The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Alaska mineral explorers work to retain their footing on slippery slope
Slipping metals prices and investors' ongoing reluctance to risk venture capital in the junior mining sector is hitting Alaska's mineral exploration sector hard; and the Far North state is not the only mining jurisdiction reeling from this one-two punch.
"After another year of strong headwinds in 2014, and with lower demand and overproduction continuing to depress metals prices, the mining industry's outlook for 2015 is unpromising at best," SNL Metals & Mining wrote recently in "World Exploration Trends," its annual report.
According to the research firm's estimates, global mineral exploration spending during 2014 totaled US$10.7 billion, about half of the US$20.5 billion in comparable expenditures tallied just two years earlier, and SNL does not foresee the sector recovering any time soon.
"Most metals prices are expected to fall further in 2015, albeit perhaps not by as much as over the past two years. As a result, SNL does not expect a rebound in the industry's total exploration budgets in the near-to-medium term," the research firm predicts.
Magnified by the Donlin Gold project transitioning from permitting to development and the lack of funding at the contentious Pebble project, the drop in Alaska's mineral exploration sector has been steeper than the global average. Since reaching an apex of US$365 million in 2011, exploration spending in the state fell to US$175 million by 2013 and last year tumbled another 47 percent to about US$92 million.
Though money still needs to be raised, exploration plans ironed out and budgets finalized, Alaska's mineral exploration sector is attempting to hold its footing in 2015 on the slippery downward slope of world exploration trends.
Major exploration
The owners of Alaska's five large mines accounted for nearly half the exploration spending in the state during 2014 and continued investments by these companies will be key to holding the sector steady this year.
Sumitomo Metal Mining Pogo LLC - a joint venture between Japanese firms Sumitomo Metal Mining Company (85 percent) and Sumitomo Corp. (15 percent) - accounted for US$17 million or about 20 percent of the exploration spending in Alaska during 2014.
The Japan-based owners of Pogo invested this money primarily on defining and expanding East Deep, North and South Pogo, three zones of high-grade gold mineralization adjacent to the current underground workings at their high-grade underground gold mine located some 60 miles east of Fairbanks.
Building on its recent success in finding zones of high-grade gold at Pogo, SMM Pogo has budgeted roughly US$15 million for a 2015 exploration program that includes roughly 168,000 feet (51,200 meters) of drilling.
"This funding shows the tremendous confidence that Sumitomo has in the Pogo deposit and our ability to find additional resources for many years to come," said Lorna Shaw, external affairs manager, SMM Pogo.
A roughly 140,000-foot (42,650 meters) surface drill program started earlier this month; the balance of drilling will be from underground stations.
The 82 surface and 19 underground holes planned will focus on near-mine targets and expansion of the South Pogo, North Zone, and north East Deep areas.
In Southeast Alaska, Hecla Mining Co. is planning to invest US$8.2 million in some 172,700 feet (52,600 meters) of drilling at its Greens Creek silver mine during 2015. Much of this work will focus on definition drilling at the Lower NWW, Deep 200 South, East Ore, Deep Southwest and 9a zones of the underground mine.
The company is particularly excited about the potential of Deep 200 South where drilling has recently cut 49.8 oz/ton silver, 0.08 oz/ton gold, 3.4 percent zinc and 1.6 percent lead over 11.1 feet (3.4 meters and 30.5 oz/ton silver, 0.05 oz/ton gold, 15.5 percent zinc and eight percent lead over 13.9 feet (4.2 meters).
Underground exploration drilling will test for extensions of this and a number of other zones at Greens Creek.
A 10,000-foot (3,000 meters) surface drilling program is planned to explore Killer Creek, a zone about a mile west-northwest of the mine where drilling has intersected broad mineralized zones up to 120 meters with stringer veins locally grading as high as 10 percent copper and 10.4 percent combined lead-zinc.
At US$9.1 million, Kensington accounted for a large percentage of the exploration funds allocated by Coeur Mining Inc. in 2014. This healthy portion of Coeur's exploration dollars doled to the Southeast Alaska gold mine is the result of a strategy that rewards exploration success with a boost in funds.
The company is particularly excited about the high-grade gold tapped at Jualin, a historic mine adjacent to Kensington. At the end of 2014, Coeur reported 289,000 tons of inferred resource at Jualin averaging 0.619 oz/t (179,000 ozs) gold. This is roughly double the average resource grade at Kensington.
While Coeur has cut its overall exploration budget in 2015, Kensington is expected to again get a healthy share of what is allotted.
"Our 2015 drilling efforts will keep the focus on expanding the size and quality of higher-grade zones at existing operations such as the Jualin deposit at Kensington and the Guadalupe/Independencia corridor at Palmarejo," said Coeur President and CEO Mitchell Krebs.
Kinross Gold (Fort Knox) and Teck Resources (Red Dog) also continue exploration at and around their respective mines.
Optimistic juniors
2015 is shaping up to be another tough year for junior mineral explorers in Alaska, and around the world.
"More than two years of investor caution has created an unenviable position for many junior explorers, forcing them to slash spending, renegotiate agreements, settle for unfavorable terms or leave the industry altogether. Although the amount of funding raised by the juniors is up slightly in 2014 as those with more promising projects are able to attract some funding, it is insufficient to reverse the trend towards further reductions in exploration spending by the sector," according to SNL.
Despite this dour outlook, a handful of junior explorers are expecting multi-million-dollar exploration programs on their Alaska projects this year.
This positive outlook is reflected in a letter Millrock Resources Inc. President and CEO Greg Beischer recently sent to shareholders.
"While we will not under-estimate the potential difficulties that the market will bring throughout the remainder of 2015, we head into the rest of the year with a spirit of optimism," he wrote.
Millrock anticipates roughly US$2.5 million of exploration in Alaska this year, including a US$2 million program funded by First Quantum Minerals to further exploration at the aptly named Alaska Peninsula project.
Millrock came by this 500,000-acre highly prospective land package on the Alaska Peninsula through an exploration and option-lease agreement signed with the Bristol Bay Native Corp. in 2012.
After funding a US$600,000 reconnaissance program in 2014, First Quantum entered into an option to earn up to an 80 percent joint venture interest in the property.
The 2014 program identified drill targets at three prospects - Mallard Duck Bay, Kawisgag and Bee Creek - and this year's program is expected to include at least 2,400 meters in drilling in six to eight holes.
Millrock is currently working with local Native village corporations to secure access and the company hopes to start drilling in June.
Constantine Metal Resources Ltd. is another company with plenty of reasons to be optimistic.
Earlier in March, this exploration company reported that Dowa Metals & Mining Co. Ltd. allocated US$5 million to continue exploration at Constantine's Palmer volcanogenic massive sulfide project in Southeast Alaska.
Dowa, which has an option to earn 49 percent in Palmer by investing US$22 million over four years, had spent roughly US$10 million at the project through the end of 2014, the second year of its earn-in agreement.
This year's drilling will focus on continued expansion of Palmer's South Wall zone, where one hole drilled last year cut the widest intersection of VMS mineralization encountered at the project to date.
This hole, CMR14-65, cut 89 meters grading 0.8 percent copper, 5.0 percent zinc, 21.1 grams per metric ton silver and 0.32 g/t gold. The center of this intersection is located roughly 50 meters east and 50 meters above where CMR14-54 cut 22.1 meters grading 2.48 percent copper, 4.05 percent zinc, 24 g/t silver and 0.39 g/t gold.
A resource update that incorporates the results from drilling completed in 2010, 2013 and 2014 is currently being calculated for Palmer.
Constantine President and CEO Garfield MacVeigh said, "2015 is poised to be a promising year for Constantine and the advancement of the Palmer project. With an updated resource estimate underway, and our thickest mineralized intersections open to expansion, the opportunity has never been more compelling."
At the opposite end of the state, NovaCopper Inc. plans to carry out an US$8- to US$10-million program at the Upper Kobuk Mineral Projects in 2015. This work, slated to begin by June, will focus primarily on infill drilling aimed at upgrading inferred resources at its Arctic VMS deposit to the measured and indicated categories.
In addition to roughly 4,400 meters of drilling needed to upgrade the resource, about 4,000 meters is necessary to gather the geotechnical, hydrological and metallurgical data needed to complete a feasibility study scheduled for completion as early as 2016.
NovaCopper, which ended its 2014 fiscal year (Nov. 30) with US$4.8 million in working capital, has enough funds to start this program but will need to raise additional capital to complete all of the drilling and other programs on the docket for 2015.
In August, First Quantum increased its exploration profile in Alaska by cutting another tentative deal on Kiska Metals Corp.'s Copper Joe property located roughly 110 miles (175 kilometers) northwest of Anchorage.
Situated roughly 20 miles (30 kilometers) southwest of both Kiska's Whistler and Millrock's Estelle projects, Copper Joe is in a region of Southcentral Alaska known for its copper-gold potential.
If the copper miner chooses to pursue an option at Copper Joe, it can earn an initial 51 percent interest by investing US$5 million in the project by 2017, a stake that would increase to 80 percent if Copper Joe was advanced to a production decision.
First Quantum has until the end of March to notify Kiska of its intentions regarding the option to enter a joint venture on the Copper Joe project.
New players
One of the more promising signs for mineral exploration in Alaska this year is that a number of new companies have cut deals on projects in recent months.
Among the most notable of these new arrivals is Royal Gold, which has inked a joint venture agreement with Contango Ore for the continued exploration of the Tetlin gold properties near the crossroads community of Tok in eastern Alaska.
Royal Gold has the opportunity to earn up to 40 percent interest in the JV by investing US$30 million in the Tetlin properties by October 2018 - an average seasonal investment of about US$7.5 million. To get the ball rolling in 2015, Royal Gold has agreed to invest an initial US$5 million in Peak Gold, a limited liability JV that holds the extensive package of Tetlin properties.
Royal Gold Vice President of Corporate Development Bill Heissenbuttel told shareholders that the Tetlin JV agreement is reminiscent of the company's original focus and pairs with the royalties the company purchased separately on the project.
Royal Gold lists near-surface mineralization, attractive grade, numerous undrilled targets and great accessibility among a list of unique attributes that attracted the royalty company to Tetlin.
Despite the continued shortage of exploration funds, Millrock Resources said it is collaborating with a major mining company to explore for high-grade gold deposits in Alaska.
"We plan to do a lot of field exams this summer, and are actively soliciting other claim holders that may wish to present their project for consideration by Millrock and its strategic collaboration partner. Additionally, we will likely carry out reconnaissance work on gold targets that Millrock has developed on open ground," Beishcher explained in a recent email to Mining News.
This early stage work will likely run about US$300,000.
While the name of its strategic partner is currently being withheld, Millrock said the gold miner is new to the state, further shrinking the field of candidates.
Other new exploration companies expanding into Alaska in 2015 include: Strongbow Exploration Inc., which is finalizing a deal on two tin projects in the state; and Sonoro Metals Corp., which has signed an option agreement to earn a 60 percent interest in Northern Empire Resources Corp.'s Hilltop Gold project located some 70 miles south of Fairbanks.
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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