Port interests more potential users

One byproduct of the recent revival of the mining industry in Yukon Territory is the ongoing success of the rehabilitated Skagway Ore Terminal at Alaska's Port of Skagway.

Originally built in 1968 to accommodate ore shipments form Yukon's Faro lead-zinc mine, the terminal closed in 1997 after the Faro Mine ceased operations due to unfavorable market conditions. Purchased by the Alaska Industrial Development and Export Authority from White Pass Railway in 1993, the terminal, after substantial renovation, resumed shipping ore concentrates from the Yukon in October 2007, specifically from the Minto copper-gold-silver mine developed by Capstone Mining Corp. (formerly Sherwood Copper Corp.)

AIDEA's board of directors approved negotiation of an amendment to the user agreement with Capstone's subsidiary, Minto Explorations Ltd., to provide additional storage capacity in October 2008. The building extension (14,000 square feet) was substantially complete mid-December 2008. AIDEA financed the Minto/Capstone upgrades for a total of US$14 million to be reimbursed by tenant fees over a seven-year period. Capstone pre-paid the outstanding balance of $8.5 million (plus a pre-payment fee) in December 2010.

In 2008, the first full year of loading concentrates from the mine, Minto shipped 28,690 dry metric tons of ore concentrate via oceangoing barges through the terminal. Since then, the Minto mine has continued to flourish, using about 40 percent of the terminal's storage capacity and 25 percent of the terminal's concrete pad. In 2011 the mine shipped 46,215 dry metric tons of ore concentrate (average of 36.4 percent copper, 132 grams per metric ton silver and 12.4 g/t gold) through Skagway.

A second shipper

In the fall of 2010, Alexco Resource Corp.'s new Bellekeno silver-lead-zinc mine came online in central Yukon. This relatively modest mining operation resulted in barge shipments of its output - lead-silver and zinc-silver - concentrates through the Skagway terminal to Seattle where they are trucked to a smelter in Trail, B.C.

Planned yearly production at Bellekeno is 12,000 metric tons of lead-silver concentrate (average of 6,200 g/t silver and 70 percent lead) and 8,400 metric tons of zinc-silver concentrate (average of 480 g/t silver and 55 percent zinc). The company planned to ship 2.0 to 2.8 million ounces of silver per year.

In December 2010, Alexco entered into lead and zinc concentrate off-take agreements with Glencore Ltd., Stamford, a branch of a wholly-owned subsidiary of Swiss-based Glencore International AG. Over the initial two-year term of the off-take agreements, roughly 42,800 metric tons of concentrate (27,300 metric tons of lead and

15, 500 metric tons of zinc concentrate) are to be shipped from Bellekeno for smelter treatment and refining.

Big plans for Skagway

While impressive, the port traffic from Minto and Bellekeno pales in comparison to what potentially lies ahead for the Southeast Alaska port. Over the years, the Government of Yukon and potential mining clients in Yukon Territory and northern British Columbia have kept in close communication with AIDEA and Skagway officials about the status and availability of the ore terminal. As mine development plans have coalesced, so have opportunities for additional shipping traffic at the port.

AIDEA is currently working with Selwyn Chihong Mining Ltd. on developing a plan for the expansion of the terminal.

The Selwyn-Chihong joint venture is working to develop the Selwyn Project, one of the world's largest lead-zinc deposits, into a huge lead-zinc mining operation.

Key milestones for the project, which is located in the Yukon's Selwyn Basin astride the western border of Northwest Territories, include completion of a bankable feasibility study mid-summer 2011; successful mine construction starting mid-summer 2011; and a mid-2012 production decision and startup as early as 2015.

Current plans propose developing two large underground mines at Selwyn that would feed a central concentrator at a rate of 8,000 metric tons per day with average annual output tentatively projected at about 255,000 metric tons of zinc and 65,000 metric tons of lead.

By comparison, that is roughly half the annual output of the giant Red Dog Mine in northwest Alaska.

Other key elements of the Selwyn project likely will include building a dedicated hydroelectric facility and an 18-centimeter diameter buried pipeline for transporting concentrate to either the Robert Campbell Highway or North Canol Road where concentrates would be de-watered in a facility before being shipped onward by truck to a concentrate shipping facility, potentially at the Port of Skagway. Several stages of expansion are anticipated as the project evolves and additional zones are developed as either open pit or underground mines.

AIDEA spent 2011 working on expansion plans to accommodate Selwyn at the port. The plans included obtaining bonding authorization from Alaska lawmakers and addressing areas of concern, including lease extension, dock access and tariffs and dredging at the port. HB 119 authorized AIDEA to bond up to US$65 million for the purpose of expanding the Skagway terminal.

It is anticipated that a portion of these funds will be used to double the size of the existing Concentrate Storage Building and to provide a new ship loader.

The new ship loader will double the loading capacity, minimize dust emissions, and will be retractable.

The retractable design will allow cruise ships to use the ore dock when ore ships aren't being loaded.

Another mega-shipper

AIDEA is also talking with Western Copper and Gold Corp. about its plans to truck copper-gold-silver and molybdenum concentrates the 560 kilometers (347 miles) from the Casino Project in central Yukon to the Port of Skagway when that project begins production in 2019.

With the completion of a 132-kilometer (120 mile) Casino access road, the project will have an all-weather access route through Carmacks to Whitehorse and on to the Port of Skagway.

Western President and COO Paul West-Sells told Mining News recently that the company plans to ship concentrate produced at Casino through the Skagway Ore Terminal.

In a prefeasibility study released in May 2011, Western cited the port's existing facilities to store and load-out concentrates as well as its facilities to receive bulk commodity shipments, fuels and connection to the Alaska Marine Highway as significant advantages. "The Port of Skagway is developing plans to expand these facilities to better serve the expanding mining activity in the Yukon and Alaska," the company said.

AIDEA has participated with the Municipality of Skagway on applications for federal grants, though the grant applications, so far, have been unsuccessful. AIDEA, along with representatives from White Pass, the municipality and the Yukon Ministry of Economic Development, visited U.S. Rep. Don Young, R-Alaska, last summer to brief him about the project.

In addition, the Alaska Department of Labor and governor's office have been engaged in talks with Yukon and Skagway leaders, economic development organizations, and the private sector about training and supplementing the mining labor force.