Infrastructure tips scale for projects

Location, location, location," the old adage goes, summing up the opportunities and challenges faced by the real estate industry. Well, "infrastructure, infrastructure, infrastructure," can offer the same insights into the problems of modern mining in remote jurisdictions like Yukon Territory.

The relative scarcity of roads, bridges, airports, power and other infrastructure in the Yukon is critical to the outlook for mining, and in many cases, the presence or lack of these important components can spell the difference between success and failure at a mine project, regardless of its mineral potential.

That's the lesson being learned by many companies that rushed to explore the Yukon for gold and other lucrative metals in recent years, only to discover that finding the minerals might not be the toughest nut to crack in bringing a mining venture to commercial production.

Roads to riches

The Yukon has few government-maintained roads, and most were developed in answer to the call of mining in bygone eras, dating back to the Gold Rush of the 1890s.

"That's how the West was developed, because of mining," Golden Predator Corp. Chairman William Sheriff told a gathering in Dawson City in August. "It's the natural progression of modern society."

Still, the Wellgreen Ni-Cu-PGM Project being developed by Prophecy Platinum Corp. in southwestern Yukon is located just 14 kilometers (9 miles) from the Alaska-Canada Highway but only recently has come into its own as a promising mining operation.

"If this was northern Ontario, we wouldn't be here. This project would have been mined out 50 years ago," Wellgreen's mine manager Rory Calhoun, P.Geo, told Mining News in August. "We haven't had the infrastructure in Yukon until recently. We have a road because the Al-Can highway was put in during World War II, but until recently, it was just barely drivable. 1985 was the first year they chip-sealed it."

Yukon currently has about 4,700 kilometers (2,914 miles) of all-weather roads in a year-round highway system that includes 129 bridges able to accommodate loads of up to 77,000 kilograms (169,756 pounds). Within this road system, only 250 kilometers (155 miles) are paved and another 1,900 kilometers (1,181 miles) are surfaced with bituminous surface treatment, a thin asphalt membrane. The remainder is gravel.

Every Yukon community, however, is connected to the highway system, except for Old Crow which is accessible only by air. This has created significant advantages for many mine projects, especially the three that have succeeded in achieving commercial production in recent years.

Alexco Resource Corp.'s Bellekeno Mine, for example, is located on the road system about 50 kilometers north of Mayo.

The Minto Mine, located 240 kilometers (149 miles) northwest of Whitehorse, is serviced via the Klondike Highway to Minto landing and a 29-kilometer (19 miles) all-weather gravel road to the mine. The Yukon River must be crossed at Minto Landing and in the summer months, a barge is used to ferry men and materials across the river. In winter, an ice bridge is built and maintained. Road access to the mine is interrupted each spring and fall for up to 8 weeks during break-up and freeze-up of the river.

The Wolverine Mine is located in southeast Yukon 190 kilometers (118 miles) by road north of Watson Lake via a 26-kilometer (16 miles) access road that connects to the Robert Campbell Highway.

Access to Yukon's road system greatly increases the likelihood of a mine project being developed and the chances of it happening sooner rather than later.

"Projects with NI 43-101 resources and are road-accessible are going to come to fruition a lot sooner than new discoveries," Sheriff said. "You see it in the markets. Stocks react to a handful of rock chip samples, but in reality, that (discovery) is years away from production. If people start looking at (mine) projects with a longer-term perspective, they start making the realization that if a project has a road, it's probably going to get into production, and if you don't have a road, that's an extra 'x' number of years before you can get into production.

"It's a matter of viewing (the industry) a lot more realistically and a lot less romantically," he added.

Keys to mineral exploration

Other infrastructure, including airports, air carriers, assay laboratories and deep-water ports, is also critical to the success of mine projects in Yukon.

The Yukon airport system contains one international, two regional and 10 community airports, as well as 16 aerodromes. These facilities are exclusively operated by the Government of Yukon. The territory is serviced by three scheduled carriers - Air Canada, Air North and First Air, several local and international air charter companies and a dozen helicopter companies.

"The labs in Whitehorse and the helicopter companies have made a big difference," said Golden Predator's Sheriff.

In the rugged, mountainous terrain of the territory, helicopters have proven vital to mineral exploration companies seeking safe, reliable and efficient modes of travel. Some companies have projects situated where rivers and old placer mining roads might be used to gain access to their properties. Kaminak Gold Corp., for example, could potentially gain access to its Coffee Gold Project, which is located in a historic placer district near the Yukon River in west-central Yukon, using these methods.

Other companies exploring more remote areas, such as ATAC Resources Ltd., would have little chance of reaching their targets without helicopters. Perched on steep mountain slopes and ridges, the Rackla Gold Trend where Atac made its exciting Osiris, Conrad, Isis and most recently, Anubis, discoveries, is one such project.

"It's very difficult to get permits to put in roads now. Used to be you could get a bulldozer and put a blade down and build a road to a (mine) project. Those days are long gone because nothing grows very fast up here. You can still see the scars on the land from the 1950s when people could do that," said Bruno Meili, president and operations manager of Fireweed Helicopters of Whitehorse.

"As long as there's mineral exploration in the Yukon, the helicopter will be here," said Meili, who has provided helicopter transportation services in the territory since 1980.

During the record-setting mineral exploration seasons of 2010 and 2011, helicopter companies offered an especially important piece of the territory's infrastructure puzzle.

"Last year, it was just crazy and the same in 2010. But it's settled down now, though exploration activity is still above normal this year," Meili told Mining News in early September. "Fireweed lucked out. All of our work is with advanced mining projects, so we have plenty of work this year."

Alaska ports

Ice-free ports, such as those in Skagway and Haines, Alaska, are another vital part of Yukon's mining infrastructure. Both ports are easily accessible along Yukon and Alaska highways and have long been used by the industry in Yukon to export mineral products from the territory. Yukon officials, in fact, have cited the Alaska ports as being an integral part of their transportation system.

Both the Minto and Alexco mines currently truck mineral concentrates to the Port of Skagway where they are loaded onto oceangoing vessels for transport to market. Wolverine's products are trucked farther south to a port in Stewart, B.C.

The Borough of Haines, meanwhile, is just beginning to explore opportunities for offering the services of its deep-water port for not only mineral exports but also for imports of large mine equipment and fuel such as natural gas for power generation.

Western Copper and Gold Corp., for example, has discussed the possibility of bringing in stator motors for power generators through the Port of Haines for the mine it hopes to build at the Casino copper-gold-molybdenum project located 380 kilometers (236 miles) northwest of Whitehorse in central Yukon, according to Haines Borough Manager Mark Earnest.

Western Copper is working to bring Casino, located 140 kilometers (87 miles) from the Klondike Highway via a historic mining road, to develop a heap leach and open-pit mining operation scheduled to begin production in 2015 and 2016, respectively. The company proposes to mine proven and probable reserves exceeding 976 million metric tons in a conventional flotation mill and 82 million metric tons in gold heap leach at Casino and produce copper-gold and moly concentrates along with gold-silver doré. The project would have a 30-year mine life and employ up to 650 people at peak production.

In a preliminary economic assessment completed in June, Prophecy Platinum also outlined plans for developing a huge open-pit mine (111,500 metric-tons-per-day mining rate) with an onsite concentrator (32,000 tpd milling rate) at Wellgreen. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper and 7.119 million ounces of platinum + palladium + gold over 37 years of mine life.

"We are pleased with the PEA results. The numbers indicate Wellgreen as one of most exciting mineral projects in Yukon," said Prophecy Chairman John Lee in announcing the PEA. "The infrastructure is excellent as the project is merely 1,400 meters in altitude and 14 kilometers (9 miles) from the paved Alaska Highway that leads to Haines deep seaport. Discussions are underway with support from local stakeholders regarding permitting and logistics."

Communications and power

Yukon boasts a modern telecommunications network with Internet and cell phone access in most communities, along with electrical infrastructure throughout central and southern Yukon. Two entities manager the territory's power resources: Yukon Electrical Co. Ltd. and Yukon Energy Corp.

Yukon Electrical is a private, investor-owned utility of Atco Corp. in Alberta. It has provided electrical service to Yukoners for more than a century and is the main power distributor in the territory. The company currently serves more than 16,000 customers in 19 communities from south of the Yukon border to north of the Arctic Circle.

Yukon Energy is owned by the Yukon Development Corp., a Government of Yukon Crown corporation. Yukon Energy produces and transmits most of Yukon's electricity. It manages hydro facilities in Whitehorse, Mayo, and Aishihik. It also manages major transmission lines throughout the territory: The Whitehorse-Aishihik-Faro grid in Southern Yukon and the Mayo-Dawson grid further north. Together, the facilities have the ability to generate 75 megawatts of power. Yukon Energy sells power directly to Mayo, Faro, Dawson and a few other small communities.

The Carmacks to Stewart Crossing Transmission Line was a major project for Yukon Energy that came on line in 2011. It involved building a new 138-kilovolt transmission line from Carmacks to Stewart Crossing in central Yukon (about 172 kilometers or 107 miles long), with a spur line to the Minto mine. It also allowed Yukon Energy to connect its northern and southern grids, which enables the company to better manage its power.

Victoria Gold Corp., which is developing the 4.8-million-ounce Eagle Gold Deposit near Mayo into a 200,000-ounces-per-year heap leach operation that could commence production as early as the fall of 2013, is also looking to Yukon Energy for power. Victoria hopes to tap Yukon Energy hydroelectric power, which is within 25 kilometers (16 miles) of the Eagle property.

A recent environmental screening report released by the Yukon Environmental and Socio-economic Assessment Board suggests that power for the mine would cost about C$25 million annually to generate and questions whether part of the cost will be passed on to other Yukon Energy ratepayers.

A spokeswoman for the power company, however, has said Yukon Energy would not take on a new customer if it meant increasing its rates.

Electricity is critical component of Western Copper's plan for the Casino project, but purchasing that power from Yukon Energy is almost certainly out of the question for such a large project.

Casino would require 125 megawatts of electricity annually, a quantity about equal to the Yukon electrical grid's total capacity, Western Copper Chairman Dale Corman has told Mining News.

The mining company intends to build its own power plant at Casino and import liquefied natural gas, possibly by hauling it in tanker trucks some 1,300 kilometers from Fort Nelson, B.C., to fuel the power generators.

Yukon Energy is working with Western Copper on the LNG studies.

"We're pooling our resources to examine the same potential energy source for our separate needs," Yukon Energy President and CEO Dave Morrison told Mining News Sept. 20.

The electricity provider also has talked with officials of both the Haines and Skagway boroughs about LNG options, though its discussions with Skagway are further along, Morrison said. "We have an MOU with Skagway regarding the possibility of them buying power from us and us buying power from them."

Working with several Yukon First Nations, Yukon Energy is also studying the potential for generating additional electricity with biomass, geothermal and natural gas resources within the territory.

Three basins in the Yukon - Liard Basin, Eagle Plains and the Whitehorse Trough - are considered potential sources for natural gas supply. The Liard Basin in southern Yukon has the only natural gas production to date. Wells in the Kotaneelee field produced via the Spectra Pointed Mountain pipeline into British Columbia have seen production decline recently due to water production and the discovered gas resource is significantly depleted.

The Whitehorse trough in south-central Yukon is a frontier basin has the potential for about 3 trillion cubic feet of natural gas and 107 million barrels of oil, according to a recent report by the Yukon Geological Survey. In April, the Yukon government placed a five-year moratorium on oil and gas development in the 3.72-million-hectare (14,363 square miles) trough.

Yukon Energy is currently talking with Northern Cross (Yukon) Ltd., an Alberta company that is exploring the Eagle Plains Basin for natural gas in northern Yukon. With an estimated 6.054 trillion cubic feet of gas-in-place, Eagle Plains is regarded as the area most likely to be developed next for commercial production.

"A fair bit of growth is anticipated in residential and business demand for power in the territory over the next few years," Morrison said.

Yukon Energy wants to respond to that demand as it materializes. "We have a base case plan for smaller scale development and most of the options we've looked at are nearly ready. Depending on load growth, we can choose which one will fit," he added.

Speculation, meanwhile, continues to center on possible construction of a pipeline bringing natural gas through the Yukon from Alaska's North Slope. No definite timetable has yet been determined for the project.