Pogo, Red Dog mines hit with the unexpected

Coping with the unexpected is a challenge facing Teck Cominco in Alaska this summer, as both its Pogo Mine project near Delta Junction and the Red Dog Mine near Kotzebue encounter the unexpected.

Construction of the Pogo gold mine is rapidly moving toward completion in time for an early 2006 startup. But workers are grappling with poor ground conditions in underground development at the project.

The mine, 85 miles southeast of Fairbanks, is estimated to contain 7.7 million tons of ore that should yield just under a half-ounce of gold per ton.

A construction force of 400 is working on the site this summer, and Teck Cominco reported the project 75 percent complete at the end of June. Underground mine pre-production development work, however, was only about 30 percent finished.

"Productivity has been lower than anticipated and progress has also been slowed by poor ground conditions in portions of the access drift areas," Teck Cominco told shareholders in its second quarter report in July.

Ore to be trucked to mill

As a result, workers will have to truck ore to the mine's 2,500-ton-per-day mill next year until construction of a conveyor system from underground is completed.

Bob Jacko, Pogo's general manager, said workers encountered the poor ground conditions in a key area under the ore bin where it connects to the conveyor belt. But the delay in completing the conveyor system will result in only minimal additional costs, he said.

Teck Cominco subsidiary, Teck-Pogo Alaska, began underground development in 2004, essentially building 12,000 feet of tunnels for men and equipment to gain access to the buried ore body.

Current plans call for a production start at Pogo in the first quarter of 2006 and a phased ramp-up to full production by mid-year 2006.

An estimated $321 million capital cost - up nearly 8 percent from $298 million estimated earlier this year - will not change significantly despite continued upward pressure on project costs, according to Teck Cominco. The reason: $285 million, or 89 percent, of the total has already been committed.

Manpower shortage felt

Meanwhile, Teck-Pogo is advertising widely for a number of production positions, including entry-level geologists, at the mine. "We're having trouble finding people these days because so much is going on in Alaska," Teck Cominco spokesman Peter Dunsford said Aug. 17.

"I'd go further and say the labor market for qualified mine workers is tight in the whole country," Jacko said. "It's getting so tight that Newmont Mining of Nevada is advertising for (underground) miners in the Fairbanks paper."

Jacko said the ads are unusual because Pogo is the only underground mine operation near Fairbanks, and it has only just started hiring. "Yep, the market's tight and not just for miners, but also for engineers, geologists and metallurgists," he added.

Zinc sales, production dip

At Red Dog, Teck Cominco saw a 46 percent drop in zinc sales in the three months that ended June 30 as the volume fell to 52,000 tonnes from 96,300 tonnes sold in the second quarter of 2004.

The Vancouver, British Columbia-based mining company blamed the unusual sales decrease on customers buying ore in earlier quarters and noted that a 20 percent jump in zinc prices, before a special charge, partly offset the lower sales volume. Operating profit totaled $9 million, down 10 percent from $10 million during the second quarter of 2004.

Zinc production at Red Dog, one of the largest zinc mines in the world, fell 3.6 percent in the second quarter, down to 134,000 tonnes from 139,000 tonnes.

Lead production at the mine also dipped 4 percent to 24,000 tonnes in the second quarter, while the company recorded no sales of lead concentrate.

Teck Cominco said Red Dog should produce 560,000 tonnes of zinc and 97,000 tonnes of lead concentrates in 2005.

Shipping season under way

Red Dog produces zinc and lead concentrates year-round but ships them to market during a short period in the summer when Chukchi Sea ice melts enough to allow barges to load and transport the ore.

"We ship everything in 100 days and sell it over 365 days," adds Rob Scott, mine manager at Red Dog.

This year's shipping season began July 4. The company plans to ship 1 million tonnes of zinc concentrate and 190,000 tonnes of lead concentrate, down slightly from year-ago levels.

Red Dog has encountered seasonal slumps before, and sales should rebound this fall, Teck Cominco managers say. Most of the mine's zinc and lead sales occur in the last five months of the year.