Alaska mining spans spectrum in August

This month's mining news is a smorgasbord to delight the appetites of explorers, developers and miners alike.

We had quarterly reports out from Teck, Kinross, Hecla and Coeur d'Alene discussing their respective results from operating mines around the state.

We had one preliminary economic analysis by NovaCopper on its Arctic massive sulfide project and one feasibility study announced by International Tower Hill Mines Ltd. on its Livengood gold project.

We had Freegold and Constantine announce 2013 drilling results from their Golden Summit and Palmer projects, respectively, and we had a new agreement signed between explorer Millrock Resources and a company to be named later on the former's Stellar project (I am sure my 7th grade English teacher would be choking over the construction of this last sentence, but you get the drift).

On the regulatory front, U.S. Rep.

Don Young, R-Alaska, is pushing the U.S. Forest Service to approve a new road in the Tongass National Forest to support proposed activities at the Niblack massive sulfide deposit and the Bokan Mountain rare earth element project.

Western Alaska

Teck Resources Ltd. and partner NANA Inc. announced second quarter results from its Red Dog mine.

During the quarter the mine produced 138,700 tonnes of zinc in concentrate.

Zinc ore grade decreased slightly to 16.9 percent while mill recoveries were up slightly to 85 percent.

The mine also produced 24,900 tonnes of lead in concentrate.

Lead ore grade decreased to 3.9 percent while mill recoveries increased significantly to 66.2 percent.

The mine posted a $56 million operating profit for the quarter, up significantly from the $46 million profit in the year previous period as a result of increased mill throughput and increased grades, offset by lower average zinc and lead grades.

Sales during the quarter were up significantly year on year and the mine plans to ship 1,039,000 tonnes of zinc concentrate and 174,000 tons of lead concentrate from the port facility this shipping season.

Interior Alaska

Kinross Gold announced second quarter results from the Fort Knox mine near Fairbanks. The mine produced 102,740 ounces of gold at a cost of $575 per ounce in the third quarter versus 71,952 oz gold at a cost of $757/oz in the year previous period. During the quarter the mine milled 3,231,000 metric tons of ore grading 0.80 grams per metric ton gold and processed via valley leach an additional 10,261,000 metric tons of ore grading 0.30 g/t gold. Gold recovery in the mill averaged 84 percent. Gold recovery on the heap leach pad was not released.

Freegold Ventures Ltd. announced initial drilling results from its summer - 2103 infill and expansion drilling program at the Dolphin - Cleary Hill deposit on its Golden Summit project. Significant results include 574.2 meters grading 0.82 g/t gold in hole GSDL1311, including 31.7 meters grading 1.48 g/t gold and an additional 179.67 meters grading 1.13 g/t gold. Hole GSDL1311 demonstrates the potential for higher grade near-surface mineralization. Additional results from this program are pending.

The most surprising news of the month was the results of the feasibility study released by International Tower Hill Mines on its Livengood gold project.

The study evaluated a 100,000 tons per day milling project that would produce 8 million ounces of gold over 14 years.

Using the trailing three-year gold price of $1,500 per ounce, the project did not generate a significant positive return.

The study utilized proven reserves of 434 million metric tons at an average grade of 0.69 g/t gold (9.6 million oz) and probable reserves of 20 million metric tons at an average grade of 0.70 g/t gold (454,000 oz).

The mine plan provides sufficient ore to support an annual production rate of about 577,600 oz over an estimated 14-year mine life.

Gold recovery is estimated at 80.3 percent.

The design specifications include a conventional, owner-operated surface mine in a blast/load/haul operation with an average waste-to-ore stripping ratio of 1.34:1.

Ore would be processed in a 100,000 tpd comminution circuit consisting of a primary gyratory crusher, wet grinding in a single semi-autogenous mill and two ball mills, followed by a gravity gold circuit and a conventional carbon in leach circuit.

Infrastructure costs came in at US$708 million and included a lined tailings impoundment, two water reservoirs, an administration office/shop/warehouse complex and a 440-person camp.

Project costs include construction of a US$129 million, 50-mile electrical transmission line connected to the existing power grid near Fairbanks, Alaska.

Initial capital costs clocked in at US$2.79 billion with an additional US$667 million in sustaining capital.

Using the above parameters at the US$1,500/oz average gold price, the average life of mine pre-tax costs, including capital and operating costs, was US$1,447/oz with a net present value of negative US$440 million at 5 percent discount rate, an internal rate or return on capital of 1.7 percent and a 10.8-year payback period.

The company indicated that it is investigating areas where per-ounce cost reduction can be achieved.

Alaska Range

Millrock Resources Inc. announced that it had entered into a letter agreement with a major international mining company whereby Millrock will grant a right of first refusal to the third party to enter into an option and joint venture agreement concerning the Stellar Project. The third party will fund an initial exploration program estimated to cost US$200,000. The program will consist of regional geochemical sampling, geological mapping and prospecting, which will be carried out in August. The miner will have an option to earn up to an 80 percent interest in the project if it exercises its right of first refusal.

Northern Alaska

NovaCopper Inc. announced the results of a preliminary economic assessment at its Arctic massive sulfide deposit, part of the larger UKMP project in the Ambler District.

Highlights of the PEA study include an initial capital expenditure of US$717.7 million and sustaining capital of US$164.4 million for total estimated capital expenditures of US$882.1 million over the estimated 12-year mine life.

In addition, closure and reclamation costs are estimated at $81.6 million.

Pre-tax net present value at 8 percent was estimated at US$927.7 million calculated at the beginning of the two-year construction period and an internal rate of return of 22.8 percent for the base case.

The after-tax net present value was US$537.2 million and the after-tax internal rate of return was 17.9 percent.

Estimated, pre-tax, payback of initial capital was 4.6 years and 5.0 years after-tax.

A minimum 12-year mine life is envisioned, supporting a maximum 10,000-metric-tons-per-day conventional grinding mill-and-flotation circuit to produce copper, zinc and lead concentrates containing significant gold and silver by-products.

The life of mine strip ratio was 8.39 to 1.

The average annual payable production was projected to be 125 million pounds of copper, 152 million lbs of zinc, 24 million lbs of lead, 29,000 ounces of gold and 2.5 million oz of silver for life of mine.

The estimated cash costs of copper came in at US62 cents per lb. Total "all-in" cash costs clocked in at US$1.26/lb copper.

The project will require 15 megawatts of peak load electrical power for the 10,000 tpd operation envisioned.

Power will be generated on-site using diesel generators with an estimated power cost of US32.2 cents per kilowatt-hour.

Access to the project is proposed to be via a road about 340 kilometers (211 miles) long, extending west from the Dalton Highway to the project.

While the actual cost of this road remains unknown, the preliminary economic analysis assumed that a toll would be paid based on a $150-million, 30-year bond at a 5 percent interest rate, which would result in the project paying about US$9.7 million each year for its 12-year mine life.

The company plans to continue refining economic and operating parameters as it advances the project to the preliminary feasibility and feasibility stages.

Southeastern Alaska

Hecla Mining Co. announced second quarter 2013 production results from the Greens Creek mine on Admiralty Island.

The total cash cost per ounce of silver produced at Greens Creek for the quarter was US$2.71/oz versus US$1.03/oz in the year-previous period.

Mining and milling costs per ton increased compared to the same period in 2012, primarily because of lower average head grades and increased use of on-site diesel generated power due to limited availability of hydroelectric power.

The average grade of ore mined during the quarter was 13.72 oz/t silver, up significantly from the average grade of 9.57 oz/t silver mined in the second quarter of 2012.

In the second quarter, Greens Creek produced 2,018,961 oz of silver, 15,486 oz of gold, 5,778 tons of lead and 15,538 tons of zinc.

The mill processed 211,755 tons of ore during the quarter.

In addition to production, exploration and definition drilling continued during the second quarter.

The company continued to define the three stacked high-grade folds that comprise the mineralization at 200 South.

This resource has been drilled for more than 700 feet of strike length and is open down dip and to the southwest along strike.

Significant intersections include 32.4 oz/t silver, 0.57 oz/t gold, 4.3 percent zinc and 2.4 percent lead over 10.8 feet; 47.4 oz/t silver, 0.12 oz/t gold, 16.4 percent zinc and 7.5 percent lead over 7.5 feet; 41.1 oz/t silver, 0.08 oz/t gold, 11.2 percent zinc and 12.9 percent lead over 7.0 feet; and 43.0 oz/t silver, 0.09 oz/t gold, 8.3 percent zinc and 3.5 percent lead over 3.5 feet.

Surface drilling is being conducted on the Killer Creek area, which is about 1.5 miles west-northwest of the mine portal.

The five completed holes show broad zones up to 400 feet with stringer veins containing copper, zinc, lead and silver mineralization in the footwall rocks.

In general, the northern holes are more copper-rich with veins up to seven feet wide.

Coeur d'Alene Mines announced second-quarter 2013 production results from its Kensington gold mine, including production of 23,162 ounces of gold, or an 8 percent decrease from results in the first quarter of 2013.

Cash operating costs per ounce were US$1,115, compared with US$1,055/oz in the first quarter 2013.

Total production costs were US$1,687/oz, a reduction of over US$100/oz from the year-previous period.

Average mill head grade of 0.18 oz/t gold fell 10 percent from first-quarter results due to the processing of lower-grade stockpile ore.

Average recovery was 98.2 percent.

The gold grade is expected to gradually improve during the second half of 2013 as higher-grade stopes are mined and processed, which Coeur d'Alene expects will lower unit operating costs 20 percent when compared with the first half of the year.

Additional cost reductions targeted for the second half of the year include reductions in contract services and lower underground backfill costs due to lower prices for backfill material.

Capital expenditures of $7.4 million in the second quarter were spent primarily on underground capital development and reserve category drilling.

Exploration during the second quarter included surface drilling on the Jualin area where drilling targeted the No. 4 vein, a zone of auriferous quartz and sulfide veining situated about 1,500 feet due south of the mill facility.

Targets selected to discover and define new mineralization are focusing on those, like Jualin and Raven, with the potential to be higher-grade than the current reserves.

Resource expansion exploration was conducted on the southern margins of lower Zone 10 and Zone 50 in the main Kensington deposit area as well as the northern extent of lower Zone 10.

Initial results from widely-spaced drilling have shown new gold mineralization extends more than 200 feet from the south limits of the current mineral reserves.

In addition, underground drilling was conducted on the Ann target and the upper extension of Zone 10 at main Kensington.

Estimated 2013 total production from Kensington is 108,000-114,000 oz of gold.

Constantine Metal Resources Ltd. and funding partner Dowa Metals & Mining Co., announced initial results for the first four holes of a 4000 meter drill program on its Palmer volcanogenic massive sulfide deposit near Haines.

Drilling is focused on expanding the South Wall and RW Zones and the first 4 holes represent 35 to 100 meter step-outs from known mineralization.

Significant results include 10.63 meters grading 1.77 percent copper, 0.27 percent zinc, <0.01 percent lead, 13.8 grams per metric ton silver and 0.15 g/t gold in hole CMR13-43, 21.71 meters grading 2.36 percent copper, 9.06 percent zinc, 0.13 percent lead, 28.8 g/t silver and 0.33 g/t gold in hole CMR13-45, 12.9 meters grading 0.83 percent copper, 10.26 percent zinc, 0.37 percent lead, 63.3 g/t silver and 0.44 g/t gold in hole CMR13-46.

Hole CMR13-43 intersected strong chalcopyrite stringer-style mineralization and represents an approximately 35-meter down-dip step-out on Zone I. This hole was drilled on an oblique angle and stayed in footwall mineralization and alteration and did not penetrate the main massive sulfide-bearing horizon.

Hole CMR13-45 is a 65-meter up-dip step-out on South Wall Zone I and intersected a thick zone of massive sulfides.

Hole CMR13-46 intersected South Wall Zone II massive sulfide mineralization about 50 meters west and 50 meters up dip of previous drilling.

This intersection significantly expands an area of thick Zone II mineralization, and opens the potential to add additional tons between the base of Zone I and the currently defined top of Zone II. Based on a revised geological model, South Wall Zone II is interpreted to represent the faulted offset of South Wall Zone 1.

The company also reported that on initial metallurgical test results.

The work is being performed on a composite of 212 assay sample rejects from past drilling.

The composite has responded well to flotation with the initial series of rougher and cleaner tests yielding high grade copper and zinc concentrates.

Based on these results a conventional copper-zinc sequential flotation flowsheet has been developed for locked cycle test work.

The U.S. House Natural Resources Subcommittee on Public Lands recently held a legislative hearing on H.R. 587, the Niblack and Bokan Mountain Mining Area Roads Authorization Act, introduced earlier this year by U.S. Rep.

Don Young, R-Alaska.

The legislation would require the Secretary of Agriculture to establish two road corridors to connect the Prince of Wales Island road system with the Niblack and Bokan Mountain mining sites on the southeast side of Prince of Wales Island.

While U.S. Forest Service Deputy Chief of the National Forest System Leslie Weldon agreed with Young that developing the rare earth metals found at the Bokan mine are in the national interest, he said the Forest Service preferred to see mine workers and supplies by boat only, which is a dangerous, costly and unreliable alternative to road access.

Keep your eye on this one!

Author Bio

Curt is President of Avalon Development Corporation, a mineral exploration consulting firm based in Fairbanks, Alaska. He is a U.S. Certified Professional Geologist with the American Institute of Professional Geologists (CPG #6901) and is a licensed geologist in the State of Alaska (Lic. # AA 159).

• Email: [email protected]
• Phone: 907-457-5159
• Contact Curt Freeman