Kensington project permitting plods ahead

Alaska state and federal regulators overseeing the proposed Kensington Gold Mine project 45 miles northwest of Juneau have released draft permits, public notices and state decisions for public review and comment.

Released on June 21 were draft permits for water discharges and wetlands disturbances, released by the Environmental Protection Agency and the U.S. Army Corps of Engineers.

Alaska regulators also released draft decisions for two tideland leases for marine terminal facilities, a temporary road closure, road construction and use, fish passage permits and two water right authorizations.

Idaho-based Coeur d'Alene Mines Corp. is seeking regulatory approval to build at the Kensington hard rock deposit an underground gold mine and mill facility capable of processing 100,000 ounces of gold each year for 10 years.

Public hearings to discuss the regulators' proposed permitting decisions have been scheduled in Juneau on July 26 and in Haines on July 27. Comments are due to regulatory agencies by August 5.

A final supplemental environmental impact statement, which is being prepared by a contractor hired by the U.S. Forest Service, is now scheduled to be released Nov. 5, according to project manager Steve Hohensee.

Final permits should be released following that environmental review, according to Ed Fogels, project manager for the Alaska Department of Natural Resources. The actual release date for final permits depends on an appeals period that follows the final supplemental EIS release, he said.

Permitting process delayed

The June release of the draft permits and the late January release of the draft supplemental EIS are months behind schedule, according to a July 2003 memorandum of understanding between regulatory agencies and the project's developer. That document outlined a schedule for permitting work with a final supplemental EIS review expected in January 2004, allowing the company to begin construction this year.

Water handling issues involving the company's proposed tailings disposal system have been one of the main hold-ups in the permitting process, regulators said. "It's not common to place tailings in a lake," said Hohensee.

Before issuing its draft permit, EPA regulators requested that Coeur provide additional background data and produce an additional potential water treatment plan, a time-consuming process, Fogels said.

State permits will be ready to go as soon as possible after the comment period closes August 5, he added.

The U.S. Forest Service decided to slow down the supplemental EIS process earlier this year in order to coordinate its completion with the final permit issuance, Hohensee said. "It was a choice. We decided that the project as a whole would be better if everything was in correspondence."

Advancing the supplemental EIS document without the draft permits could have created some conflicts in the regulatory approvals, he added. "We could be selecting something that's not entirely permitable," Hohensee said.

Regardless of the changing permit schedule, Coeur's bottom line is its goal to begin gold production at Kensington in 2006, according to Tony Ebersole, director of investor relations. The company estimates construction of the project will take 18 months.

"There's been good cooperation between the government agencies and that's been a real positive," he said, in a telephone interview July 6.

The company will make its final decision whether or not to build the Kensington mine after it receives all of its permits, Ebersole said.

Increased capital costs

Estimated construction costs are $91.5 million, with projected cash operating costs of $220 per ounce of gold. That's an increase over recent estimates of $75 million previously released by Coeur, due in part to the recent rise in diesel fuel prices, Ebersole said.

Even at the $91.5 million in construction costs, Kensington is "still profitable," he said.

And the project's economics could improve, once mining begins. Current reserves contain about 1 million ounces of gold, with an average grade of 0.25 ounces of gold per ton of rock. Additional higher-grade mineralization has been identified at the underground deposit, an estimated 2.4 million tons measuring 0.302 ounces per ton, or an additional 724,800 ounces of gold, according to a recent Coeur press release.

"This much higher grade of mineralized material indicates a strong opportunity to increase the Kensington mine life by as much as 50 percent beyond our initial estimates, which significantly enhances project economics," said Bob Martinez, president and chief operating officer of Coeur, in a June 28 press release. "Meanwhile, we still see significant exploration upside potential at both Kensington and the adjacent Jualin property."

Third regulatory review

This is the third time regulatory agencies have reviewed the Kensington project under the National Environmental Policy Act since the original plan of operations to develop a gold mine was submitted in 1990. While receiving past regulatory approval, no mine has ever been built at Kensington, a few miles inland from Comet Beach on Lynn Canal.

Coeur has been involved in the Kensington project since 1990, developing initial plans with partner Echo Bay Exploration. Now, Coeur is the sole developer of the project.

Low gold prices caused Coeur to look for ways to reduce Kensington's capital costs and to accomplish that, the company modified its proposed development. Coeur submitted an amendment to its approved 1998 plan of operations, changing the location for site access. Mine entry is now proposed at the Jualin gold prospect, with a tunnel connecting to the Kensington workings.

Coeur has also proposed a change in the tailings disposal system by placing them in the Lower Slate Lake. The company also wants to eliminate the proposed on-site employee camp, instead ferrying workers to the Slate Creek Cove from Cascade Point, then busing them five miles to the Jualin mine site.

Such changes require a supplemental EIS to the existing permits, according to the Forest Service, which is serving as the lead federal agency. Therefore, in the draft supplemental EIS document, a no action decision would require the developer to build Kensington as it was previously proposed and approved in the late 1990s.

Draft permit details

Of the draft permits released late last month, EPA proposes to issue a National Pollutant Discharge Elimination System permit for discharges to East Fork Slate Creek, with ongoing discharges to Sherman Creek and Lynn Canal. The draft permit sets conditions on the discharge, or release, of pollutants from various types of operations into U.S. waters.

The Corps of Engineers is considering Coeur's application for discharging approximately 611,700 cubic yards of fill and dredged fill materials into 91.7 acres of waters of the U.S. The Corps is also considering an application by Goldbelt Inc. to discharge dredge and fill materials into waters in conjunction with construction of a moorage facility at Cascade Point.

The Alaska Department of Environmental Conservation has also prepared draft state certifications of EPA's draft NPDES permit and the Corps of Engineer's draft 404 permits.

Finally, the Alaska Department of Natural Resources is considering a lease of approximately 5.8 acres of state tide and submerged lands at Cascade Point in Berners Bay, to be offered at public auction to the highest qualified bidder.