The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
CEO Marie Greene sees mine's achievements as only the beginning of successful industry-aboriginal engagement in arctic development
2014 marks the 25-year anniversary of the Red Dog Mine in Northwest Alaska being among the largest producers of zinc on the planet. For the more than 13,600 Inupiat who are shareholders of NANA Regional Corporation, owners of the land where Red Dog is found, this world-class mine's success is measured by more than the amount of zinc shipped to world markets every summer.
"It has been a revolutionary thing for our region economically and demonstrates the kind of development that can be done that not only benefits the local people but protects the environment," said Willie Hensley, who was active in the founding of NANA and subsequent development of Red Dog, during a Nov. 7 luncheon celebrating the mine's new milestone.
Income from Red Dog has served as a catalyst to grow the Inupiat-owned company into a global enterprise that generated US$1.7 billion in gross revenues during 2013.
"We just experienced the best 35 years of the last 10,000, not likely to be repeated again," Hensley reflected, while addressing a crowd gathered at the Alaska Miners Association annual convention in Anchorage.
Success in the executive boardroom is a means to an end for the Northwest Alaska Native regional corporation that regards subsistence - hunting, fishing and other traditional activities - as its most valued resources.
"Since production began in 1989, Red Dog has been recognized as an example of responsible resource development and it is an important part of Alaska's story," NANA President and CEO Marie Greene told the audience.
Unlikely partners
Like most stories in which global mining companies seek to develop a mine in the traditional homelands of aboriginals, the early chapters are filled with travails.
"This is a story of an indigenous people finding a way in the business world; a young state overcoming political hurdles to bring a product from remote Alaska to worldwide markets; and it is a story of two companies far more likely to be adversaries than partners, but dug deep to find a way to work together," said Greene in prefacing her presentation.
"Looking back from the perspective of 25 years, it is amazing to me, even now, that Red Dog was developed at all," she added. "To say the cards were stacked against the mine was an understatement. At the time, our region did not want mining, and there was a further complication."
Cominco Ltd. - which would later merge with Teck to form the company that now operates Red Dog - was more than a likely adversary to NANA in the early years.
"Many people don't know, or perhaps don't remember, before Cominco was a partner at our mine, they were suing NANA and Alaska to gain access to the Red Dog land," Greene said.
The court battle was waged over ownership of the lands and Cominco's right to explore the fantastically high-grade zinc deposit found there.
While the land still belonged to the federal government at the time, both NANA and the state of Alaska had selected the lands under provisions of the Alaska Native Claims Settlement Act.
Just a few years earlier, in 1971, President Richard Nixon signed ANCSA into law. Broadly speaking, this newly penned law conveyed 44 million acres of land to Alaska's 12 regional Native corporations, one of which was NANA.
In 1974, NANA chose lands covering what would later become Red Dog Mine as a portion of the lands it had coming.
Competition for this chunk of real estate was fierce. In addition to NANA, Alaska had selected this region as part of the 104 million acres it had coming as part of its statehood agreement with the federal government; and a number of other mineral companies such as Kennecott and Anaconda were eyeing the region as well.
In 1979 and 1980, Cominco blanketed the land with mining claims and drilled eight holes.
"The results exceeded their expectations. They knew then, for a fact, that the deposit was large and of high grade - and their interest in potential development grew," Greene reflected on the discovery of Red Dog.
NANA, however, was opposed to Cominco's work in the region and was making headway in gaining ownership of the land through ANCSA. As a result, the young Native corporation sued, and Cominco was served with an injunction ordering the halt to drilling on the contested land, prompting the mining company to fire back with a lawsuit of its own.
It was at this volatile juncture that Cominco made a bold move that cemented the future of Red Dog - it chose diplomacy over conflict.
"They reached out to NANA leadership, on a personal level, to try to understand the issues and opposition to development in the region," Greene reflected.
This early engagement formed the foundation of what is now one of the strongest and most successful indigenous people-mining company partnerships in the world.
Greene characterizes the operations agreement signed between NANA and Cominco in 1982 as "a progressive and visionary contract based on cooperation and a long-term partnership that continues to strengthen and grow."
"It was a product of mutual respect with a commitment to a relationship," she added.
Greene said this decision to move forward with mining at Red Dog was not one that the Inupiat shareholders of NANA took lightly.
"Our people knew we were balancing responsible resource development with our traditional way of life. We knew there were risks. We knew there were benefits. But, more importantly, we knew we wanted to be the ones to weigh them. We - as a people - wanted to have a unified decision to move forward. It took us 10 years to begin development on the mine, but it was worth every moment. As a result, today, we have the best of both worlds - a mine that allows us to maintain our traditional subsistence lifestyle and to participate in the modern American economy," the NANA leader informed an audience at the 2010 Inuit Circumpolar Council General Assembly held in Nuuk, Greenland.
Economic foundation
Under the unique development and lease agreement forged for Red Dog, Teck is the mine operator and NANA is the land owner. The mandate of this agreement articulated that the mine:
• Protect subsistence and the Inupiaq way of life;
• Create lasting jobs for NANA shareholders;
• Provide opportunities for NANA's youth; and
• Act as a catalyst for regional economic benefits.
Through 2013, NANA has received US$1 billion in net proceeds from the Red Dog, of which it has paid out US$608 million to the other Alaska Native Corporations and US$199 million in dividends to its own shareholders. Additionally, the Northwest Arctic Borough, which encompasses the entire NANA region in Northwest Alaska, has received US$119 million in payments in lieu of taxes to fund local government, provide services and to build schools.
"This economic foundation supports jobs, education and advancement opportunities and a revenue stream for local government that is allowing our corner of Alaska to become more self-reliant," Greene said.
Ahpa Porter, manager of natural resources, minerals, NANA, told the convention audience that the median household income in the Northwest Arctic Borough has mushroomed 243 percent, to about US$61,000 today from US$18,000 in 1979.
During 2013, Teck and NANA paid around US$54.7 million in wages to roughly 610 employees working at Red Dog.
Porter said the benefits Red Dog has provided to Northwest Alaska can be measured in more than just dollars. He points to a growing population in the NANA region at a time when many rural areas of Alaska are experiencing out-migration to urban centers, as well as an explosion in graduation rates among people in the region as other evidence of the benefits of having an economic engine such as Red Dog nearby.
"We all know people who could not live in the borough without these good jobs," Porter reflected.
Promising future
Teck paid off its capital and operating costs at Red Dog in 2007, which triggered an increase in NANA's net proceeds royalties to 25 percent of net profits from the zinc mine. NANA's interest, which is bumped up by 5 percent every five years, currently sits at 30 percent and its next rise is due at the end of 2017.
Despite flagging zinc prices, NANA's net proceeds from Red Dog was US$143 million in 2013.
A growing royalty, along with climbing zinc prices bodes well for NANA and Teck in the coming years.
Red Dog, currently the second-largest zinc producer in the world, accounts for four percent of global supply, producing 551,300 metric tons (1.215 billion pounds) of the galvanizing metal in 2013.
"As of Oct. 20, the last ship of concentrates sailed from the port site. A total of 24 ships carrying more than 1 million dry metric tons of zinc and about 205,000 dry metric tons of lead concentrate left the port site this year," said Greene.
These volumes are slightly higher than 2013 and represent all of Red Dog's concentrates available to be shipped from the operation, according to Teck.
While several of the large zinc mines around the world are shuttering operations, the Aqqaluk deposit at Red Dog Mine provides plenty of high-grade reserves, enough to last until 2031. A number of deposits and prospects in the immediate and surrounding area also will likely extend the mine's operation for decades.
"The immediate future of the Red Dog District looks very promising," Greene said.
At the end of 2013, the Aqqaluk deposit at Red Dog had 45.4 million metric tons of ore in reserve averaging 15.8 percent (6.05 million metric tons) zinc, 4.1 percent (1.86 million metric tons) lead and 72.6 grams per metric ton (106 million ounces) silver.
Qanaiyaq and Paalaaq, two deposits adjacent to the current mine area, will likely boost the quantity and quality of the Red Dog reserves.
Qanaiyaq, a near-surface deposit that lies to the south of the mined out Red Dog main deposit, has an indicated resource of 8.3 million tons with an average grade of 25.7 percent zinc, 6.9 percent lead and 3.99 ounces per ton silver. It is anticipated that this high-grade deposit, even by Red Dog standards, will be incorporated into the mine plan in the near future.
Teck has not released a resource for Paalaaq, a deeper deposit immediately north of Aqqaluk.
"We are very blessed that Northwest Alaska has a quality of minerals that are seldom matched by other locations in the world," Green said.
Bridges of understanding
NANA leadership says Red Dog's record over the past quarter-century and the economic success of the remote northwestern corner of Alaska provides evidence of the success of the agreement forged between the unlikely partners.
"It has been a revolutionary thing for our region economically and demonstrates the kind of development that can be done that not only benefits the local people but protects the environment," former NANA President Hensley said.
Greene, who is retiring her post as NANA's president and CEO at the end of 2014, wants her tale of the successful Inupiat-miner partnership that resulted in a world-class zinc mine to serve as a guide for the future development of a resource-rich Arctic.
"I tell you this story because Red Dog Mine is not the end but the beginning," the outgoing Inupiat leader said. "In the next 25 years we will see an Arctic that is open to the world and Inuit communities that will play a large role in what happens."
"NANA and our regional partners again have a chance to shape that future," she added.
For those that wish to develop the abundant natural resources of Northwest Alaska and the Arctic at large will depend upon successful engagement with the people that have called this land home for millennia.
"Let us all be mindful of how Red Dog Mine is achieved: big projects, big decisions, big advancements are brought about by people working together - people creating bridges of understanding," Greene said.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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