NANA – "Two worlds, one spirit"

The Red Dog Mine has been a gamechanger for the more than 14,000 Iñupiat shareholders of NANA Corp., the Alaska Native Claims Settlement Act (ANCSA) regional corporation that owns the world-class Red Dog deposits in Northwest Alaska that are the source of around 5 percent of the world's new zinc supply each year.

The revenues from shipping out more than 1 billion pounds of zinc annually, along with healthy portions of lead, silver and minor amounts of germanium, has served as a catalyst to grow the Iñupiat-owned company into a global enterprise that generated US $1.5 billion in gross revenues during 2017.

While NANA has grown into a multi-billion-dollar corporation over the roughly four decades since ANCSA was passed, the corporation remains deeply connected to its culture and the Northwest Alaska lands that its people have called home for more than 10,000 years.

This connection to tradition while fulfilling its corporate mission to improve the quality of life for its shareholders through success in the boardroom is guided by 17 traditional Iñupiat values known as Iñupiat Ilitqusiat.

Meaning "those things that make us who we are", this core philosophy was developed over thousands of years and articulated by the Iñupiat Elders of Northwest Alaska during the Spirit Movement of the 1980s.

Built on a foundation of five values related to culture, Iñupiat Ilitqusiat consists of four values related to family, three about how you work with other people, two are about balance in life.

"All of that really supports hard work, which is another value, and that allows us to be successful and share in that success – those are all parts of values of Iñupiat Ilitqusiat," NANA President and CEO Wayne Westlake told Mining News.

Adhering to these values allows NANA to keep one foot firmly planted in tradition and helps to guide its success as a global corporation.

NANA's motto – Two Worlds, One Spirit – reflects this equilibrium between remembering the Iñupiat values that make its shareholders who they are and using those values to guide decisions made in the boardroom.

"It is really the ability to balance, that is the key to 'Two Worlds, One Spirit'– not to separate but to embrace them both," he said.

Understanding and respecting that the core values of its people is considered in all executive decision is crucial for any company hoping to explore and potentially develop the vast resource wealth the NANA region of Northwest Alaska has to offer.

"One of the key things when it comes to partnerships with NANA is the embracing the Iñupiat Ilitqusiat, those values and be willing to understand that and work with us to ensure we don't lose that, but we also create economic benefit," Westlake said.

Red Dog: confrontation to cooperation

While NANA has grown into a diversified and global enterprise, this success is rooted in mining, thanks largely to the success of Red Dog.

"We are into mining," Westlake said. "In other words, when people think about mining in Alaska, you can't help but to not think of NANA."

This, however, was not the case when ANCSA was passed by the U.S. Congress in 1971, leading to the creation of NANA and 11 other landholding Alaska Native regional corporations.

"Looking back from the perspective of 25 years, it is amazing to me, even now, that Red Dog was developed at all," former NANA President and CEO Marie Greene said during the 25th anniversary of the mine in 2014. "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."

These complications arose as a product of uncertain land ownership following the passage of ANCSA, a landmark federal bill that provided initial funding to help start the 12 ANCSA regional corporations and allowed each to select lands within their respective regions.

Because one of the richest deposits of zinc in the world was being explored under the 24.3 million-acre section of Northwest Alaska that became the NANA region, the newly formed Alaska Native corporation faced tough boardroom decisions early on.

Provided with $43 million in cash and the ability to select roughly 2 million acres within its region to form the foundation for NANA, the Northwest Alaska Iñupiat corporation soon found itself vying with Cominco Ltd. – which would later merge with Teck to form the company that now operates Red Dog – along with the state and federal governments for the same piece of real estate.

In 1974, NANA chose lands covering what would later become Red Dog Mine as a portion of the lands it had coming under ANCSA.

In 1979 and 1980, Cominco blanketed these same lands, which was still under federal control, 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.

Despite there being additional mining company suitors interested in the deposit, this engagement resulted in a unique development and lease agreement forged for Red Dog, which paved the way for NANA to gain ownership of the lands hosting the fantastically high-grade zinc deposit and for Teck to develop and operate the globally significant mine.

NANA's desire to participate in two worlds was enshrined in the mandates of this agreement:

• Protect subsistence and the Iñupiaq way of life;

• Create lasting jobs for NANA shareholders;

• Provide opportunities for NANA's youth; and

• Act as a catalyst for regional economic benefits.

Cominco's willingness to respect the values of the people in the NANA region and find areas of mutual interests formed the foundation of what is now one of the strongest and most successful indigenous people-mining company partnerships in the world.

"There is a relationship and partnership of cooperation," Westlake said of NANA's relationship with Teck.

It also provides an early example of a mining company willing to build a partnership with a corporation that puts as much stock in its culture, people and traditional uses of the land as it does in economic success from extracting the rich resources under those lands.

"We want to mine but there are certain things in our life that we don't want to lose," Westlake said.

Economic generator

In the 30 years since Red Dog went into production, the zinc mine has proven to be a significant cornerstone of NANA's business and an economic generator in its remote region of Northwest Alaska.

Under the agreement with Teck, NANA receives a net proceeds royalty from the Red Dog operation. This started off at 2 percent and upon Teck paying off its initial investment and operation costs in 2007 was bumped to 25 percent.

Under the agreement, this net proceed royalty increases by 5 percent every five years, up to a maximum of 50 percent. In 2017, NANA's royalty from the net profits at Red Dog was bumped to 35 percent and will increase again to 40 percent in 2022.

When you count both direct workers and contractors, the Red Dog Mine accounted for 1,338 jobs in 2018, of which 55 percent where filled by NANA shareholders.

"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.

These economic benefits go beyond royalties and wages.

Red Dog is currently the only "taxpayer" to the Northwest Arctic Borough, a municipality that blankets the same 40,750 square miles of Northwest Alaska as the NANA region.

The mine actually makes payments in lieu of taxes (PILT) to the borough each year.

Over the years, these PILT payments have supported government services to the region's residents, including bonding for schools, programs, services and other necessary infrastructure.

The structure of these payments was renegotiated in 2017.

Under the terms of the agreement, Red Dog is flowing roughly US$20 million to US$26 million into the borough each year. Approximately US$14 million to US$18 million of these annual funds are being paid directly to the Northwest Arctic Borough, a payment calculated on a percentage of Red Dog's fixed asset value.

The balance of the yearly payments are put into a village improvement fund established under the new PILT agreement. Administered by the borough, with input from the 11 villages it encompasses, this fund is earmarked for community programs, services and infrastructure.

Red Dog put an initial US$11 million in this fund in 2017 and will make annual payments into it based on the zinc mine's gross profit, calculated to be between US$4 million to US$8 million a year.

Through 2018, the Red Dog operation had paid $235 million in PILT payments to the Northwest Arctic Borough.

"Red Dog really brings an economy into the region and part of that economy comes with the payment in lieu of taxes," said Westlake.

7(i) sharing benefits all Alaska

The economic benefits from Red Dog flow to every corner of Alaska, thanks in large part to ANCSA Section 7(i), which requires regional corporations to distribute 70 percent of net revenues from resource development on ANCSA lands among all 12 regional corporations. In turn, Section 7(j) requires that half of the Section 7(i) payments to be distributed to the respective village corporations within each of the ANCSA regions.

The "leveling effect" of 7(i) and 7(j) creates economic activity that otherwise would not occur in recipient regions and provides village corporations with vital funding.

When it comes to 7(i) proceeds from mining, NANA has been by far the largest contributor.

Of the approximately $2 billion in proceeds NANA received from Red Dog through 2018, the Northwest Alaska Native corporation paid roughly $1.2 billion in 7(i) payments to the other ANCSA corporations.

"That means we have a significant impact on the rest of the state and the other Alaska Native communities," NANA Vice President of External Affairs and Acting Vice President of Lands Liz Cravalho informed Alaska lawmakers in 2018.

While these provisions were primarily put into ANCSA as a way to bring balance to all the regional and village corporations by sharing the resource successes, they also fit well within the Iñupiat Ilitqusiat values.

Westlake told Mining News that he is proud of the work NANA companies and shareholders have put into the success of Red Dog, which has allowed NANA to share its success across Alaska through 7(i) distributions.

After 7(i) distributions, NANA has netted $750 million of the royalties it has received so far from Red Dog.

Expanding NANA's mining business

With Red Dog going strong and new mining projects advancing in the Ambler Mining District, it looks like NANA will be able to continue to share in its mining success for decades to come.

Red Dog currently has enough high-grade zinc ore in reserves to keep the operation going until 2031 and additional zinc deposits both on adjacent state lands indicate that this world-class mine will continue to be a globally significant supplier of this important base metal much deeper into the 21st Century.

In recent years, NANA has been actively expanding its mining business. This initiative includes forging a partnership with Trilogy Metals Inc. to explore and develop the copper-rich deposits in the Ambler Mining District in the eastern part of the NANA region and launching an independent campaign to explore the gold-rich Fairhaven Mining District in the southern areas of its territory.

"Mineral projects are part of NANA's strategy for responsible in-region resource development to provide a sustainable economic base for NANA, the region and shareholders for generations to come," said NANA Vice President of Natural Resources Lance Miller.

The exploration work being carried out by NANA is not restricted to lands it owns but extends to public lands in the region.

This includes exploration in the Fairhaven Mining District, an area that is estimated to have produced more than 600,000 ounces of gold since the turn of the 20th century.

Under the direction of Miller, this work has focused on a roughly 70-mile-long structural zone known as the Kugruk Mega Shear.

Most of this placer gold produced in the district has been mined from Candle Creek, which drains off the east side of this Kugruk Mega Shear. Extensive ground cover in the region, however, has hidden the bedrock source of this alluvial gold.

NANA geologists, led by Miller, have narrowed down the potential lode source with regional exploration including mapping, hydro-geochemistry and systematic grid soil sampling.

This targeting led to drilling on NANA's Kuulu property, a block of state mining claims immediately west and upland of Candle Creek.

The best hole cut 5.8 feet (1.77 meters) averaging 20.5 grams per metric ton gold, 92 g/t silver, 1.79 percent zinc and 2.63 percent lead; including a 0.6-foot interval of 175 g/t gold and 470 g/t silver.

In 2018, geologists working on an exploration program for NANA collected quartz-sulfide vein samples of up to 21.6 grams per metric ton gold in muscovite-biotite schist at Motherwood Point, which is where Kugruk Mega Shear emerges on the northern shore of the Seward Peninsula, some 20 miles north of the high-grade intercept at Kuulu.

"The Kugruk Mega Shear, located in the Fairhaven District on the northern Seward Peninsula, has produced results of new gold mineralization, and confirmed extensive gold and base metal mineralization," said Miller.

In addition to searching for metals, NANA's natural resources department ensures there are gravel resources available for economic development and are working to advance exploration for natural gas, which could result in energy independence for the NANA region.

Bringing benefits to NANA's Ambler District

In 2011, NANA and Trilogy Metals formed the Upper Kobuk Mineral Projects (UKMP), a partnership that brings together Bornite and a number of other copper-rich prospects on NANA-owned lands with the world-class Arctic deposit and dozens of similar volcanogenic massive sulfide prospects located on Trilogy's state, federal and patented mining claims in the Ambler Mining District.

"An agreement like this can potentially lead to long-term economic benefits to the region," Westlake said.

Located a mere 16 miles apart, Arctic and Bornite are each considered world-class copper assets that would have long since been developed if not for their remote location, some 200 miles off the beaten path in Northwest Alaska.

Together, Arctic and Bornite host roughly 8.9 billion pounds of copper, 3.6 billion lb of zinc, 626 million lb of lead, 77 million lb of cobalt, 770,000 ounces of gold and 58.3 million oz of silver. And, the copper and cobalt contingents are expected to grow significantly when expansion areas of the Bornite project are brought into the resource.

Advancing these deposits in tandem will improve the economics of both.

Arctic, the most advanced of the UKMP projects, hosts 43.04 million metric tons of probable reserves averaging 2.32 percent copper, 3.24 percent zinc, 0.57 percent lead, 0.49 grams per metric ton gold and 36 g/t silver.

A prefeasibility study published in 2018 details plans for an open-pit mine at Arctic and a 10,000-metric-ton-per-day mill to produce metals-rich concentrates to deliver to markets.

An $18.2 million exploration program being funded by South32 Ltd., an Australian major with an option to earn a 50 percent interest in UKMP, will focus primarily on expanding the copper- and cobalt-rich Bornite deposit on NANA lands but includes funds to investigate the VMS targets along the 75-mile-long Ambler Belt.

According to a 2016 calculation, the open-pit deposit at Bornite contains 40.5 million metric tons of indicated resource averaging 1.02 percent (913 million pounds) copper; and 84.1 million metric tons of inferred resources averaging 0.95 percent (1.77 million lb) copper.

The underground portion hosts 57.8 million metric tons of inferred resource averaging 2.89 percent (3.68 billion lb) copper.

The deposit also hosts 182.4 million metric tons of inferred resource averaging 0.019 percent (77 million lb) cobalt, according to a resource calculated for the battery metal in mid-2018.

This already world-class copper-cobalt deposit is expected to be bigger with a new resource due out in the coming weeks.

Tuuq Drilling, a NANA-owned company, is carrying out the drilling at UKMP.

Westlake is particularly pleased that 100 percent of the Tuuq crew that carried out the drilling at UKMP in 2018 were NANA shareholders.

"That is something to be proud of from a training, development, growth and experience aspect," he said.

That is on top of NANA shareholders filling 70 percent of the positions offered by Trilogy during 2018.

"It is an important project for the people in our communities up there who otherwise would not have any employment at all," Westlake said.

"It is seasonal work, they are happy with that, they are able to get some income to help them make it through the winter," he added.

This ability to work in the summer and have the winter to spend with family, hunt, trap and participate in other community activities is a reflection of the corporation that they are shareholders of – living in two worlds with one spirit.

EDITOR'S NOTE: NANA Corp. – "Two worlds, one spirit" is the second article in a 13-part series that investigates what the Alaska Native Claims Settlement Act means for Alaska's mining sector and its future. The remaining 11 articles will dig deeper into each of the land-holding Regional corporations and the Village corporations within them; the mining lands that they own; and the services they offer to the mining sector. As a life-long Alaskan that has written about mining here for more than a decade, it is my hope that this series will provide a better understanding of ANCSA and serve as a guide to mining companies seeking to do business in The Last Frontier. For further information on ANCSA see An Alaska Native claims primer for miners published in the February edition of North of 60 Mining News.

Author Bio

Shane Lasley, Publisher

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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