Yukon mines could boost Skagway economy

The resurgence of mining industry activity in Yukon Territory is bringing with it the prospect of more commercial activity in Southeast Alaska, specifically in the coastal community of Skagway.

Though tiny in size with only 850 year-round residents, Skagway is home to one of Alaska's most strategically located ice-free, deepwater ports. The Skagway Ore Terminal at the port stores 65,000 tons a year of copper-gold-silver concentrates from Yukon's only operating mine, Capstone Mining Corp.'s Minto Mine. And once a month for the past three years, dock workers have loaded Minto's concentrates onto ships bound for smelters in Asia.

The Port of Skagway also has tremendous potential for providing these services to at least a half-dozen other Yukon mines currently in development.

The port's 100,000-square-foot ore terminal, which was refurbished by the Alaska Industrial Development and Export Authority in 2007, has 60,000 square feet of excess capacity for ore storage along with additional land for expansion.

The port, itself, also hopes to expand.

The Municipality of Skagway applied for a US$11.5 million federal grant in August to purchase a more flexible ore loader as part of US$44.4 million in planned port upgrades.

Skagway officials say the port offers the closest export access for Yukon's impending surge of minerals production. It also would support Alaska gas pipeline and Mackenzie Delta/Beaufort Sea oil and gas resource development logistics.

Part of The Gateway Project, the application includes US$15.9 million in matching funds from Skagway for dock rehabilitation, US$15 million from the State of Alaska for ore terminal expansion, and US$2 million from the White Pass & Yukon Route Railway for a new floating dock.

In its application for the TIGER II Discretionary Funding, Skagway described the new ore loader as an innovative strategy to overcome a berthing bottleneck at the port. Unlike the port's existing stationary ship loader, the new loader could swing out of the way of docking cruise ships; be positioned over either forward or aft ore ship hatches; and provide multi-use simultaneous berthing availability for two cruise, bulk or general cargo ships.

"We're trying to make it a two-berth dock," Skagway Mayor Thomas Cochran told Mining News Oct. 20. "A new loader also would be a faster loader and get the ore ships in and out more quickly."

"It is exciting stuff," said Jim Hemsath, deputy director for development at AIDEA.

Cochran said the municipality would like to see more growth at the port, which currently serves a steady stream of cruise ship visitors throughout the summer months.

"We're trying to diversity the economy, if at all possible," Cochran said.

Skagway's first application a federal grant was rejected in February, but Hemsath said he is cautiously optimistic about the town's latest proposal, submitted for consideration in a second round of competitive funding.

"We think we have a relatively compelling story. We have a sizable local match with the state and the city putting up about US$15 million each, and the White Pass railroad will chip in US$2 million. And we have an international component," Hemsath said.

Cochran said Skagway anticipates a decision on its grant application in November.

More Yukon mines

Three large mine projects in Yukon, including one seeking to develop the largest known undeveloped zinc deposit in the world, along with several smaller projects have expressed interest recently in possibly shipping concentrates through the Skagway port within the next few years.

Australia-based Overland Resources Ltd., owner of the Yukon Base Metal Project in southeastern Yukon, envisions storing and loading zinc-lead concentrates in Skagway. Overland is currently in Yukon's permitting process for developing an open pit zinc-lead mine on the Andrew Property in eastern Yukon. Andrew hosts an estimated 8.9 million-metric-ton zinc-lead resource along with possible silver and germanium byproducts in two deposits, and the property has considerable potential for expansion.

Selwyn Chihong Mining Ltd., a new joint venture between Selwyn Resources Ltd. and Yunnan Chihong Zinc Germanium Co. Ltd. is developing the super-giant Selwyn lead-zinc deposit located on the eastern border of Yukon Territory. It is also eyeing the Port of Skagway as a preferred option for trans-shipping ore concentrates from a proposed 90,000 t/d mine that could begin production in late 2014.

Western Copper Corp. also has expressed interest in shipping concentrates from its giant 1 billion-metric-ton Casino porphyry copper-gold-molybdenum-silver project in west-central Yukon and its smaller Carmacks Copper Project through the Skagway port.

Other Yukon mine projects, including the Whitehorse Copper Project, are also penciling the port into their ore transportation plans, according to Harvey Brooks, deputy minister for Economic Development at the Government of Yukon.

"The mine projects are looking at Skagway as one of the high priority options for moving their ore," Brooks told Mining News Oct. 21.

Brooks said Yukon government officials view development of the Port of Skagway as useful and prudent in promoting natural resource development in territory.

If all of the large mine projects were to begin production on schedule, as much as 1.3 million tons of concentrates could be shipped annually through the port and more than 150 new year-round jobs would be created at the port and terminal, according to the grant application.

"We have come up with some ideas. In addition to arranging discussions between the port's various stakeholders and mining interests, we've worked to make sure the port can economically handle and transport the mines' concentrates," Brooks said.

Potential terminal expansion

The sheer volume of concentrates from all of the mine projects that could potentially begin production within the next few years would quickly outstrip available storage space at the terminal, but AIDEA officials envision expanding the terminal to meet the demand.

"Capacity, in terms of storage space, is not a problem. We'd just lay down another concrete slab," Hemsath said.

Overland Resources has indicated an interest in leasing 40,000 square feet of terminal space to store its ore concentrates. Selwyn may use up to 60,000 square feet of storage space, but instead of one ship a month, it would need to load 20 ships a year.

"We think we have enough storage space for both Overland and Selwyn and for Western Copper's Casino," Hemsath said. "We have additional land to the north of the terminal and up inland for more storage."

While there may be plenty of space at the terminal, the port and streets of Skagway, itself, could get a little crowded, especially during cruise-ship season between May and September, Cochran said.

Rail transportation an option

Trucks bringing ore concentrates to the port via the South Klondike Highway that connects Skagway to Whitehorse could be delayed if traffic becomes congested, though Lynden Shipping has indicated that it does not foresee a problem, Hemsath said.

The planners, however, are considering options for alleviating any potential congestion that might develop.

One possibility would be to unload the trucks on the outskirts of town and move the ore to the terminal on a custom-built conveyor system.

Another option would be for the White Pass & Yukon Route Railway to resume ore shipments to the port from Yukon Territory. White Pass officials have been promoting the idea all summer.

A subsidiary of Ontario-based Clublink Enterprises Ltd., the 112-year-old railroad carried significant amounts of ore and concentrates from Yukon mines to Skagway for decades where it was loaded onto ore ships. But when world metal prices plummeted in 1982 and mines closed, the railroad suspended those operations. It reopened in 1988 to operate as a narrow gauge railroad that is one of Alaska's most popular shore excursions for cruise-ship visitors.

The White Pass organization, which Clublink purchased in 1997, also operates all three cruise-ship berths at the Port of Skagway

Cochran said White Pass officials recently met with Yukon Premier Dennis Fentie and his staff to present the idea of the railroad resuming its ore transportation role.

The railroad, which experts say could transport the ore more efficiently with fewer greenhouse gas emissions than over-the-road transportation, could be a viable option for meeting the increased demand.

In July, Hretzay told members of the Skagway Port Commission that his capital cost for the railroad would be very low and the train would ship as much freight and ore as it could handle. He said he could get the train running to Whitehorse, which is about 72 kilometers, or 45 miles, north of the railroad's current terminus in Carcross in one year if needed, and low-cost financing would enable the company to rebuild and extend the train tracks 180 kilometers, or 112 miles, farther north to Carmacks, Yukon, where a number of mine projects are located.

Former White Pass President Paul Taylor reportedly told the port commission in July that the railroad could possibly ship ore at a rate of 4 million tons per year.

Brooks said it is important that the railroad and the territory's mine shippers develop a strong private sector business case for rail transportation of the concentrates.

Then everyone interested in seeing the idea move forward, including the U.S. and Canadian federal governments and the State of Alaska and Government of Yukon, should join Skagway and the railroad in discussing future rail development, he said.

"They (the railroad) are re-looking at their business model because they want to be part of the solution in Yukon as things move forward," he added.

Conveyor system option

Hemsath said he is leaning toward the idea of building a conveyor system as the best method for alleviating potential traffic congestion from mine traffic in the town of Skagway.

"I have yet to see a business case that validates using rail. Lynden Shipping does not see a problem with using trucks," he said.

He said a potential stumbling block to using rail transportation is the mine operators' unwillingness to chance their ore concentrates being mixed with output from other mines. The shippers also blanch at potential added costs associated with loading their ore twice, first onto trucks at the mine and then onto the railroad's ore cars at some interim point, before the concentrates are shipped to the Port of Skagway, he added.

Cochran also said the mines have expressed some concerns about this potential scenario.

White Pass officials did not return telephone calls by press time.

Hemsath also said he would like to see a sophisticated logistics study conducted that would consider all of the constraints involved on the land side for shipping the mines' concentrates to the port.

"Right now all of these mines are in conversation with us," he said. "These are 30-year mines, but no one wants to commit for more than six or seven years. Everything has to pay out. Right now, things are looking good. But if the price of these commodities drops, then everything stops."