New life for Nixon Fork mine near McGrath

Gold and copper production at the shuttered underground Nixon Fork mine, about 30 miles northeast of McGrath in central Alaska, may restart at the end of 2004.

Mystery Creek Resources Inc., a wholly owned subsidiary of publicly traded St. Andrew Goldfields Ltd., submitted a new five-year plan of operations for Nixon Fork to regulators in March. The mine has been closed for five years.

Mystery Creek plans to refurbish the existing mill, change the extraction process to allow for gold and silver dory production on-site, drive new tunnels connecting two drifts and start production by the end of the year.

Capital costs to start production at Nixon Fork are estimated at $10 million, said Mystery Creek President Paul Jones, in a telephone interview April 30. Once producing, cash operating costs have been estimated at $265 per ounce of gold.

"There is certainty, subject to permitting," Jones said, about the project's future. "It's been a good process. We've been pushing pretty hard on the permits - we tell them we need them in August, but we realize they've got other things they're working on."

Consolidated Nevada Goldfields Inc. started production at Nixon Fork in 1995, building a 165-ton per day ball mill, a 50-person camp and a tailings dam and water containment system. A crew of 60 workers produced gold and copper concentrate flown out of the remote mine site to Palmer, Alaska, then shipped to Japan for final processing.

Real del Monte Mining Corp. took over operations in 1998. The mine finally shut down in mid-1999.

"The last year they operated, the grade ran 42 grams per ton (1.3 ounces per ton)," said Jones.

Unmined mineralization identified by past exploration work includes an indicated resource of 71,900 ounces, and an inferred resource of 64,400 ounces. Average grade is about one ounce of gold per ton of rock, Jones said. At the mill's planned production rate of 50,000 ounces per year that would be about a three-year mine life, Jones said. But he is optimistic that additional mineralization will be found, extending operations. "We submitted permits for the next five years," he said.

Drilling work in progress

While permit applications are being reviewed by regulators, Mystery Creek is conducting exploration drilling from underground workings to identify additional ore for future mining, and to delineate mineralization in order to establish a new mine plan.

"There are several places we know that there is more ore," Jones said. "We may connect the Crystal and the Mystery declines, because there are areas (of mineralization) in between."

In addition, there is another known mineralized area about two miles south of the existing mine workings.

"That would be a different decline," Jones said. "We have not had even a chance to touch that area."

Crews started drilling early in the winter, and will continue with the underground drill work into the summer, Jones said. A crew of eight to 12 people has been on-site this winter for the drilling work. "That will increase as we start working on the mill-double that," Jones said.

According to a Feb. 2 St. Andrew press release, Mystery Creek plans to complete two phases of exploration core drilling this year, for a total of 31,500 meters, more than 100,000 feet. Spending for the first phase was budgeted at $945,000.

The second phase of drilling, scheduled to be complete by June, is estimated at $2.3 million, according to a St. Andrew press release. Data from the drilling will be used to determine a new resource for Nixon Fork, a number which should be calculated and released later this year, Jones said. A definitive feasibility study is also scheduled to be released this summer.

Maintenance work started, sorely needed

Mystery Creek plans to conduct some needed maintenance to the existing facilities this spring and summer. Some work has already started, including drilling water wells in a nearby drainage called Ruby Creek to check for possible water injection sites.

Some of the old mine workings, which extend to 1,000 feet below the ground's surface, have water that needs to be pumped out, Jones said. "When the mine shut down, they were down to the water table, so we're looking at how to get rid of the water," he said. "It's not as bad as it first looked. It's really resolvable."

Mystery Creek also plans to clear out some diversion ditches surrounding the tailings pond, which have filled in with no maintenance for the last five years.

In addition, holes in the pond liner need to be repaired. Jones said that local wildlife, probably caribou, walked out on the pond liner to get to water that pooled on the surface, punching holes with their hooves. "There's about a dozen of those hoof holes we need to patch," he said.

Additional water monitoring wells will be drilled below the tailings pond, he said, and the company plans next year, with regulatory approval, to raise the height of the tailings dam by 20 to 25 feet, adding capacity for future mine operations. "There's been absolutely no maintenance since it closed down in 1999," he said.

Process change proposed

Mystery Creek has also submitted as part of its new plan of operations a proposal to change the mineral extraction process, in order to reduce shipping costs. Previously, Nixon Fork ore was ground up, producing a bulk sulfide concentrate containing copper, gold and silver. That material was shipped in one ton super sacks via air from Nixon Fork to Palmer, then on to Japan for refining.

Mystery Creek plans to split the process circuit, adding a gravity circuit and leaching out the copper mineralization, leaving gold and silver to be poured into bars for shipping. The remaining copper material would be stored for future removal, Jones said. "We'll look at how to get that out of there," he said. "We might take it out on a winter trail."