Cruise ships could share docks with coal

An ambitious plan by Canadian junior Cash Minerals could bring 1.2 million tonnes of coal per year to Southeast Alaska's Skagway Ore Terminal for export to Pacific Rim markets. Cash has begun talks with the Alaska Industrial Development and Export Authority, the contractual owner of the ore terminal, about the logistics that would be involved in using the facility. The coal would be mined over a 20-year period at Cash's Division Mountain deposit in Yukon.

The Skagway Ore Terminal was constructed in the 1960s by the White Pass & Yukon Route Railway to store and ship concentrates from the now closed Faro lead and zinc mine in Yukon. There have been no shipments of concentrates through the terminal since 1997, due to low base metals prices. AIDEA purchased the ore terminal from White Pass in 1990 and performed environmental improvements, but White Pass still owns three docks at Skagway, including the ore dock, and there is a high volume of cruise ship traffic from May through September.

"It is feasible to load coal there, but you can only dock one boat at a time, either an ore ship - a bulker - or a cruise ship," AIDEA Project Manager John Wood told Mining News. Loading coal takes several days, so there would be "scheduling challenges" during the tourist season, he added. That issue would be up to Cash and White Pass to resolve between themselves. "The city of Skagway supports shipments through the Skagway Ore Terminal as well as tourism," Wood said. "There's a happy medium there someplace."

AIDEA pays a local contractor around $30,000 a year to do maintenance at the Skagway Ore Terminal. The coal from Division Mountain would not directly compete with Alaska shipments, from Usibelli Coal Mine or the Beluga deposit in Southcentral Alaska, if that were ever developed, according to Wood. The Yukon coal is a much higher rank, bituminous coal, while the Alaska coal is sub-bituminous. Power plants are built to burn one type of coal or the other, so the markets for the Canadian and Alaska coal would be different.

Skagway third-busiest cruise port

White Pass is optimistic that the scheduling challenges at the Skagway Ore Terminal can be resolved. "There's times when it's impractical and undesirable to be loading, but there's ways to do it. We're 'can do' people," Michael Brandt, the company's vice president for marketing and planning, told Mining News. On a typical weekday in July there may be four big ships docked at Skagway. During the five-month season there are usually 400-500 dockings, Monday through Thursday, Brandt said, and cruise traffic is expected to increase in the future. Skagway is Alaska's third-busiest cruise port after Juneau and Ketchikan. White Pass owns three deepwater docks, including the ore dock.

"The use of Skagway as a port facility is critical to a number of proposed mineral projects," Kevin Brewer, manager for mineral development with the Yukon government's Department of Energy, Mines and Resources, told Mining News. The Minto deposit and the Carmacks copper deposit are examples, he said. "We've been looking at this issue closely and we need to talk to Alaska a bit more. Our concern as a government is to ensure that all parties have sufficient port access," Brewer added.

Cash Minerals' new president and CEO, Basil Botha, believes that coal and uranium will be the answer to the world's energy needs in the future, as the search rages for alternatives to oil and gas. "The coal market is on fire and has been for a little while now," he told Mining News. "1.2 million tonnes is a drop in the bucket in the grand scheme of things." Botha took over at Cash Minerals in May this year, after the company changed its name from Cash Resources and brought in new management in January.

In addition to the Division Mountain project, Cash also has a right to earn an interest in six uranium projects in Yukon. A 2,800-meter drill program of approximately 24 holes is currently in progress on four of the uranium properties.

Infill drilling this summer

This summer Cash is conducting an infill drilling program at Division Mountain in an effort to upgrade some of its resources from inferred to measured. Out of Cash's estimate of 51.6 million tonnes of coal in the deposit, 13 million tonnes are in the inferred category. A scoping study completed in April by mining consultancy Norwest supported the potential for economic development of an open pit mine based on the annual production of around 1.4 million tonnes of saleable coal. Of this, 175,000 tonnes per year could be used to fuel a 40 MW mine-mouth power plant.

The capital cost for the proposed mine would be around C$30-$35 million, Botha said. Botha emigrated to Canada in 1994 from South Africa, where he was responsible for the development of three operational coal mines supplying 3.2 million tonnes of coal per year to Sasol Secunda, the largest gasification fuel from coal producer in the world. "In Yukon nothing's happened in the mining industry for 20 years," Botha said. "There's a lost generation that has no idea what it does for the country and the world."

Cash has been working to create public awareness about the Division Mountain Project, including keeping First Nations groups informed. Division Mountain, which is "more like a large hill," according to Botha, is located 90 kilometers north-northwest of Whitehorse on federal land, although Champagne and Aishihik First Nations land borders the property. Cash announced July 14 that it had concluded a Letter of Understanding with Champagne and Aishihik.

"Champagne and Aishihik First Nations are interested in assessing the potential of our land for mineral opportunities," Chief James Allen said. "We wish to maximize the economic benefits for our citizens through employment, training, contracting and direct participation in business opportunities which may arise from the Division Mountain coal project."

By truck to Skagway

The coal from Division Mountain would be hauled by truck via Whitehorse to Skagway, the route that Faro mine used. The board of AIDEA is due to meet July 25 to give the go-ahead for a cost reimbursement plan and scoping study for the Skagway Ore Terminal. Cash will pay AIDEA $50,000 for the study, but if the project goes ahead, AIDEA will reimburse the mining company, Botha said. The Yukon mine permitting process must also be completed, but Botha hopes that production will start at Division Mountain by late 2007. "A lot of work was done already in the mid-1990s, for example by Usibelli," Botha said. "We're not starting from grassroots - we're halfway up the tree already."

Alan Renshaw, Usibelli's chief engineer, confirmed that the Division Mountain is very large. Renshaw participated in Usibelli's exploration of the property in the 1990s, when the Alaska coal mining company took an option out from Cash Resources. "We spent a month or so drilling it out, running the economics," Renshaw told Mining News. "The problem we saw was that it would have been awful hard to turn a profit with that high of a transportation cost .... With the price of coal being higher now, maybe it would make more sense. It's a fantastic property, there's no doubt the coal's there. We decided to pass on it, but it was a tough decision for us."