The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
At a projected 30,000 ounces a year by 2017, this northern operation is set to move the dial of placer gold production in Alaska
The Chandalar Mine in Alaska's Arctic is on track to begin commercial production this summer, a milestone that is expected to significantly move the dial of placer gold production in Alaska.
Goldrich Mining Co., which owns 50 percent of a venture to mine gold in the Chandalar district, provided a forecast of anticipated gold recoveries from the mine over the next five years that includes 16,500 ounces of the precious metal this summer.
Considering that the 300 or so placer mining operations across the 49th state collectively produced roughly 75,000 oz of gold in 2014, this mine will be a significant contributor to Alaska's alluvial aurum production in 2015 and the operation is slated for upgrades that will nearly double its output in the coming years.
Gold-rich deposit
Located on the southern slopes of the Brooks Range roughly 200 miles north of Fairbanks, the Chandalar property has long been known to host rich gold deposits. Since 1906, sporadic mining operations in the district have recovered roughly 85,000 oz of gold from placer and high-grade lode deposits.
Most of the placer mining in the district was carried out in areas where frozen overburden and gravels provided stability for underground mining.
In 2007, Goldrich set out to quantify the placer deposit for commercial production. An exploration program that included 107 holes of drilling outlined 10.5 million cubic yards of pay gravels in Little Squaw Creek averaging 0.025 oz/per cubic yard (258,000 oz) gold.
This US$300 million placer deposit, at US$1,160 per ounce gold, is divided into two distinctive zones. A narrow canyon section of upper Little Squaw Creek contains nearly 3.2 million cubic yards of material averaging more than 0.025 oz of gold per yard, or roughly 87,600 oz of gold. Where the creek valley widens into a fluvial fan lies another 7.3 million yards of pay material averaging about 0.024 oz of gold per yard, or about 170,750 oz of the precious metal.
Aside from being slightly higher grade, the canyon section has the advantages of not being permanently frozen and having less overburden material to strip off of a thick pay-streak.
The pay-zone in the canyon averages about 86.7 feet (26.4 meters) thick and lie under about 41 feet (12.5 meters) of overburden.
Following up on the deposit outlined by drilling, the company opened up a small pit at the mouth of the canyon for test mining in 2009. This trial run produced a total of 593.5 oz of gold.
The narrow canyon area provided little room to establish the size of ponds needed to settle sediments out of the production water before being used again, which was a limiting factor for the trial run.
Water circulated back to the production plant caused the spray jets to plug and increased the density of the water, decreasing the effectiveness of the gravity plant's recovery.
A second run in 2010 produced another 1,522 oz of gold and 259 oz of silver.
Enter Nyac
To further the development of Chandalar placers, Goldrich forged a partnership with NyacAU LLC in 2012. The resulting company, Goldrich NyacAU Placer LLC, is a 50-50 joint-venture to operate the Chandalar placer mines, with NyacAU acting as managing partner.
The agreement covers production from all placers on Goldrich's 22,850-acre Chandalar property including: Little Squaw Creek, Big Squaw Creek, Big Creek and Tobin Creek. The partnership also covers placer production from future properties within two miles of the Chandalar property or any creeks draining the claim block.
A private mining company owned by Anchorage-based physician and fourth generation Alaskan Dr. J. Michael James, Nyac offers the partnership more than two decades of placer mining experience and the financial wherewithal to potentially develop the largest placer gold operation in the United States.
In 2013, the U.S. Bureau of land management awarded Nyac Mining Co., a placer mining venture also owned by James, the "BLM Hardrock Mineral Small Operator Award" for the high standards it executes at its placer mine in Southwest Alaska.
BLM said the systematic approach Nyac takes to mining and reclamation is more typical of much larger companies.
"The sustainable manner in which Nyac operates helps it shine amongst its peers," said the land management bureau. "The company has perfected a reclamation process that ensures soils are stabilized and re-vegetation takes place as early as possible. Nyac employs a holistic water management and reclamation system that recycles its process water and recovers fine sediment for use in reclamation. The system ensures no unsettled waters leave the mine site, and results in high-quality reclamation of disturbed lands."
It was this attention to detail that prompted Goldrich to choose this Alaska-based company as a placer mining partner.
"After spending almost a year interviewing and evaluating various major placer miners, we believe the managers of NyacAU are the partners of choice for their production ability, attention to the environment, and sincere concern for community matters," Goldrich President and CEO Bill Schara said at the time of the deal.
Return on investment
NyacAU also is fronting all the capital needed to get a commercial operation going at Chandalar. Through the end of 2014, the company had invested roughly US$17.3 million into developing the operation and another US$5 million of capital expenditures have been budgeted for this year. Nyac is to be repaid this initial investment from the gold produced at the coming placer operation.
According to Goldrich's production projections, the return on Nyac's investment is coming soon. The company forecasts that the Chandalar Mine will produce 16,500 oz of placer gold in 2015, worth US$19.8 million at US$1,200/oz gold. With this year's production costs expected to average US$713/oz, this results in a pre-tax net profit of roughly US$8 million.
The JV expects production to rise and costs to fall as it expands operations over the next three years.
During the past two years, the partners have expanded the recovery plant, moved it to a lower and broader part of the valley; and built new water recycling ponds.
"Commercial production at Chandalar in 2015 is the culmination of three years of work by GNP," said Schara. "GNP completed initial construction and a successful test plant in 2012, acquired a significant mining permit for expanded operations in 2013, and relocated and expanded facilities in 2014. All this was accomplished during one of the most difficult periods in the industry over the past 30 years."
The expanded facility includes a new grizzly feeder with an expected capacity of about 600 cubic yards per hour, which will be realized as gravel screens and gold recovery tables are added in stages through 2016.
To keep up with the needs of the expanded operation, Goldrich NyacAU Placer is transporting seven 40-ton rock trucks to the northern Alaska placer gold mine in the next few weeks, increasing its fleet to 13 such vehicles.
As a result, alluvial gold recoveries are expected to jump to 23,000 oz in 2016; 30,000 oz in 2017; and reach 32,000 oz by 2018. As production rises, the costs are expected to decrease to about US$450 per oz.
At $1,200 gold, pre-tax net profits are anticipated to soar to US$13.2 million in 2016; US$21.5 million in 2017; peaking at roughly US$24 million by 2017. Every US$100 per oz swing in the gold price equates to about a US$3 million change in net profits once the operation reaches full capacity.
To be ready for the upcoming inaugural season of commercial mining of the Chandalar placers, stripping the overburden from gold-rich gravels is now underway.
Mining of pay gravel is expected to start in May and initial gold processing is planned for late June. Weather permitting, the plant is expected to run through mid-September.
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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