Kensington shutdown would be costly

Coeur Alaska has spent more than $206 million on the development and construction of Kensington gold mine near Juneau, but the economic benefits of the project could soon disappear if the mine doesn't commence operations, a report by the McDowell Group says. The mining company commissioned the report to determine how much Kensington is contributing to the economy of Southeast Alaska.

Construction work has been completed on the main 12,000-foot access tunnel at Kensington, with all remaining, non-tailings-related surface facility construction scheduled for completion by mid-August, Coeur said in a release July 11. The tunnel allows for clear access between the mine site and the Jualin property, where the mill and processing facilities are located.

Coeur is not allowed to work on its proposed tailings facility because the 9th Circuit Court of Appeals vacated the U.S. Army Corps of Engineers' permit to dispose of the tailings in Lower Slate Lake, ruling that it was issued in violation of the Clean Water Act. The company hasn't yet said what it will do about the problem, except that it is "continuing to review its options, including engaging the environmental organizations' plaintiffs," according to the release. A coalition of environmental groups brought the lawsuit against the Corps of Engineers.

Production has been planned for this year

The original construction schedule envisaged that the mine could begin production in late 2007, employing 200 workers. As of early April 2007, the Kensington construction labor force included 387 workers, approximately 56 percent of whom (219) are Alaska residents, including 119 Juneau residents, the McDowell report said. Total direct annual labor income related to the Kensington construction project is estimated at $11 million for Juneau residents, $17 million for Southeast Alaska residents (including Juneau residents) and $22 million statewide (including Southeast residents).

"If mine construction were stopped prematurely, Juneau's economy would experience an immediate loss of project-related spending and labor income," the report says. "In terms of local spending, some of the over 70 Juneau vendors who have provided goods and services to Coeur and its contractors through the mine development and construction process could expect to lose some additional volume of business."

Besides the loss of jobs and direct and indirect income that would result from a construction shutdown, there would be other negative impacts, the McDowell report said. With an extended shutdown, the project could expect to lose skilled workers to other construction projects, which would increase remobilization costs. An extended shutdown could also result in lapsed permits. "The cost of reacquiring lapsed permits could be substantial and could place the project at some risk," the report says.

The report draws attention to other project closures in Southeast Alaska that have had a detrimental effect on the region's economy. In April 1993 low silver prices forced Greens Creek mine to suspend operations until 1996, which caused the temporary loss of 206 jobs worth about $10 million in annual payroll. In 1994 Alaska Pulp closed its Wrangell sawmill with the loss of 200 jobs, 20 percent of the Wrangell workforce. In 1997 Ketchikan lost its largest employer, Ketchikan Pulp's mill, which had provided 400 jobs.