Pogo gold project headed toward first production

Nearly half a decade after embarking on development of the huge Pogo gold resource in Interior Alaska, operator Teck-Pogo Inc. is eyeing light at the end of the tunnel - first production in early 2006. The company is also gearing up for additional exploration near the known deposit later this year.

Pogo, 85 miles southeast of Fairbanks near the town of Delta Junction, is estimated to contain 7.7 million tons of ore that should yield just under a half-ounce of gold per ton.

Karl Hanneman, the project's manager of public and environmental affairs and special projects, described the ore at Pogo as "a very clean quartz" that will produce 400,000 to 500,000 ounces of gold a year.

Plans are on track to develop an underground mine and operate a 2,500-ton-per-day mill, Hanneman said in an interview Feb. 12.

At estimated capital costs, including contingencies, of $298 million, the Pogo mine is expected to yield commercial quantities of gold for at least a decade with an average life-of-mine direct operating cost of $140 per ounce. Gold currently sells for about $400 an ounce.

To be milled on site, Pogo's gold will be produced as bullion and cast as gold dore, or bars, ranging in size from several hundred to a 1,000 ounces, Hanneman said. It will then be shipped outside Alaska for additional processing.

Teck-Pogo is a subsidiary of Teck Cominco Ltd., which owns a 41 percent interest in the Pogo deposit. Co-owners are Sumitomo Metal Mining Co. Ltd. which owns a 51 percent stake and Sumitomo Corp., which holds 9 percent interest in the mine.

Exploration to resume in 2005

After a nearly five-year hiatus, Teck-Pogo plans to resume exploration this summer in hopes of expanding the size of Pogo, Hanneman said. "We plan to do additional exploration in and around the known ore body to expand the resource," he said. "Now that permitting and construction is behind us, we're looking for additional mill feed."

The Pogo ore zone currently covers an area of about 3,500 feet by 2,000 feet and has an average vertical thickness of 21 feet and dips at 25 degrees. Teck-Pogo can explore up to 40,000 acres around the mine.

Teck-Pogo has indicated that it plans to conduct some exploration work this year, but a specialist with the Division of Land, Mining and Water of the Alaska Department of Natural Resources said no permit application is on file from the company yet. However, the mining exploration season in Alaska traditionally begins in May. Applicants typically have about 30 days to file for permits before they send explorers into the field.

Discovered in 1981 through grassroots exploration by WGM Inc., Pogo was explored extensively by that company between 1991 and 1994 in a deal financed by Sumitomo Metal Mining. Teck Cominco acquired its ownership stake in 1997 and signed on in 1998 as project operator.

Previous exploration yielded 16,000 soil and rock samples; 254,000 feet of surface diamond drilling in 286 holes; 42,000 feet of underground diamond drilling in 135 holes; and 6,000 feet of underground development. Metallurgical testing including a pilot plant was carried out between 1996 and 2000.

Baseline environmental studies also were initiated in 1997 and will continue through development.

Pogo clears environmental hurdles

Teck-Pogo designed the Pogo mine to minimize environmental impacts and maximize its acceptance by the public because the area surrounding the mine is considered a very sensitive environment.

The Goodpaster River, which is a major tributary of the Tanana River, which in turn flows into the Yukon River, runs north to south along the west side of the Pogo property. The Goodpaster is a Chinook salmon spawning ground and has a resident population of Arctic grayling.

The Pogo ore body also is in the Liese Creek valley, which drains into the Goodpaster River. Most of the mine's service facilities will be located in the valley.

Meeting the regulatory requirement to control surface and groundwater, coupled with moderately steep terrain and poor ground conditions presented major challenges for engineers designing the site, according to Teck-Pogo.

Still, the company won all of its major permits to operate the mine, including a long-awaited water permit from the U.S. Environmental Protection Agency. The permitting process began more than four years ago when Teck-Pogo applied for a National Pollutant Discharge Elimination System permit. Though most of the land in the Pogo area is owned by the state of Alaska, the project required both state and federal permits.

Last March the EPA issued the NPDES permit, which regulates the discharge of water from the mining process at Pogo. It was to become effective following a 30-day appeal period.

However, the Northern Alaska Environmental Center, a Fairbanks-based environmental group, filed an appeal, which put EPA's plans to issue the permit on hold. Teck-Pogo suspended construction until uncertainties related to the appeal could be resolved and sent home 160 construction workers.

The environmental group subsequently agreed to withdraw its appeal in return for Teck-Pogo drilling two additional water-monitoring wells and conducting a 10-year fish study of the Goodpaster River.

The company said public support for the mine was instrumental in persuading the environmental group to reconsider its appeal. EPA finally issued the water permit in May.

Project managers pushed ahead with construction and have encountered few delays since, according to Hanneman.

Major mine infrastructure nearly complete

In anticipation of full project startup when Teck-Pogo received final permits for the mine, construction activities actually began last January with the building of an ice road to bring in construction equipment and supplies. Contractors pushed through a 50-mile pilot road in April, and by mid-July, the artery was being used to haul supplies to the mine site.

When a major forest fire burned acreage dangerously close to the mine site in late June, Teck-Pogo again halted construction activity for two weeks as smoke and ash filled the air, Hanneman said. The fire consumed 175,000 acres of forest lands but did no damage to buildings and structures at the mine site.

By late September, the all-weather road to the mine from the Richardson Highway was complete. In addition, Teck-Pogo completed construction of a 50-mile power line in November, Hanneman said.

On site, contractors have erected and closed in a main mill building, where the ore will be processed after it is brought to the surface. The ore will be mined by a method called "drift and fill" in which a horizontal drift, ranging from nine feet by nine feet up to 12 feet by 12 feet, is driven through the ore and then backfilled with cement before the next cut is taken.

The mill will include grinding, gravity concentration, flotation, cyanide leaching of the concentrate and tailings dewatering. Overall gold recovery is expected to be about 94 percent. All of the mill tailings will be dewatered using pressure filters. About half of the tailings will be used as underground backfill, or paste fill, while the remainder will be dry-stacked in a tailings storage facility on surface. Currently, workers are completing electrical and mechanical work inside the structure, Hanneman said.

An electrical substation is finished and major earthwork for water collection and placement of tailings from the mine are 80 percent complete, he said.

Underground development began last year

Teck-Pogo also began underground development in 2004, essentially building 12,000 feet of tunnels for men and equipment to gain access to the buried ore body. This work included construction of roads, ramps and ventilation in preparation for mining. The mine will be accessed by three declines: two will be used for worker/material access and ventilation, and the third for conveying the ore to surface.

The mine operator is also building a permanent camp on site for 250 mine workers, plus shop and maintenance buildings.

Construction activity at the mine will continue this year. "We currently have about 270 people on site working in all construction disciplines, and the construction work force will peak at 500 in 2005," Hanneman said.

Pogo's permanent work force will total about 300 at startup in the first quarter of 2006, with about 240 workers on site at all times. Because road access is available to the mine, many of the mine's permanent workers will live off site and be bused to Pogo from Fairbanks and Delta Junction.

A year-round, two-shift-per-day production cycle will offer the mine's workers a variety of work schedules, including four days on and three days off as well as traditional two weeks on/one week off shifts, he said.