Good, bad and ugly hits Alaska mining

Several events have dramatically affected Alaska's mining industry in recent weeks, underscoring critical links between Alaska and the global economy.

First came bad news for newly-elected Gov. Bill Walker: The plunge in world oil prices pushed Alaska's coming-year budget projections about $3.5 billion into the red. The ripple effect of this was a slashing of everything not required and one of the cuts, temporarily at least, was state funding of the Ambler District Road. Deposits like Bornite, Arctic and Sun, among others, are adversely affected by this decision.

Just after the new year began, the Swiss National Bank cut its longstanding tie to the Euro, sending Swiss Francs skyrocketing and the Euro into further troubled waters. One result was a strengthening of gold prices as investors looked for a safe haven for their funds.

In Alaska, the Fort Knox, Pogo, Kensington and Greens Creek mines all benefited from rising gold prices.

Silver followed gold's upward move, also putting smiles on faces at Greens Creek.

Lead and zinc, both significant contributors to revenue from Red Dog and Greens Creek, did not share the upward ride of precious metals.

Zinc currently trades in the middle of its one-year range and lead near the bottom of its one-year range.

While copper is not currently a big revenue source for Alaska's mines, it has a potential to be so in the future and is a stong driver of Alaska mineral exploration, so its plight also is of interest.

Unfortunately, copper took a tremendous beating in 2014, plummeting from the upper $3.30s per pound in January 2014 to lows of about $2.60 in late December.

Copper has recovered slightly in 2015, trading between $2.66 and $2.87 per pound.

Finally, the Canadian dollar continued to slide against the U.S. dollar, a drop of some 20 percent in just two years. This means it takes more Canadian dollars to fund a dollar of exploration in Alaska. And since more than 75 percent of Alaska's mineral exploration is funded by Canadian companies, this is bad news for an industry facing another year of limited exploration budgets and lackluster investor sentiment.

So there you have it, the good, the bad and the ugly - welcome to 2015!

Interior Alaska

Freegold Ventures Ltd. released an update on recently completed column test work at its Golden Summit project.

Further bottle roll tests and column leach tests on the oxide component of mineralization at the 6.5-million-ounce Dolphin-Cleary deposit indicated gold extractions exceeding 80 percent can be achieved within 14 days on coarse crushed material (80 percent passing 25 millimeters).

The column test ran for 65 days and final extractions were 85 percent for gold.

These tests suggest recovery on the oxide component does not appear to be sensitive to grind size.

These results compare favorably with earlier bottle roll test results on coarse crushed material.

Sodium cyanide consumption in the column test was reasonable at 0.69 kilograms per metric ton.

Optimization of cyanide dosing in future test work programs will focus on potential improvement in both kinetics and cyanide consumption.

Head grades of the oxide material were 1.0 gram per metric ton gold and 10 g/t silver.

Results of the tests will be incorporated into the preliminary economic assessment currently underway.

Freegold undertook additional column leach work to provide more comprehensive data to examine potential for an initial heap leach operation on the oxide component of Dolphin-Cleary.

International Tower Hill Mines Ltd. reported progress toward optimization of its Livengood gold project.

In addition to reviewing mine production scheduling and detailed metallurgical test work, the company examined power supply alternatives to determine how changing energy supply dynamics might affect project assumptions regarding electrical generation and scrutinized construction and operations camp alternatives to better define costs of supporting the project's manpower requirements.

The company also continued to advance environmental baseline work in support of future permitting to better position the project for a construction decision when warranted by market conditions.

Revised production schedules were run at throughputs ranging from 11,250 metric tons per day to 90,000 tpd.

At the upper level of production, the mine would produce about 7.7 million oz of gold over its 12-year mine life from ore ranging from 0.50-0.92 g/t gold.

The impact of just this scheduling change would increase the net present value of the project by $305 million (at 5 percent and $1,500 per ounce gold).

Integrating 45-degree slopes into the mine plan for the first five years and then reverting to the design slopes used in a September 2013 feasibility study would result in an additional increase of $95 million (at 5 percent and $1,500/oz gold).

Re-evaluation of metallurgical tests determined that the observed calculated head grades from the 250- to-300 kilogram composite samples of the five primary rock types of the deposit met or exceeded the drill assay grades used in the feasibility study by a ratio of 1.00 to 1.43, depending on rock type.

Additional metallurgical recovery work will be required but if a higher head grade can be confirmed, its effect would be a significant improvement on project economics.

Due to the potential importance of the 2014 head grade evaluation to the project, a significant multiphase metallurgical test-work program is already underway in an attempt to validate the observed higher calculated head grades.

The objectives of the 2015 metallurgical test program are to optimize the gravity circuit, optimize the grind size and power consumption, optimize the re-agent consumption, optimize the leach retention time, confirm the overall recoveries by rock type and provide additional confirmation of the head grades.

The company also will continue environmental baseline studies and to evaluate alternatives for fresh water supply for potential cost savings.

Contango ORE Inc. said it finalized a joint venture with Royal Alaska LLC, a wholly-owned subsidiary of Royal Gold Inc. to advance exploration and development on the Tetlin project near Tok. Royal Gold's initial investment of $5 million will fund exploration activity, and Royal Gold will have the option to earn up to a 40 percent economic interest in the joint venture by investing up to $30 million (inclusive of the initial $5 million investment) prior to October 2018. Royal Gold indicated that plans were being formulated for an active exploration program to be conducted in 2015.

Alaska Range

Coventry Resources Inc. said new claims, covering roughly 11,040 acres, have been staked immediately adjacent to and along strike from the previous boundaries of the Caribou Dome copper project in the Valdez Creek District.

Sediment-hosted copper mineralization has been identified across the entire east-west strike of the previous 10,240-acre project area.

This includes delineation of nine outcropping pods of very high-grade copper mineralization over about 750 meters of strike.

The newly staked claims cover mapped extensions of highly prospective stratigraphy that hosts known mineralization and incorporates numerous historic copper (and other base and precious metal) occurrences, including the underexplored Aly's Peak prospect where large areas of moderate to strong propylitic alteration have been mapped during limited previous exploration.

Disseminated sulfides (pyrite, pyrrhotite +/- chalcopyrite) have been reported to be common, and locally reach one by two meters in size.

Analysis of very limited rock chip sampling yielded up to 1.36 percent copper and assays of massive epidote-garnet-copper sulfide-copper oxide skarn in float near the top of Aly's Peak yielded 1.08 percent copper.

Kiska Metals Corp. said it restructured net smelter returns royalty interests for its 100 percent-owned Whistler project pursuant to two royalty purchase agreements entered into Dec. 16. Highlights of the transactions dictate that net smelter return royalties totaling 3.5 percent on the core claims at Whistler will be cancelled, and replaced with one 2.75 percent NSR royalty over the entire property. Kiska will retain a buy-down provision to 2 percent for $5 million, issue 2 million warrants and receive net proceeds of $1.1 million for the royalty transactions.

Northern Alaska

Goldrich Mining Co. released a year-end summary of development and pre-production activities at its Chandalar gold project in the Brooks Range.

Goldrich NyacAU Placer LLC, a 50-50 joint-venture between the company and NyacAU LLC has invested more than $17 million in equipment and infrastructure to prepare for commercial-scale gold mining on the Little Squaw placer gold deposit.

Major accomplishments during 2014 included relocating the plant to a lower and broader part of the valley, building new water ponds, and expanding the plant.

A new grizzly feeder was mobilized and installed on site as well as support frames for additional gravel screens and gold recovery tables to be mounted this spring.

Full capacity of the feeder is expected to be about 600 bank cubic yards per hour and will be realized as additional gravel screens and gold recovery tables are added in stages through 2016.

Because of the substantial increase in plant capacity, the partners plan to transport seven additional 40-ton rock trucks over the winter trail, beginning in February, to the mine site, bringing their fleet to 13 trucks.

Goldrich also completed an airborne radiometric and magnetic survey in 2014.

Results of the airborne study demonstrate a broad northwest-trending belt of elevated potassium values with a centrally located, kilometer-scale feature where thorium values are elevated relative to potassium.

The potassium/thorium anomaly is closely associated with magnetic anomalies to form a circular kilometer-scale feature in the highlands above and adjacent to the Little Squaw placer gold deposit and is consistent with an intrusive body at depth.

Southeast Alaska

Hecla Mining Co. announced preliminary fourth-quarter production results from its Greens Creek mine on Admiralty Island. During the fourth quarter the mine produced 2.5 million oz of silver and 15,289 oz of gold, constituting 34 percent and four percent increases, respectively over production levels during the same period a year earlier. Annual production of about 7.8 million oz of silver exceeded the previous year's production by nearly 400,000 oz. The mill operated at an average rate of 2,236 tons per day during 2014.

Coeur Mining Inc. announced preliminary year-end production results from its Kensington mine. The mine outperformed its previously announced production target of 107,000-112,000 oz by producing 117,823 oz of gold. The mine produced 33,533 oz of gold in the fourth quarter, down from the 36,469 oz gold a year earlier. Kensington also processed 167,417 tons of ore in the fourth quarter at an average grade of 0.21 oz per ton. Average recovery was 94.2 percent. The mine is expected to produce 110,000-115,000 oz of gold in 2015. Coeur expects to release a new mine plan for Kensington in early 2015, which is expected to reflect higher-grade, higher-margin production over the life of the mine.

Ucore Rare Metals Inc. said it has contracted with Ausenco Engineering Canada Inc. to complete a feasibility study on its Bokan-Dotson Ridge project.

The feasibility study will make use of new studies completed after a preliminary feasibility study was published in early 2013.

These studies include results from bulk sampling and XRT tests.

The resultant upgraded material is being used for final laboratory testing and as feedstock to the pilot plant; engineering for recently completed permitting now being incorporated in the plan of operations for the proposed mine site; revised resource drilling exceeding 4,000 meters that will be incorporated into a resource model; continued testing of the metallurgical process flow sheet, and finalization of the rare earth oxide separation process.

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).

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• Contact Curt Freeman