Mine eyes next decade, beyond

Greens Creek Mine is preparing for the next stage of its long-running tenure as a low-cost primary silver producing mine in Southeast Alaska.

The underground mine, located on Admiralty Island about 18 miles southwest of Juneau, extracts ore from a volcanogenic massive sulphide deposit with an unusually high silver content. The mine produces silver, along with zinc, lead and gold as by-products.

Idaho-based Hecla Mining Co. owns the mine, which has operated for most of the quarter-century since its operations began in 1989.

Drilling efforts over the past 10 years have replaced production and added new reserves and resources. Exploration efforts are ongoing along the trend of numerous orebodies underground and aggressively exploring the highly prospective 27-square-mile land package on surface. Underground drilling efforts this year are looking to convert resources to reserves and define extensions to the 200 South, Southwest Bench and NNW. Surface drilling at Killer Creek may define a new mineralizing center at Greens Creek.

In 2014, Hecla carried out significant exploration that is expected to boost the mine's resource and reserves.

Hecla President and CEO Phillips S. Baker Jr. told industry analysts recently that Greens Creek continued its "solid, low-cost, consistent cash-generating performance" in 2014.

"At Greens Creek, we continue to deliver high-grade drill intersections that should add resources all along the Southwest bench, 200 South, and Deep 200 South Gallagher Fault Block trends, as shown in slide 25; and upgrade resources to reserves at the Northwest West, West Wall zones, Central West, and Deep 200 South trends. In the next quarter, we expect to complete more exploration and definition drilling in these areas, which should boost resources and reserves and continue to extend mine life," Baker said during a teleconference in November.

Deep 200 South had some of the widest and highest grade intercepts in recent history at the mine and include 48.0 oz/ton silver, 0.07 oz/ton gold, 6.6 percent zinc and 3.3 percent lead over 26.7 feet and 32.5 oz/ton silver, 0.46 oz/ton gold, 17.0 percent zinc and 7.3 percent lead over 35.0 feet. Similar southward trending mineralization remains open along the 5250 and Gallagher trends, and the Southwest Bench and Northwest-West zones are open to the southwest.

Greens Creek holds current proven and probable silver reserves of 92.5 million ounces, 713,000 ounces of proven and probable gold reserves, as well as 256,130 tons of lead and 677,940 tons of zinc in proven and probable reserves.

There are an additional 9.4 million ounces of silver measured and indicated resources and 31.8 million ounces of silver inferred resources. Measured and indicated gold resources measure 72,000 ounces and inferred gold resources measure 216,000 ounces.

To facilitate at least another decade of production at Greens Creek, Hecla is planning a $30 million expansion of the mine's tailings plant to be built in 2015 and 2016.

Luke Russell, Hecla's vice president of external and environmental affairs, said the company has secured the final permit needed for the two-year tailings facility expansion, which will cover 18 additional acres.

Perpetual water treatment

At Greens Creek, all mine water and water used in the milling process is treated in water treatment plants and then released into Hawk Inlet under strict specific discharge permit limits. The need for water treatment sometimes results when certain types of mineral deposits, such as massive sulphide deposits, are mined.

"We work hard to protect water quality and to conserve usage through efficient operations, engineering, and training" at Greens Creek, Hecla said on its website.

Federal and state agencies completed a review of the mine's reclamation and closure plan in 2014, and for the first time, added a requirement that Hecla provide financial security to ensure "perpetual" treatment of water discharged from the mine after it closes.

Hecla reported in recent regulatory filings that it updated its asset retirement obligation in early 2014 for Greens Creek to reflect to reflect the revised reclamation and closure plan. The company has estimated undiscounted costs of roughly $102.7 million for the plan, reflecting a $28.8 million increase from the $73.9 million cost estimate in the previous plan.

Hecla said the increase primarily resulted from the new requirement to include perpetual water treatment in the closure plan.

The new requirement resulted in an increase to Hecla's ARO asset and liability of $8.0 million, after discounting the estimated costs to present value.

In the third quarter of 2014, as part of the revised reclamation and closure plan, the company said it increased its bonding for the mine to roughly $68.9 million.

Sarah Samuelson, a spokesman for the U.S. Forest Service, said the requirement for perpetual water treatment at Greens Creek reflects an anticipated need to treat water discharged from the mine indefinitely.

"They won't have a lot of water to treat, but it must be treated forever," she added.

Hecla has a solid record of compliance with Alaska's water quality standards at Greens Creek, but the geochemical materials that will remain in the deposit when the mine closes will likely be very mobile when they come in contact with water, said Allan S. Nakanishi, supervisor for the Mining Section of the Division of Water at the Alaska Department of Environmental Conservation.

"If we cannot predict with confidence when water treatment will no longer be needed, we say, 'perpetual' or 100 years, which is the foreseeable future," said Kyle Moselle, large mine project manager in the Office of Project Management and Permitting at the Alaska Department of Natural Resources. With the new requirement in place, there is an expectation that water draining from the mine site will continue to be treated, and Alaska has financial assurance that this will occur going out 100 years, Moselle added.

Massive sulphide deposits

Greens Creek is one of only two mines in Alaska that produce metals from massive sulphide deposits; the Red Dog Mine is the other.

Nakanishi said a similar review of the reclamation and closure plan for Red Dog is currently underway, but it is still early in the process.

Ironically, naturally-occurring drainage into one of the main creeks affected by mining had no aquatic life before zinc and lead production began at Red Dog. After nearly 25 years of production at the Northwest Alaska mine, Nakanishi said Red Dog's owners have actually improved the water quality of the formerly "sterile" creek to the point where it is habitable for aquatic life; "fish and other wildlife are slowly moving upstream."