-grade ore, according the mine’s owner. Idaho-based Hecla Mining Co., which owns the underground Greens Creek mine near Juneau, reported silver production of approximately 2.55 million ounces in the second quarter July 13. That was a decrease of 7 percent from a year ago. Silver production at Greens Creek is similarly down 7 percent for the first half of the year at 5.14 million ounces, compared to 5.53 million ounces in 2020. In its report, the company attributed the decline to “lower grades resulting from mine sequencing.” Hecla leaders earlier this year estimated total silver production of 9.5 million to 10.2 million ounces from Greens Creek in 2021. Even with the recent decline, silver output in the first half of the year from the Admiralty Island mine was still far better than comparable 2019 levels when the company produced approximately 4.6 million ounces of silver, which was an 18 percent increase over 2018, according to company records. Secondary gold production at Greens Creek was down 2 percent in the second quarter at 12,859 ounces, but is up 3 percent for the year overall at 26,125 ounces, Hecla reported. CEO Phil Baker said the “solid” and relatively steady silver production from what is by far the largest of the company’s five operating mines, helped Hecla generate $41 million in cash overall for the quarter, marking its fifth consecutive quarter of increasing cash reserves and said the company’s collective response to COVID-19 should help sustain the momentum. “With the company’s U.S. vaccination rate higher than the U.S. average, including Greens Creek at a nearly 90 percent vaccination rate, and Casa Berardi (Quebec) increasing, we expect to build on these results,” Baker said in a formal statement. After bottoming out at around $12 per ounce during the global onset of the pandemic, silver prices have rebounded to as high as $28 per ounce of late and are currently in the $26 per ounce range. Gold has recently sold in the $1,800 per ounce range after peaking at more than $2,000 per ounce roughly a year ago. The U.S. Forest Service is also in the midst of a supplemental environmental impact statement review of Hecla’s plan to expand the tailings disposal facility at Greens Creek by about 14 acres, or 20 percent. Hecla expects the current 66-acre facility will likely be filled by about 2031, at which point the mine would have to be closed. The company submitted the plan last October. Exploration update On the exploration side of the industry, remote camps are active this summer across the state after the disrupted 2020 work season. There are four drill rigs working at the Donlin gold site near the Kuskokwim River in Western Alaska and they are expected to drill 64 holes totaling approximately 20,100 meters this summer, according to Donlin’s co-owner Vancouver-based NovaGold. The drilling at the well-advanced prospect is aimed at further testing the continuity of the ore body and the structure of the mineralization, according to the company. HighGold Mining Inc. is also adding to the drilling work this summer at its early-stage Johnson Tract gold prospect on the west side of Cook Inlet. According to a statement from HighGold, the company was able to raise enough money in its most recent stock sale for leaders to consider adding 4,000 meters of drilling to the initially planned 16,000-meter, $10 million program. Back in Southeast Alaska, Constantine Resources is working towards drilling 6,000 meters of exploratory boreholes at its multi-metal Palmer project near Haines. The nearly $9 million work program is being funded by Tokyo-based Dowa Metals and Mining, which purchased up to 56 percent of the project through the funding arrangement, according to Constantine. A small summer program is also ongoing at the Pebble camp in Southwest Alaska, where a crew of nine is continuing baseline environmental studies and data collection for engineering as well as demobilization of unneeded facilities, according to Pebble Partnership spokesman Mike Heatwole. Pebble is currently appealing the Army Corps of Engineers Alaska District denial of its Clean Water Act wetlands fill permit last November. Elwood Brehmer can be reached at [email protected]

Study: Green energy requires massive jump in metal mining

Clean energy may mean less mining for coal, but it also means opening or expanding mines to unearth minerals such as cobalt for use in alloys and batteries, tellurium for solar cells and semiconductors, and germanium for transistors in electronic devices. That’s according to Dr. Michael Moats, professor and interim chair of materials science and engineering at Missouri University of Science and Technology, who says reducing carbon emissions from energy systems in the United States will increase the need for metal production by two to six times per kilowatt of energy production. “We could eventually reach some of our materials needs by recycling, but there is very little to recycle at this point,” says Moats. “So, we’re going to have to bring on new mines to meet the demand.” Moats, who is director of the Thomas J. O’Keefe Institute for the Sustainable Supply of Strategic Minerals at Missouri S&T, says current mining of cobalt, for instance, provides about 100,000 tons per year. To meet future green energy needs, he says production would need to double by 2030 and triple by 2050. Much of current production comes from the Democratic Republic of Congo and is refined by China. “It becomes an issue of how much control you want over your supply chain and how difficult it can be to bring supplies from overseas during wartime or political upheaval,” Moats says. “It’s a very complex discussion because it involves energy, defense, economics, diplomacy and other areas.” Moats says the United States has cobalt assets in Missouri, Minnesota and Idaho, but production trails other sources because the U.S. permit process takes years. Resources in the U.S. are small compared with countries such as Canada, he adds, and the U.S. lacks the smelters to refine the materials from ore and existing mine tailings. Developing a trained domestic workforce consisting of the trades, engineers and scientists is another issue. Moats testified to members of the U.S. House Committee on Natural Resources earlier this year that many U.S. universities no longer offer degrees in mining or metallurgical engineering. Missouri S&T offers one of 11 mining engineering programs accredited by the Accreditation Board for Engineering and Technology. It is one of only seven schools in the U.S. that offer ABET-accredited metallurgical engineering programs. In his testimony before the committee members, Moats recommended that the federal government create a mining and metallurgy innovation center to foster research and build interest in critical metals production. “We want to promote science-based policy at the O’Keefe Institute,” Moats says. “We want to be engaged in the conversation to find solutions in the best interests of all stakeholders.”

Coeur receives preliminary OK for Kensington expansion

The U.S. Forest Service is likely to approve a plan that would allow the Kensington gold mine near Juneau to operate for at least 10 years longer based on a draft decision published July 9. If the draft record of decision remains substantively the same in its final version the underground mine’s life would be extended from 2023 out to 2033. Chicago-based Coeur Mining Inc. applied for the first amendment to its operations plan in September 2019. Extending the life of Kensington in this case involves increasing the mine’s tailings storage capacity by 4 million tons, or nearly 50 percent, to approximately 8.5 million tons, according to the draft decision. That would be done by raising the height of the tailings treatment facility from 88 feet to 124 feet and constructing another 40-foot “back dam” between the treatment facility and Upper Slate Lake, a natural lake. The draft approval also allows Coeur to expand the mine’s existing Pit No. 4 and Comet waste rock storage facilities as well as construct a new waste rock facility for a total storage capacity increase of 6 million tons. The work would also require 1.75 miles of new roads, according to the Forest Service. The development growth would also allow Coeur to increase throughput at Kensington’s mill from approximately 2,000 tons to 3,000 tons per day. Located about 45 miles north of Juneau on the edge of Lynn Canal, Kensington employs nearly 370 people. “The Forest Service recognizes the importance of mineral resources and encourages safe, responsible mineral exploration and development as part of our multiple-use mandate,” Tongass National Forest Supervisor Earl Stewart said in a prepared statement. “We have worked closely with Coeur Alaska to mitigate potential impacts of their proposed extension of operations for the mine. Public engagement has been and continues to be an important part of the process.” Forest Service officials opened a 45-day objection period along with publication of the draft decision that is open only to individuals who submitted “specific, timely comments” during any of the comment periods for the project, the July 9 announcement states. In January, the Juneau-based Southeast Alaska Conservation Council requested the agency require dry-stack tailings to limit spill risk to nearby Berners Bay, an ecologically significant area, following the release of the draft EIS. Southeast Alaska Fishermen’s Alliance Executive Director Kathy Hansen wrote in January comments on the project that the group supports Coeur’s plan because mining is an important part of the region’s economy, along with fishing, and the company’s operations have not harmed the surrounding marine environment. Coeur is proposing to improve Dolly Varden habitat by constructing new stream channels and small stream deltas along with replacing three culverts to facilitate fish passage. Forest Service officials state in the draft record of decision that there is a high likelihood that the tailings treatment facility — formerly Lower Slate Lake — will be restored to long-term fish habitat after closure of the mine. The expansion project would result in the loss of approximately 52 acres of wetlands through water inundation or fill; however, Coeur’s reclamation plan calls for a net increase in wetlands in the area once the mine is closed, according to the Forest Service. Coeur has operated the mine since startup in 2010, when Kensington represented about 5 percent of the company’s precious metal assets. Now, Kensington is nearly 30 percent of Coeur’s precious metal assets among its five operating mines, according to the company. This year Coeur expects to produce between 115,000 to 130,000 ounces of gold at Kensington, very much in line with the 125,000 ounces produced last year. Kensington held an estimated 331,000 ounces of reserves at the end of 2020 and another 830,000 ounces worth of mineralized material, according to Coeur’s annual report. The mine also produced 28 percent of the company’s revenue last year. Coeur expects to spend $23 million to $30 million on capital investments at Kensington this year that will be focused on pit development and equipment replacements, according to a corporate presentation. Elwood Brehmer can be reached at [email protected]

US looks to Canada for minerals to supply EV batteries

WASHINGTON — U.S. policymakers hoping to power an electric vehicle boom acknowledge the country lacks a robust and reliable supply chain for the minerals needed to power next-generation cars. That reality — exposed by the economic aftershocks delivered by the COVID-19 pandemic — looms as a national security risk the administration plans to remedy, in part, by working with like-minded nations. Increasingly, Canada appears to be among the first in line. The White House is signaling plans to increase collaboration between the U.S. and Canada on critical minerals, according to a recent supply chain review that highlighted the country’s mineral assets. It’s one of several indications the administration sees Canada as a crucial ally to realize its EV goals, including a joint announcement July 1 to collaborate on reducing emissions through clean energy, mineral sourcing and accelerating EV adoption. “No two countries in the world have their energy sectors as closely linked as Canada and the United States do,” Canadian Natural Resources Minister Seamus O’Regan said in a statement. “It’s a relationship that supports thousands of jobs and drives economic activity on both sides of the border. We’re strengthening our bilateral energy relationship to build a clean energy future.” In the long term, President Joe Biden and his administration hope the U.S. can build up domestic mining operations to provide reliable mineral sources such as lithium, cobalt, nickel and graphite at home. But in the short term, they’re looking to allied countries like Canada with robust mining operations and compatible environmental standards to help out. It’s part of a larger strategy in which Canada is positioning itself to be a “premium” supplier of battery minerals to the U.S. and other countries looking for transparent supply chains with requirements for environmental and labor safety, analysts say. And compared to other allies like Australia and Japan, Canada enjoys an advantaged tax status and proximity to auto manufacturing centers in Michigan and Ohio. “These two federal governments share the same values,” said Christopher Sands, director of the Canada Institute at the Wilson Center, a non-partisan foreign policy think tank. “We have the same common cause — that’s what Canada is really trying to get across with its outreach to the Biden administration. To say, ‘We get you, we share exactly your perspective and we want to help you succeed.’” The China problem As the coronavirus pandemic ravaged communities and shut down economies, it revealed a new weakness that U.S. policymakers are just beginning to grapple with: A supply chain so fragile that the economy or national security can be impacted by a ship stuck in the Suez Canal, sudden increased demand for electronics, or political rivals seeking retaliation. In particular, the latter possibility is sending chills up lawmakers’ spines. The leading economic and political rival to the United States on the world stage, China, is home to more than 75 percent of all battery production capacity and around 80 percent of global refining capacity for EV minerals, giving it immense influence over the battery supply chain. “It is reasonable to expect that China could restrict exports of any or all of the battery supply chain materials it produces” due to trade tensions or interest in giving priority to Chinese customers, Department of Energy researchers wrote in a recent supply chain review for electric vehicle batteries and critical minerals. “Alternatively, China could dump processed materials or finished anode and cathode materials on global markets to reduce competition.” It’s not just about economic strategy: The fragile mineral supply chain is also being dubbed a national security threat, as lithium batteries are crucial parts of “propulsion, communications, sensors and weapons” operations within the Department of Defense, according to the report. The United States has stores of many of the raw materials needed for electric vehicle batteries, but it lags behind China and such countries as Australia, Brazil and Canada in mining and processing, according to the report. And with a democratic system that won’t accommodate the quick, targeted spending strategies used by China’s communist government, experts say the United States will have to take an approach that incentivizes domestic production while filling in the gaps with reliable imports. “I think there’s a growing acceptance at a government level that there’s a lot of potential benefits from taking an approach to battery raw materials that’s more regional, rather than just within your own borders,” said Andrew Miller, product director at Benchmark Mineral Intelligence. “As people become more familiar with some of the challenges facing the strategic minerals supply chain, it becomes pretty apparent that you’re not going to solve these problems overnight. Most likely, you’re still going to have some kind of dependence on other nations. So positioning those dependencies with allies and with countries that have a strategic position to help you does make sense.” Northern neighbors Biden has pledged to make the U.S. a leader in battery manufacturing and to ensure new jobs supported by the growth of electric vehicles will be kept in the U.S. The new supply chain review and recommendations from the Departments of Commerce, Energy, Defense and Health and Human Services reflect that’s still the plan, accomplished in part by boosting demand for electric vehicles and incentivizing more private sector investment. The administration has faced some early opposition from some conservationist and Indigenous groups over environmental concerns about increasing mining activity within U.S. borders. Biden has said he would triple the amount of federal land set aside for conservation, but it’s likely to be a point of tension as the administration seeks to both accelerate battery production and protect natural resources and prioritize environmental justice. “A lot of these EV raw materials aren’t necessarily scarce around the world,” said Miller of Benchmark Mineral Intelligence. “But attracting the financing and having the technical capabilities to turn that into something that the battery industry can use; that’s where the gap is.” While Canada has an established mining industry, it’s not yet producing electric vehicle battery minerals at scale, he said. However, U.S.-Canada trade in critical minerals already exceeds $76 billion, according to the Department of Defense, and Canada also has some unique advantages as a frequent trade partner and geographic neighbor. Being close to auto manufacturing centers in Michigan and Ohio makes Canada a natural supplier choice, as the cost of shipping goes up the further away resources are coming from. Canada also plans to become a center for battery recycling for this reason, Sands said, as lithium-ion batteries are heavy and shipping them from Detroit to Quebec is cheaper than other far-flung areas. Lithium-ion cells and battery packs imported to the U.S. are subject to a 3.4 percent tariff, but Canada and Mexico are exempted under the United States-Mexico-Canada Agreement. Plus, Canada is the only country that can be considered a “domestic source” under the Defense Production Act, making Canadian companies eligible for some U.S. government funding. Canadian officials are likely to face similar opposition from conservationist and Indigenous groups, Sands said, but the Canadian government in recent years has tended to coordinate more closely with Indigenous groups than in the U.S. and is attempting to get ahead of potential conflicts. “The way that Canada has been approaching these new mining projects is bringing everybody on board and trying to line up a very consumer-friendly, investor-friendly picture: heavy mining that’s done in the safest possible way,” Sands said. “They think that that will be their edge.” This is not the first time Canada and the U.S. have indicated they’re planning to collaborate on critical minerals. Former President Donald Trump’s administration agreed upon an action plan to secure critical minerals supply chains early last year. The Biden administration doubled down on that commitment in February. In March, the Commerce Department held a roundtable discussion with mining companies and battery manufacturers about how to strengthen the mineral supply chain between the U.S. and Canada. Both countries also already participate in an international consortium with Australia, Botswana and Peru that’s dedicated to ethical mining practices called the Energy Resource Governance Initiative.

Ucore aims to start construction of rare earths facility by ‘23

A Canadian metals exploration and technology firm has solidified its plan to disrupt China’s control over increasingly critical metal supply chains and Southeast Alaska is at the center of it. Leaders of Nova Scotia-based Ucore Rare Metals Inc. highlighted their “Alaska 2023” plan to complete a $35 million rare earth metals processing plant in Ketchikan by the end of the namesake year during a May 11 videoconference presentation hosted by the Alaska Support Industry Alliance. Ucore chose the Southeast town for its proximity to the Bokan Mountain-Dotson Ridge rare earth mine prospect on nearby Prince of Wales Island, which the company has held since 2007. CEO Pat Ryan said the schedule is “aggressive,” but the company hopes to use revenue from the metals processing facility to support development of a small underground rare earth mine. If developed today, the Bokan project would be just the second rare earth mine in the country. As it stands, Bokan is an advanced-stage prospect that the company largely set aside after a 2015 drop in prices for rare earth metals. Ucore leaders at the time shifted their focus to developing the Ketchikan SMC — in which they hope to deploy an emerging, proprietary metals separation technology dubbed “RapidSX” — to be ready to jump into the burgeoning rare earth supply chain when prices improved. It appears that time is rapidly approaching. Company leaders announced May 4 that they began testing the RapidSX technology under an agreement with a rare earth producer. They expect the design for a commercial-scale system to be ready early next year if the current tests go well, according to the May 4 statement. Ucore Vice President Mike Schrider said rare earth prices started to increase significantly last year and the company is tracking them so it is ready to restart work on the mine when metal prices justify it. With much of the resource delineation complete, Ucore can have Bokan “near shovel-ready” within 30 months of reaching a financing agreement for the mine, he said. In 2014, the Legislature approved the Alaska Industrial Development and Export Authority to issue up to $145 million in bonds to help finance the Bokan project. Ucore estimated in 2013 that the mine would cost about $220 million to develop. Company leaders said they are currently in discussions with AIDEA officials for financing the Ketchikan SMC. An AIDEA spokeswoman did not respond to questions about talks with Ucore in time for this story, but authority leaders have regularly voiced general support for developing Bokan. Ucore’s value-added rare earth plan could put Alaska on a path to help underpin the country’s clean energy revolution in much the same way the North Slope did with oil decades ago, according to Ryan. “The new oil or the new gas for the future are these critical (rare) metals,” he said. Currently, China controls roughly 80 percent of global available rare earth resources, Ryan said, which is potentially problematic given the particular need for them in electric vehicle batteries and motors. It’s because of China’s control over those markets that Ryan said Ucore is working to integrate multiple aspects of the supply chain into its business. “If we don’t do something to regain and recapture the supply chain in North America, in the U.S., it will be lost to China,” he said, insisting that Chinese government officials strategically aimed to the middle of the rare earth supply chain — processing concentrates into metal oxides —to influence the broader downstream markets. “China’s forcing people to set up (rare earth metals processing) in China,” Ryan added. Shipping concentrates to China forgoes upwards of half the total value in the supply chain, he said. The Bokan Mountain prospect holds more than 4.7 million metric tons of indicated rare earth ore, according to a 2015 resource assessment. That translates to approximately 63.5 million pounds of collective rare earth metals, according to Ucore, which are used in a plethora of high-tech applications, from smartphones to advanced batteries and fighter jets. There are 17 minerals defined as rare earth elements, but “heavy” rare earths — such as europium, terbium, and ytterbium with a greater atomic weight — are the most sought after and are used in products that rely on high-temperature magnets. More common lighter rare earths are used in a range of applications including LED displays. Heavy rare earths account for roughly 40 percent of the mineralization at Bokan, according to Ucore. The company hopes to utilize “allied” rare earth feedstock from mines in Brazil, Australia, or the Mountain Pass mine in California, among others, to supply the SMC until the Bokan mine is producing, according to Schrider, who said the feedstock supplies would eventually be blended for oxide production. The company’s economic modeling shows it can be competitive in rare earth oxide markets with its RapidSX separation technology, which uses the same metallurgical processes as traditional plants but does it on a much smaller footprint and at a much lower cost, Ryan said. He described a typical rare earth processing facility as being roughly the size of a football field, while the Ketchikan SMC would fit “in the Red Zone,” or the last 20 yards, he said. Ryan emphasized that Ucore’s biggest hurdle isn’t financing — he’s confident in what they’re developing — rather, it’s China realizing they could lose control of a valuable geopolitical tool. “When they see what’s developing, we’ll have to have our supply chain all wrapped up,” he said, stressing the company will then need political support to keep Chinese government officials from working to unravel what they’ve put together. Elwood Brehmer can be reached at [email protected]

Constantine drilling again at Palmer, water permit in limbo

Constantine Metal Resources plans to put nearly $9 million into further drilling work at its underground Palmer mine prospect near Haines this summer after the pandemic curtailed work last year. The $8.8 million summer work budget is largely for drilling to further delineate the Palmer project resource base as well as collect geotechnical data for the large underground exploration tunnel the company hopes to dig in the coming years. In total, the leaders of Vancouver-based Constantine hope to conduct roughly 6,000 meters of drilling; the work is being funded by large Japanese mining company Dowa Metals and Mining Ltd. Constantine, which has led exploration at the polymetallic Palmer prospect for years and is continuing as the project operator, will see its ownership share drop to no less than 44 percent, according to a March 30 statement. Constantine CEO Garfield Mac Veigh said in an interview that the company advanced its understanding of the environmental factors at play during the $2.2 million surface work program conducted at Palmer last summer. This year the company hopes to find the “offset” to the prospect’s South Wall deposit with some of its drilling, according to Mac Veigh. An offset is generally a similar geologic formation — in this case likely metal-bearing — that has been displaced and shifted by a fault. “That could have a substantial impact on the economics of the project because that offset should be pretty accessible from our underground exploration,” Mac Veigh said. If developed as currently envisioned, the Palmer project would be an underground mine that would process up to 3,500 metric tonnes of ore per day, or approximately 12.5 million metric tonnes over the life of the mine, based on figures from a 2019 preliminary economic assessment. From that, the mine would produce more than 1 billion pounds of zinc, 196 million pounds of copper, 18 million ounces of silver, 91,000 ounces of gold and nearly 2.9 million tonnes of barite, a common industrial mineral, according to Constantine. The deposit is adjacent to the Alaska-Canada border and near the Haines Highway about 40 miles northwest of Haines along the Klehani River, which flows into the Chilkat River. It is on a mix of federal mining claims surrounded by land owned by the Alaska Mental Health Trust Authority, which is open for development. The mine would cost $278 million to develop and require another $140 million for sustaining capital and reclamation costs for an estimated all-in cost of $418 million, according to the 2019 report. About 1,700 meters of the drilling this summer is dedicated to advancing the company’s knowledge of the geotechnical structures and hydrologic systems in the area of the proposed exploration tunnel, according to Mac Veigh. Constantine was moving towards the major exploratory endeavor to blast a roughly 1.25-mile tunnel that would serve as a space to conduct exploration drilling and collect further geotechnical and hydrologic data in 2019 before a Supreme Court case originating from Maui pushed Department of Environmental Conservation officials to remand and review the wastewater discharge permit for the work and the company to reevaluate its wastewater plan. In the Maui case, the Hawai’i Wildlife Fund and attorneys for the national environmental law firm Earthjustice contend the County of Maui for decades has been polluting near shore ocean waters by injecting millions of gallons of treated sewage water into the groundwater. The groups brought a lawsuit against the County of Maui and in 2014 a federal District Court of Hawaii judge found the wastewater injection well operation violates the Clean Water Act because the wastewater seeping up through the ocean floor can be traced back to the injection wells. The county’s appeal to the Ninth Circuit Court of Appeals was rejected as well. A 6-3 Supreme Court ruling hedged the issue somewhat, contending Maui needed a Clean Water Act National Pollutant Discharge Elimination System permit from the Environmental Protection Agency but also narrowing the scope of when such a permit is required from what the environmental groups were seeking. In Alaska, where the state has taken primacy over wastewater management from the EPA, such permits are handled by DEC. DEC spokeswoman Laura Achee wrote via email that Constantine’s wastewater permit remains valid but the company “is revising their wastewater disposal system engineering plans, and will submit their plans to DEC for review and approval.” There is no timetable for how long that will take. Gershon Cohen, project director for Alaska Clean Water Advocacy, originally petitioned DEC officials to reconsider their 2019 approval of Constantine’s wastewater discharge permit, contending it was wholly inadequate for the amount of groundwater contaminated with hydrocarbons, blasting solids and explosive residue prior studies indicate could be released by the blasting for the exploration tunnel. Constantine’s original plan called for diverting the water into two settling ponds to handle 500 gallons per minute and hold up to 358,500 gallons each for 12 hours to allow solid materials to settle out of the water before it is sent back underground. According to Cohen, that would be enough capacity to handle just two days worth of water flow from the tunnel area and doesn’t account for how the system would operate in winter conditions. “This is going to be a truck traffic-sized opening under a glacier for a mile to reach a deposit,” Cohen said, noting nearby Glacier Creek is a major coho salmon rearing stream and insisting the wastewater would reach the Chilkat, treated or not. “Once it starts leaking it’s never going to stop. If they start digging that tunnel they will be setting in motion something that can’t be reversed.” Constantine has dye water tracing tests ongoing in the area and will likely conduct seismic surveys of the Glacier Creek area to better understand the bedrock and soil makeup and how that could impact water flow as well as establishing infrastructure in the mountainous area, according to Mac Veigh. He said it’s too early to tell how much the new water treatment design will differ from the original plan, but added it probably won’t be finished until late this year after the company has been able to digest all of the data it gathers this year, at the earliest. Constantine is also looking at technologies that would allow it to clean the wastewater before it leaves the tunnel, according to Mac Veigh. Elwood Brehmer can be reached at [email protected]

‘Abuses of every kind’: How a billion-dollar gold racket wrecks the jungle, enriches narcos

Editor’s note: The following is an excerpt from the book ‘Dirty Gold: The Rise and Fall of an International Smuggling Ring’ by Miami Herald journalists Jay Weaver and Nicholas Nehamas and former Herald journalists Jim Wyss and Kyra Gurney, based on a Herald series that was a finalist for the Pulitzer Prize. It is now available from PublicAffairs, an imprint of Hachette Book Group, Inc. Juan Pablo Granda stepped into a small office in a middle-class neighborhood in the permanently foggy city of Lima, Perú, on Feb. 18, 2013. The lights were off. He couldn’t see. As his eyes adjusted to the darkness, Granda began to make out menacing shapes: two men, short and squat, with handguns strapped to their hips. Behind them, their boss sat at a desk. A single-barreled shotgun leaned against the wall. Granda, a 31-year-old Florida State University graduate with degrees in international business and management, wasn’t there to buy cocaine or weapons, as the room’s bristling tension might suggest. He was there to buy gold, the metal that has mystified, entranced, and led human beings to destroy themselves since the dawn of time. The office belonged to one of the biggest gold exporters in Perú, a developing South American nation where precious-metals brokers sometimes operate more like drug dealers than suit-and-tie commodities traders. Where Africa has its “blood diamonds,” Perú and its neighbors in South America have “dirty gold” — and much of it ends up in jewelry and electronic goods purchased by unsuspecting consumers in the United States. The metal Granda sought is produced by a little known and incredibly destructive criminal economy fueled by the cocaine trade. Under the nose of governments and law enforcement agencies around the world, dirty gold has infiltrated the global precious-metals industry. Deep in Perú’s Amazon rain forest, tens of thousands of struggling wildcat miners use backhoes, pickaxes, and high-powered hoses to rip the metal from pristine jungle riverbanks and toxic mercury to strip it from rock. Violent drug traffickers and other criminal gangs control many of the mines and smuggling routes. Mining camps are overrun by vermin and disease. Women and children are coerced into the sex trade to serve the hard-living miners, who travel from Perú’s mountains and coasts to find some of the most lucrative work available in this country of 32.5 million people. Nearly half of the people who live in Perú’s rural highlands, along its jungle rivers, or on the edges of its subtropical deserts do so in poverty, many without running water, electricity, or basic healthcare. Illegal gold mining is one of the best ways out. The miners have turned an area in Perú’s southeastern rain forest known as La Pampa into one of the hemisphere’s largest illegal gold mines, a giant tear-drop-shaped desert that stretches more than forty-two square miles. In La Pampa, anywhere from thirty thousand to forty thousand men, women, and children dig through the muck day and night in search of the elusive metal. While the rain forests of the surrounding province, Madre de Dios (Mother of God), support some of the richest wildlife found anywhere on Earth, La Pampa has been transformed into a hostile, alien planet. For every ounce of gold the miners extract, researchers estimate that they leave behind nine tons of waste, amid giant craters filled with chemical-tainted water colored in unearthly shades of electric blue and metallic orange. Thanks in part to mines like La Pampa, South America’s old-growth rain forest is being turned into a desolate wasteland. After fossil fuel combustion, deforestation is believed to be the second-leading driver of climate change. In Perú alone, an area bigger than all five boroughs of New York City has been stripped to bare, mottled earth. The story is the same across much of the Amazon. Although loggers and cattle ranchers tear down far more jungle than miners, the mercury used in illicit gold mining can poison the rain forest and local peoples for generations. For Perú’s government, La Pampa became something even more sinister than an environmental catastrophe: a toxic stew of poverty and criminality, where police dared not tread and international and Peruvian laws were mere conjecture. If miners wanted to sleep with underage girls, there was a price for that. If they needed to settle a score, La Pampa’s mining pits were ready-made graves with no undertaker to ask questions. “You can find everything in there … abuses of every kind,” Peruvian defense minister José Huerta Torres said. Although solutions do exist — including less destructive forms of mining that would actually increase gold yields — there is little will to solve the problems as long as the gold keeps flowing. And the rush of gold won’t stop as long as there are men like Granda who come from overseas to buy it. By the time he stepped into that dark Lima office, Granda knew all about the evils of illegal mining — he just didn’t care. His job was to acquire gold for NTR Metals, the Miami subsidiary of Dallas-based Elemetal, one of the largest international gold-trading companies in the United States. As much gold as he could possibly find. For Granda, convincing the Peruvian gold dealer to agree to an exclusive relationship with NTR could jump-start his new career, one that followed jobs in South Florida selling subprime mortgages and classes for an online university. Granda launched into a carefully crafted pitch. NTR had the best prices, Granda told the gold dealer — and could pay faster than any of its competitors. He had seen how rival American firms operating in Perú misweighed and undervalued the gold that suppliers brought in to sell. “You’re getting ripped off,” Granda said. The Peruvian gold dealer was impressed. He was the second in command in his office — which, it turned out, was dark not for purposes of intimidation but because of one of Lima’s frequent power outages. He invited Granda and his fellow NTR salesman, Renato Rodriguez, to join his boss for dinner that evening. Over a meal of ceviche, Perú’s signature citrus-cured raw fish dish, they closed the deal. The rookie trader had won his first client for NTR. The Party Three days after clinching his first gold deal, Granda clutched a toilet in the bathroom of Lima’s trendy beachside restaurant Costa Verde, vomiting uncontrollably. A torrent of bitter stomach acid mixed with pisco sours — Perú’s supersweet, deadly strong national drink — rained down into the porcelain bowl. It had been a hell of a birthday party for his company’s biggest supplier, Pedro David Pérez Miranda, a muscular playboy with a thick mane of curly black hair who had been dubbed “Peter Ferrari” by the local press for his love of European sports cars, tight shirts, and beautiful women. Rumors of his fondness for plastic surgery abounded. Ferrari spared no expense on his fifty-third birthday. A bottle of Johnnie Walker stood on each table. Gold Label, of course. Models and expensively suited men danced to the rhythms of a live salsa band. The room screamed money — and not necessarily the legitimate kind. In Perú, the world’s second-leading producer of cocaine, the flashy Pérez Miranda had been dodging allegations for two decades that he dealt in stronger stuff than gold, allegations that he always denied. Granda was starting his new job traveling Latin America and the Caribbean as a gold buyer for NTR Metals. His boss, Samer Barrage, and the more experienced salesman Renato Rodriguez had brought him to the party on Feb. 21, 2013. The three men had known each other in Miami for nearly a decade before going to work for NTR. Now, twenty-six hundred miles south in Perú, they were embarking on a grand adventure. Granda, short and round-faced with jet-black hair, was the baby of the bunch, a hard-working, hard-partying bachelor from the suburbs south of Miami who had recently earned his MBA. Rodriguez, 40, was a working-class family man born to Ecuadorian immigrants and raised in Brooklyn. He went by “Ronnie.” On his arms, he wore three tattoos: his father’s signature, his daughter’s footprints, and the postmark from the letter that his father had mailed his mother asking her to marry him. He was a big man, 6-foot-1 and 280 pounds, sensitive about his weight, and desperate to fit in with Barrage and Granda, both handsome and suave. When the other two called him ” Fat Ronnie,” as they often did, the nickname stung. But Rodriguez didn’t fight back. He yearned to be one of the gang. On their business trips across South America, when Granda and Barrage frequently hired escorts at local hotels, Rodriguez would shed his family-man exterior and join them. Barrage, 36, was the boss, more worldly and sophisticated than his subordinates. Born in London, he spoke with a posh British accent and owned homes in Nicaragua and Spain. His brother worked at a top law firm in Washington, DC. His son went to an elite Miami prep school that produced half the city’s mayors, lawyers, and judges. They were three amigos, alike in their ambition and disregard for following the rules. They hungered for their vision of the American Dream. And Miami, America’s modern-day Casablanca, was the best place to find it. Because of its proximity to Latin America, Miami had become the United States’ gold-import capital, the center of a multi-billion-dollar gold industry that sells metal to hundreds of Fortune 500 companies and central banks. The global supply chain rests on exporters like Pérez Miranda. For a year, Barrage and Rodriguez had cultivated the man better known as Peter Ferrari, finally stealing his business away from a rival Miami gold company in 2012. It was a major coup. Pérez Miranda didn’t own any mines himself; rather, he was a “collector” or “aggregator” of metal that he bought from miners and smaller dealers. These brokers — in Spanish called comercializadoras — feed jungle metal from places like La Pampa, the giant illegal rain forest mine, into our pockets, through our ears, and around our fingers, wrists, and necks. When Granda was finally done throwing up at Peter Ferrari’s birthday party, Barrage and Rodriguez helped him from the bathroom to a couch in the restaurant’s lounge. He took a fifteen-minute nap and then jumped up and started drinking again. There was no time to rest. With Ferrari as a major client, the Americans believed they had bought a lucrative one-way ticket into the narcotics-fueled netherworld of illegal gold trading. Drug traffickers, always seeking ways to launder their money and appear to the outside world as legitimate businessmen, had started investing their cocaine cash in South America’s informal gold-mining industry. It was a perfect cover. Trading gold made financial sense, too. Between 1999 and 2011, the price of a single, fourteen-pound gold bar skyrocketed from $51,000 to $390,000, driven by terrorist attacks, financial insecurity, and a searing hunger for jewelry and electronics in the consumer markets of India, China, and the United States. In America, the boom was helped by gold bugs like then-Fox News host Glenn Beck, who produced fear-mongering advertisements urging listeners to invest in the reliable metal. Most of the world’s gold comes from mines controlled by multi-national conglomerates. Just five countries produce half the world’s annual gold supply: China (roughly 400 tons per year), Australia (300 tons per year), Russia (295 tons per year), the United States (210 tons per year), and Canada (180 tons per year). Those big mines have a host of problems: They destroy mountains, ravage landscapes, and contaminate the air, water, and soil. In countries with weak labor protections where gold is also mined — like Indonesia, South Africa, and Ghana — the big mines are known to exploit workers. But big mines are generally subject to far more regulations, and are more free from the influence of organized crime, than the industry that has come to be known as informal, or “artisanal,” mining. The informal miners work outside the regulated government system. There is nothing artisanal about how the vast majority of them mine; they are not craft cheese makers or country vintners. Rather, they are people desperately trying to earn a living through subsistence mining, with little education or access to financing and safe equipment. Because of their crude methods, the small-scale miners have become the world’s largest source of mercury pollution, releasing an estimated 1,400 tons of the dangerous chemical into the earth’s environment every year. As big mines and traditional sources of gold tap out, the growth in the small-scale mining industry has been tremendous. Twenty-five years ago, an estimated six million people worked in small-scale mines. Today, the World Bank estimates a hundred million artisanal miners worldwide are active in eighty countries, producing 20 percent of the global gold supply. At least a third of them are believed to be women and children. Gold, Pope Francis said on a trip to Perú’s devastated rain forest, is a pernicious and corrupting idol — “a false god that demands human sacrifice.” But Elemetal, NTR’s parent company, saw the small-scale miners as an opportunity. Before the Great Recession caused prices to spike, Elemetal only bought gold domestically, operating a chain of “We Buy Gold” stores across the United States. The storefronts took in metal from pawnshops, antique stores, and people looking to junk their heirlooms and old coins. But in 2012, the company expanded its operations abroad, to Latin America, where the legion of artisanal miners was carving a valuable new supply of gold out of the jungle. Elemetal quickly surpassed its competitors as the largest buyer of South American gold. The rapid expansion brought the American company into contact with unsavory characters like Peter Ferrari, particularly in the major gold-producing nations of Perú, Colombia, and Bolivia, which supply 40 percent of raw gold exports to the United States — and all of its cocaine. Thanks to the three amigos’ aggressive sales tactics and see-no-evil approach, NTR Metals would buy nearly $1 billion worth of Peruvian gold by the end of 2013, or one of every two ounces of Peruvian metal heading for Miami. Granda, Barrage, and Rodriguez were far from the only traders buying dirty gold in Latin America. They were simply the best at it. But unbeknownst to the three Miamians, an unlikely team of U.S. law enforcement officers was forming to combat a problem their government had ignored for decades. The federal agents and prosecutors only half-jokingly called themselves “the Fellowship of the Ring,” after the fractious crew of J. R. R. Tolkien characters tasked with destroying Sauron’s evil golden ring of power. Among the company was a rebellious, bow-tie wearing Miami prosecutor; a hot-headed Cuban-American Homeland Security Investigations agent; a former U.S. Air Force Pararescue trooper and one-time rodeo cowboy who had joined the Drug Enforcement Administration looking for justice and adventure; and a soft-spoken FBI agent and military intelligence veteran determined to make her first big case. Despite their radically different backgrounds and approaches, one mission would ultimately unite them: Bringing down dirty gold.

Donlin owners reports strong results from 2020 drilling

Despite a slow start, the largest drilling program in more than a decade at the massive Donlin Gold prospect ended with better-than-expected outcomes, according to final results published March 25 by the companies backing the work. Donlin Gold contacted mineralization zones in both of the deposit areas the joint-venture is targeting; the results beat prior grade-thickness modeling with higher gold grades than initially predicted across much of the 23,000-meter, 85-hole drilling program the company conducted last year. Mark Bristow, CEO of mining major Barrick Gold Corp., which owns half of the Donlin prospect, said in a prepared statement that the drilling results “represent a major step forward in improving the geological confidence in the Donlin project,” adding the information is an important step in improving the value of the world-scale project. NOVAGold CEO Greg Lang said a near-surface contact in the northerly Lewis pit intersected nearly 18 meters of gold with an average grade of 10.5 grams per tonne with a nearly four-meter zone averaging 28 grams per tonne. “On every level, the results of the largest drill program at Donlin Gold in 12 years have been incredibly rewarding for the partnership and all stakeholders. Since we released the initial results in August last year, the assays have consistently revealed higher-grade gold intersections,” Lang said. Vancouver-based NOVAGold is Barrick’s partner in Donlin Gold LLC. Notable hits in the ACMA pit include a 22.6-meter interval with an average grade of 8.7 grams per tonne and a 10-meter subset with a grade of 15.5 grams per tonne. “Needless to say, the assay results from the 2020 drill program further strengthen our resolve and belief in the extraordinary nature of Donlin Gold and provide us with a wealth of knowledge to integrate into an updated geologic model,” Lang added. He and Bristow also highlighted that the work was done without any confirmed COVID-19 cases at the remote Western Alaska camp. Company leaders restarted work in late May after suspending work for roughly six weeks last spring due to the pandemic when about 120 people were working at the camp . Donlin Gold also secured several state permits and land-use approvals for an access road, fiber optic cable and other facilities last year. As proposed, the open-pit mine in the upper Kuskokwim River drainage would be one of the world’s largest, producing more than 33 million ounces of gold over an initial 27-year life. A 315-mile natural gas pipeline from the west side of Cook Inlet would supply a power plant at the mine and fuel storage tanks would be built at Dutch Harbor, in addition to the very large-scale operation at the mine site. State Division of Mining, Land and Water officials on March 11 published the second notice for Donlin’s water-rights applications, key permits that would allow the company to divert and use water from streams at the mine site in the upper Kuskokwim River drainage. Donlin leaders said the 2020 program and additional drilling this year should lead to a final geologic model for the ore body; the company’s focus will then turn to an updated feasibility study and a final investment decision by the board of directors. A short sale report issued against Donlin last May by J Capital Research argued company leaders have long inflated the economic viability of the project that is challenged by its remoteness on multiple fronts. The report also claims the $6.7 billion cost estimate to build Donlin is dated and artificially low. Lang vehemently rebutted the claims in the report and NOVAGold sued J Capital over them June 29 in federal New York District Court. Shares of NOVAGold lost 22 percent of their value in the two weeks following the release of the J Capital report. That suit is ongoing. The $6.7 billion construction cost estimate was developed from the last feasibility study done on the project in 2011. Donlin representatives have long said the project generally needs sustained, high gold prices because of the extensive network of support infrastructure that needs to be developed but have declined to specify what parameters they believe are needed to green-light development. Spot gold prices have returned to the $1,700 per ounce range after briefly surpassing $2,000 per ounce last summer. The price band over roughly the last 18 months has been significantly higher than prior years when gold was hovering in the $1,200 to $1,400 per ounce range. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: Bring critical supply chains home — now

Bipartisan consensus has finally emerged on the need to bring critical industries and supply chains home. Overreliance on imports — particularly from geopolitical rivals — is now an urgent issue for both parties. The question is whether this consensus can be turned into robust policy solutions to confront the startling scale of the problem. President Biden’s recent executive order on supply chains calls for an immediate 100-day review of four critical sectors: pharmaceuticals, critical minerals, semiconductors, and advanced batteries like those used in electric vehicles, or EVs. While pandemic-related supply chain disruptions of everything from raw materials to personal protective equipment highlight the urgency, China’s dominance of key supply chains should drive us to think big. Consider mineral production and processing. China has made dominance of mineral markets a strategic priority, giving its companies government support in order to capture market share. From rare earth elements to key mineral inputs in lithium-ion batteries — namely lithium, cobalt, nickel and graphite — China’s control of global production and processing is unrivaled. China uses its dominant position as both a source of geopolitical leverage and a means to swallow the industries that rely on these essential materials. For more than a decade, China has exploited its control of rare earth elements for strategic advantage. Just last month, rumblings emerged that Beijing might cut rare earth supplies to the U.S., to see if this would affect F-35 aircraft production. The national security implications are obvious. China’s vise-like grip on the materials needed for electrification of the auto sector is just as concerning. The shift to EVs has become a sprint. From GM to Ford and Tesla, the future of transportation will be electric. But despite U.S. producers’ ambitions, China is far in the lead as it aims to dominate auto manufacturing for the remainder of the 21st century. China’s metal mining underpins this dominance. Given preferred access to key materials, Chinese battery manufacturers are gobbling up the global market. As of last year, China had 107 battery mega-factories in the pipeline, with 53 of them now active and in production. In contrast, the U.S. has only nine battery mega-factories planned or producing. The auto industry — once the crown jewel of American manufacturing might — is in danger of slipping away. Despite vast domestic resources, U.S. mineral import reliance has doubled in just the past two decades. And for nearly two dozen minerals and metals that the Departments of Defense and Interior have classified as critical to U.S. national and economy security, China is the dominant supplier. The Biden administration’s supply chain review should formalize what we already know: it’s time for multi-faceted, aggressive action to bring these supply chains home right now. The hollowing out of our auto industry and its millions of good, family-supporting jobs is something we cannot let happen. Nor can we let China tighten its grip on the production of irreplaceable materials used in our most advanced weapons systems. There is no building back better without the material supply chains needed to support infrastructure investment. Moreover, national security requires the reshoring of critical industries. From minerals to pharmaceuticals, we must ensure safe domestic production using the full breadth of our policy tools. The time for half-measures is long past. John Adams, U.S. Army brigadier general (ret.), is president of Guardian Six Consulting and a former deputy U.S. military representative to NATO’s Military Committee. He is a national security adviser and writer on national security and defense issues, and was the lead author for the 2013 study on the U.S. defense industrial base, “Remaking American Security.”

Review: Rare earth independence a decade off

President Joe Biden’s ambition to make the U.S. less dependent on other nations for rare earths and minerals critical to the clean energy transition will take years to accomplish. A review of the U.S. critical minerals and rare earths supply chain that the president ordered this week is likely to show that even with sweeping changes the nation is at least a decade from becoming self sufficient. That will mean turning to countries such as Canada, which has the the largest number of rare earth projects in the world, according to Gareth Hatch, managing director of Strategic Materials Advisors Ltd. “There’s far greater expertise in rare earths and critical minerals in Canada and Australia than there is in the U.S.,” said Hatch, who is also the CEO of Innovation Metals Corp., a subsidiary of Ucore Rare Metals, which has a rare-earth project in the U.S. “But the downstream markets are in the U.S., so it’s in the interest of all three countries to work together with the U.S. being the ultimate end market.” America lacks capacity to produce enough permanent magnets, needed to run the engines of everything from missile guidance systems to the wind turbines and electric cars at the center of the clean energy transition. Miners say it takes so long to get federal and state environmental permits, and that the process is so unpredictable and open-ended, that they struggle to plan new mines. Little capacity The U.S. has only one operational rare earths mine, with a handful of others a decade away from starting production, and the mined ore all gets sent to China for processing. This compares to China’s dozens of mines and hundreds of refining and separation facilities. “The supply-side response is always so slow compared to demand side events, so you absolutely have to start now for putting this capacity in place,” Hatch said. “The red tape associated with development of new minerals or mining projects in the U.S. has been pretty significant.” The Trump administration went some way toward speeding up permitting in July 2020, when it rewrote the way agencies scrutinize projects under the National Environmental Policy Act. But Biden is expected to either undo those changes or wait on the outcome of pending litigation. Biden’s order doesn’t specifically call for more domestic extraction, but lawmakers are gearing up for a fight. House Democrats say they support Biden’s goal of fortifying the nation’s supply chains, but not if it means more mining. Republicans counter that growing demand, especially for electric vehicles and renewable energy projects, can’t be met without more mining. To the argument that the U.S.’s reliance on imports from potentially hostile foreign nations like China creates a national security risk, Aaron Mintzes, senior policy counsel at environmental group Earthworks, counters that other nations will swiftly step up to fill any voids. That happened in 2010, when China put trade restrictions on rare earth minerals, and Australia, Indonesia, Canada, and the U.S. almost immediately opened new mines. “Savvy investors hedge against future supply chain disruption risk,” Mintzes said. “The market has priced this in.

Corps shuts state out of Pebble appeal process

Pebble Limited Partnership can appeal the denial of a primary environmental permit for the company’s large mine proposal but the State of Alaska cannot, U.S. Army Corps of Engineers officials ruled in separate Feb. 24 decisions. In a Feb. 26 statement from his office announcing the Corps’ determination that the state does not have standing to appeal the permit decision, Gov. Mike Dunleavy said that it is another instance of federal officials inhibiting the state from fulfilling its obligation to develop its natural resources. “This is a precedent-setting decision that puts all possible resource development projects on state land at risk and cannot be accepted,” Dunleavy said. “We will not stop fighting for Alaska’s economic prosperity.” Then-Attorney General Ed Sniffen argued in the state’s Jan. 22 appeal to the denial of Pebble’s wetlands fill permit that commitments made in the Alaska Statehood Act and other Alaska-centric federal legislation require state officials to push back against federal authorities that challenge the state’s use of its resources. Army Corps of Engineers Pacific Division Commander Kirk Gibbs wrote to state Department of Law officials that the state does not meet the Corps’ definition of an “affected party” to appeal. The regulations governing the permit appeals process require the appellant be “a permit applicant, landowner, a lease, easement or option holder (i.e., an individual who has an identifiable and substantial legal interest in the property) who has received an approved jurisdictional determination, permit denial, or has declined a proffered individual permit,” according to Gibbs’ letter. Gibbs is also the decision-maker on the merits of Pebble’s appeal. While the Pebble deposit and the vast majority of the project’s extensive network of support infrastructure is on state land, the permit denial was directed specifically at Pebble, which applied for the Clean Water Act permit in late 2017. Pebble’s parent company Northern Dynasty Minerals separately announced Feb. 26 that Corps of Engineers Pacific Division officials deemed that Pebble’s appeal is “complete and meets the criteria for appeal.” The Dunleavy administration was also seeking to participate in Pebble’s appeal conference intended to clarify and explain the administrative record between the Corps and the company, which Gibbs also all-but rejected. Administration officials contended that because it has “substantial and identifiable legal interests in the property in question,” the state should be able to participate in the conference. Gibbs wrote that the meeting is limited to the appellant, their agents and Corps staff, and state officials would be asked to participate only if they can contribute to clarifying the administrative record that will be adjudicated in the appeal. It’s unclear exactly how long it will take before Gibbs rules on Pebble’s appeal. A Pacific Division spokesman previously said Corps officials have an informal goal of ruling within 90 days of an appeal being filed but the complexity of the Pebble project could make for a longer wait. Dunleavy has long insisted he maintains a “neutral” stance on the highly controversial project, a claim mine opponents is hollow given the appeal and prior instances in which he and officials in his administration attempted to assist Pebble through federal permitting. A spokeswoman for Dunleavy said in response to questions following the initial appeal that the governor believes the Army Corps Alaska District’s record of decision denying Pebble was politicized after it previously seemed to be on track for a wetlands fill permit. The final Pebble environmental impact statement published last July largely maintained the conclusions reached in the draft version published in early 2019: that the project would not have measurable impacts on Bristol Bay’s salmon populations or the major fishery there. However, officials from several state and federal resource agencies issued comments on the draft that were largely critical of the review for what they viewed as significant gaps in background data and overly broad or simplified conclusions made by Corps officials. The Nov. 25, 2020, decision to deny Pebble’s permit application followed a rigorous compensatory wetlands mitigation requirements by the Corps in late August and the September release of secretly recorded videoconferences in which then-Pebble CEO Tom Collier and Northern Dynasty CEO Ron Thiessen outlined plans for expanding Pebble far beyond what they have proposed and discussed potentially beneficial relationships with Alaska politicians, including Dunleavy, with activists posting as potential investors. Elwood Brehmer can be reached at [email protected]

AIDEA to split $70M of Ambler access work with explorer

The leaders of Alaska’s development bank have a deal to finance remaining preconstruction work for the Ambler mining district access road with the company leading exploration in the region. The 50-50 cost-share agreement approved Feb. 10 by the Alaska Industrial Development and Export Authority board of directors and signed with Ambler Metals, a joint venture of Trilogy Metals, authorizes up to $70 million of spending on the Ambler road until state officials decide whether or not to build the remote 211-mile industrial road. It runs through 2024 if AIDEA officials don’t reach a final investment decision before then. The AIDEA board transferred the $35 million that it plans to use for the 50-50 cost-share agreement from the authority’s Revolving Fund in June to the formerly unfunded Arctic Infrastructure Fund established by the Legislature. The Bureau of Land Management approved the environmental impact statement for the road in July. The federal agency led the review because the road would require a special right-of-way across federal lands in the area, including through Gates of the Arctic National Park. BLM granted AIDEA the right-of-way in early January. Vancouver-based Trilogy Metals has been exploring two large multi-metal prospects — Arctic and Bornite — on the southern flank of the Brooks Range near the terminus of the proposed road. Leaders of the junior explorer have long said the road is needed to make the prospects economically viable despite their generally high grades of mineralization. “I would again like to commend the leadership of AIDEA and Ambler Metals for the incredibly hard work that they have invested in moving the Ambler Access Project forward. I am also extremely pleased at the commitment by the State of Alaska and AIDEA in their determined effort in making this road a reality. The completion of this agreement marks another step to the eventual construction of this road which will have a significant benefit to the people of Alaska,” Trilogy CEO Tony Giardini said in a statement from the company. The agreement also includes a clause that allows Ambler Metals to credit its future predevelopment contributions against the tolls and other fees the company would pay to use the road once it is developed. An AIDEA spokeswoman did not respond to questions about the specifics of the deal in time for this story. Officials in AIDEA and Gov. Mike Dunleavy’s administration have emphasized the road’s potential to access numerous other less-delineated mineral prospects in the region as well despite significant opposition from Tribal and village governments in the area, particularly those near where the road would connect with the Dalton Highway north of Fairbanks. “Projects like the Ambler Access Project help to create the tangible economic opportunities Alaskans need and deserve, especially for neighboring communities. No one does resource development better than Alaska,” AIDEA chairman Dana Pruhs said. Local opposition to the road stems from fears it will disrupt caribou migrations and attract additional sport hunters in a large area of the Interior used predominantly for subsistence purposes. AIDEA leaders insist use of the road will be actively monitored and restricted to mining traffic only with exceptions for local uses. However, the legal path to keeping the road private remains unclear given $26 million in state general funds has been spent on the road that is expected to cost upwards of $520 million, according to the authority. AIDEA’s early price estimates for initial construction of the road were in the $300 million range. Elwood Brehmer can be reached at [email protected]

Pebble releases appeal to Corps permit denial

Pebble Limited Partnership leaders argue Army Corps of Engineers Alaska District officials ignored their own findings and set arbitrary wetlands protection requirements when they rejected the company’s hotly contested mine plan, according to Pebble’s appeal documents published Jan 27. Pebble’s parent company, Vancouver-based Northern Dynasty, released the 91-page appeal days after the State of Alaska filed its appeal, in which officials in Gov. Mike Dunleavy’s administration argued the Corps’ decision prevents the state from fulfilling its obligation to develop its mineral resources. Pebble previously announced it had filed its appeal with Army Corps of Engineers Pacific Division leadership but had not made the details of its arguments public. The company insists the Nov. 20, 2020, record of decision, or ROD, signed by Corps Alaska District Commander Damon A. Delarosa denying Pebble the wetlands fill permit for its project directly contradicts what the agency’s regulatory officials wrote in the final Pebble environmental impact statement, or EIS, published last July. The Army Corps of Engineers administers Clean Water Act Section 404 wetlands permits nationwide but the EPA has final say over whether a wetlands fill permit is issued. The appeal states that the ROD “speculates” that the project — primarily the mine site in the Koktuli River watershed, which would permanently lose 22 miles of stream habitat — would likely degrade stream productivity. It also cites excerpts from the final EIS that indicate the ecosystem could withstand the development. “This loss of habitat is not expected to have a measurable impact on fish populations downstream of the mine site because these narrow, steep, higher-gradient streams have lower habitat values and low fish densities compared to downstream reaches,” the final EIS states, according to the appeal. Pebble also highlighted references in the final EIS to the projects impacts on commercial fisheries in which Alaska District officials wrote that the mine and its extensive network of support infrastructure “would not be expected to have measurable effects on the number of adult salmon returning to the Nushagak and Kvichak district(s),” the two major watersheds that the project straddles. The final Pebble EIS largely maintained the conclusions reached in the draft version published in early 2019. However, officials from several state and federal resource agencies issued comments on the draft they believed were largely critical of the review for significant gaps in background data and what they viewed as overly broad and simplified conclusions made by Corps officials. According to Pebble, the denial decision was also based on an unprecedented standard that the mine would have a “more than trivial” impact on the Koktuli River drainage, which Corps officials relayed to the company in June, several months before the ROD was issued. Alaska District regulators determined the project would have some impact on 29 percent of the wetlands in the Koktuli watershed, the appeal states, adding that they concluded the project would cause “significant degradation” — a key finding in environmental reviews — based on a “preponderance” of significant impact findings for various factors. “The District recognized that its ‘significant degradation’ determination was unprecedented and acknowledged that it was not aware of any other similar findings for large projects in Alaska,” the appeal states. Pebble additionally alleges that the requirement for the company to mitigate its wetlands damage via actions within the Koktuli drainage also flies in the face of prior Corps precedent in Alaska. The appeal notes that several large North Slope oil and gas projects were approved with mitigation measures, such as improving local wastewater facilities, that Pebble initially proposed and Alaska District officials approved the similarly massive Donlin Gold mine project in the Kuskokwim region with a mitigation plan that included preserving large tracts wetlands outside the immediate watershed because of a lack of available options near the mine site. While Army Corps Pacific Division Commander Col. Kirk E. Gibbs will have the final say on the merits of the Pebble ROD appeals, some prominent opponents of the project claim the appeal submitted Jan. 22 by Gov. Mike Dunleavy’s administration is simply a political ploy because the state is not eligible to challenge the ROD. Agency regulations limit administrative appeals to “affected parties,” which includes permit applicants and landowners — Pebble is on state land — who also have “received an approved (jurisdictional determination), permit denial, or has declined a proffered individual permit,” Corps regulations state. While the state is an impacted landowner, the permit denial was specific to Pebble Limited Partnership’s proposed project. “The state’s efforts to appeal the Corps of Engineer’s Pebble permit lacks legal merit, runs against the best interests of Alaskans, and is an unnecessary distraction at a time when the State of Alaska has far more pressing demands on its budget and legal resources,” said Dan Cheyette, lands and resources vice president for Bristol Bay Native Corp., which has helped lead in-state opposition to the mine project, in a statement for the Journal. Pacific Division spokesman Luciano Vera wrote via email that division officials were reviewing the state’s appeal and no determinations have yet been made. A spokeswoman for the Department of Law referred questions about the state’s standing to the arguments made in the appeal document. The appeal, signed by then-Attorney General Ed Sniffen, contends that the state “is an ‘affected party’ given its substantial and identifiable legal interests in the property in question and in the precedent the permit denial sets for all future projects in Alaska requiring individual (Clean Water Act) Section 404 permits.” Corps officials typically have a goal of issuing appeal decisions within 90 days but there is no deadline by which a decision must be made. Elwood Brehmer can be reached at [email protected]

DNR proposes changes to water reservation process

The Department of Natural Resources is pitching reforms to Alaska’s water reservation program via regulation that previously failed to make it through the Legislature. State Division of Mining Land and Water officials published new proposed water reservation regulations that, among numerous technical updates and phrasing changes, would add language stating that water reservation certificates currently issued to private parties would instead be held by the Department of Natural Resources, which adjudicates water use and reservation applications. Resource development advocates insist the change is needed so control of a public resource is kept within a public agency and to prevent opponents of a given project from attempting to impede development by chasing water rights. For their part, conservation groups insist the change would strip Alaskans of their rights to protect the fish — another public resource — in waters vulnerable to development. Alaska’s current system of water rights is generally viewed as one of the most open in the country; it allows anyone to apply for temporary water use authorizations as well as water reservation, or in-stream flow, rights to maintain sufficient stream flows for fish and other wildlife. Reviewing water reservation applications often takes DNR years in coordination with the departments of Fish and Game and Environmental Conservation. Alaska Miners Association Executive Director Deantha Skibinski said the policy of DNR holding water reservations is something that her group believes is “absolutely critical.” “I think we could all agree on having a state agency managing state water is the right thing to do,” Skibinski said. In-stream flow reservations have been used as a tool to stop projects such as North Slope oil exploration in the past, which “just provides a ton of instability and uncertainty in our process,” she said, adding that there are likely many individuals who would not want the Alaska Miners Association to hold water reservations in the state. “Ultimately I think the state having control over (water reservations) is one of the ways that gets us to a more fair system for both sides,” Skibinski said. Bob Shavelson, advocacy director for Homer-based Cook Inletkeeper stressed the change would give an agency that is “controlled” by resource companies further discretion in how to allocate the state’s water. “From our perspective it’s just a matter of fairness,” Shavelson said, noting that companies can and would continue to be able to remove water from streams with temporary use authorizations from DNR. “A big mining corporation, Pebble, Donlin, anybody, they can take water out of the stream but now Alaskans can’t keep water in the stream. To us, that’s unfair.” He contended the change could also raise constitutional issues regarding how the state would treat similarly situated parties. The proposed regulations are a continuation of an attempt by former Gov. Sean Parnell’s administration to overhaul the water reservation structure, according to Shavelson. House Bill 77, which drew strong public opposition and died in the Senate in early 2014, would have limited water reservations to public agencies among many other revisions to state resource policies. DNR officials said they could not comment in detail on the proposed regulations during the public comment period but Water Section Chief Tom Barrett said in an interview that the agency takes water reservations very seriously. “These flow reservations are pretty significant and they can have an impact on other water users or potential users,” Barrett said. He added that the state is not trying to withhold water rights for any one group, noting the DNR commissioner — who approves water reservations — currently has the discretion to discontinue them as well. Skibinski said the odds of DNR leaders ever invoking their authority to revoke a water right are very slim. However, former DNR Commissioner Andy Mack in 2017 reversed a 2015 decision to grant an in-stream flow reservation to the Chuitna Citizens Coalition, a group aimed at stopping the since-abandoned Chuitna coal project on the west side of Cook Inlet. Mack ruled that because PacRim Coal scrapped the project, the circumstances that led the agency to issue the reservation had changed and therefore it was no longer needed. Legislators contacted to discuss the proposed changes were not aware of them, but former House Resources co-chair Rep. Andy Josephson, D-Anchorage, said it initially sounds to him like another attempt to make the changes in HB 77 and they will likely be challenged on whether or not the changes can be made by regulation. Currently, the Department of Fish and Game holds the vast majority of flow reservations; Barrett estimated approximately 95 percent. Another handful is held by federal resource agencies such as the U.S. Fish and Wildlife Service. The Nature Conservancy is one of the few private entities to hold water reservations. It secured four flow reservations near the Pebble deposit in 2017. TNC Alaska representatives said they were reviewing the regulations and couldn’t yet comment on them. DNR’s public comment period closes Feb. 26. Elwood Brehmer can be reached at [email protected]

State to appeal Corps’ denial of Pebble permit

The Pebble Partnership will have the State of Alaska on its side when the company appeals the federal decision to deny the company approval to construct its mine later this month. Gov. Mike Dunleavy announced via a Jan. 8 statement from his office that his administration would appeal the November U.S. Army Corps of Engineers record of decision, or ROD, denying Pebble the ability to secure a key Clean Water Act wetlands fill permit. Dunleavy said in the statement that the decision signed by Army Corps of Engineers Alaska District Commander Damon Delarosa’s rejecting Pebble’s mine plan sets a “dangerous precedent” that will harm future development in the state. “We have to prevent a federal agency, in this instance, the Alaska District of the Army Corps of Engineers, from using the regulatory process to effectively prevent the state from fulfilling a constitutional mandate to develop its natural resources,” the governor said. The decision was based on flawed conclusions and “usurped the entire public interest review process,” the statement reads. Corps Alaska District leaders found that Pebble’s plan for a large open-pit mine and extensive support infrastructure does not meet Clean Water Act criteria for minimizing development impacts and “is contrary to the public interest.” The Pebble ROD followed draft and final versions of the project’s environmental impact statement — intended to inform the record of decision — that largely concluded the Bristol Bay region’s prolific salmon fishery wouldn’t be meaningfully impacted by the project. Those findings were blasted by conservation, commercial fishing and Alaska Native groups opposed to Pebble for fears it would degrade water quality in productive salmon habitat and the mines waste would be a constant threat to the area’s salmon stocks, particularly in the Nushagak River. Public surveys have consistently found a majority of Alaskans are against the Pebble mine plan. Several state and federal agencies logged criticisms of the draft EIS for cursory analysis and conclusion drawn with incomplete data in official comments on the massive document. Acting Attorney General Ed Sniffen said in the statement from the governor’s office that the Pebble ROD “ignored long-standing guidance that required it to tailor mitigation requirements to recognize Alaska’s unique position of holding more intact wetlands than any of the Lower 48 states combined.” In the first indication that Pebble could have trouble obtaining a wetlands fill permit the Corps officials in late August imposed mitigation requirements mandating the company conduct direct, in-kind mitigation — restoration or preservation — in the Koktuli River drainage, a Nushagak tributary, where the mine would be located. Pebble proposed preserving 112,000 acres of predominantly state land, including 31,000 acres of aquatic resources to offset impacts to 3,300 acres of wetlands and 185 miles of streams. The company did not propose any compensatory mitigation for its west Cook Inlet port site. In June 2018 former Environmental Protection Agency Administrator Scott Pruitt and Assistant Army Secretary for Civil Works R.D. James signed a memorandum of agreement laying out Alaska-specific guidelines generally calling for less rigorous requirements for wetlands fill permits in the state. The memo encouraged Alaska District officials to allow for compensatory mitigation over a larger watershed scale “given that compensation options are frequently limited at a smaller watershed scale,” its states. “Given this flexibility, Alaskans should be assured that discharges of dredged or fill materials into waters of the United States will be evaluated in a reasonable manner, consistent with the agencies’ goal of fair, flexible, and effective protection of the nation’s wetlands resources,” the memo states. Department of Law spokeswoman Maria Bahr wrote in response to questions about the specific flaws in the ROD that the department is preparing the appeal that will identify the state’s arguments and it will be filed by the Jan. 25 deadline. The appeal would be adjudicated by the commander of the Army Corps Pacific Ocean Division headquartered in Honolulu, currently Col. Kirk E. Gibbs. Dunleavy has insisted his administration is neutral in regards to the development of Pebble while many of the project’s opponents consider the appeal further proof the governor is doing what he can to spur its development. Norm Van Vactor, CEO of the Bristol Bay Economic Development Corp., a group that works to support the region’s communities through its ownership of Bering Sea fishing quota, said he is disappointed but not surprised by the governor’s decision to appeal the Pebble denial. Dunleavy has not missed an opportunity to back the project, he said. “There’s been evidence that literally some of the governor’s correspondence are cut and pasted documents that originated with the Pebble Partnership; it’s just blatant,” Van Vactor said in reference to a letter Dunleavy sent to Corps officials in 2019. “He might as well be their spokesman.” He said regardless of the expected appeals he expects the combination of President-elect Joe Biden’s incoming federal administration and Sens. Dan Sullivan and Lisa Murkowski, who both took positions against Pebble late last summer should provide opportunities to protect the Pebble area, something Murkowski has already discussed. Dunleavy spokeswoman Lauren Giliam wrote via email that the governor has always advocated for a “consistent, predictable and fair” permitting climate. “Supporting the attributes of a robust regulatory regime is not the same as cheerleading for a particular project. The Pebble project’s proposal has, for the better part of 20 years, been snarled through ad hoc political decisions as opposed to objective regulatory determinations. The U.S. Army Corps of Engineers most recent decision, a literal 180-degree reversal in the span of a month, is a clear case-in-point,” Giliam wrote. “Time and again, the governor has always deferred to the science of the project, and if it was found to be good for Alaska, he would welcome the opportunity.” Pebble spokesman Mike Heatwole said company representatives briefed administration staff about their plans to appeal the project but they did not request the action from the state. The company still plans to file its own appeal, according to Heatwole. ^ Elwood Brehmer can be reached at [email protected]


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