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By Sarah Hurst
Mining News Editor 

Alaska green fuel scheme more than hot air?

Gold mining company enters race to make low-grade coal economical, but financial hurdles are high for Silverado Gold Mines


Last updated 2/27/2005 at Noon

While KFx struggles to prove that its K-Fuel process can dry Alaska's sub-bituminous coal in an economical manner, another company wants to convert the coal into liquid fuel. Like KFx, Vancouver-based Silverado Gold Mines has a checkered history and is having trouble bringing its ambitious project to fruition.

Silverado has previously been involved in placer gold mining on its Nolan properties, north of the Arctic Circle. With little to show for that, the company is now enthusiastically promoting its "green fuel" process. Silverado would like to turn its mothballed Grant Gold Mill near Fairbanks into a demonstration plant, at a cost of $20 million.

Finding the money will not be easy, although Silverado has requested $10 million in appropriations this year from the U.S. Department of the Interior, according to CEO Garry Anselmo. "Iraq and Homeland Security take up all the budget," he told Mining News. "We were working with the federal government in D.C. for an appropriation before, and we failed with the Department of Energy - we were supposed to go in with a utility, but didn't know it at the time."

Silverado achieved gold sales of just $100,976 in the year ended November 2003, the company's 2004 annual report says. This amount was offset against the cost of exploration, so Silverado reported no revenues. It incurred exploration costs at Nolan of approximately $4.8 million in 2003 and spent around $1.1 million the previous year. Silverado's share price spiked briefly to a high of 76 cents in December 2002, but rapidly sank to just six cents in February 2005.

Low-rank coal-water fuels

The mastermind behind the green fuel process is Dr. Warrack Willson, a chemical engineer who tried to get the project off the ground with the University of Alaska Fairbanks, before joining Silverado as its vice president for fuel technology in 2000. "Garry is pretty flamboyant, I was a little hesitant," Willson said of Anselmo. "My first reaction was, holy smoke, here's another Danny de Vito. But I enjoy working with him; he can calm down the buffoonery in investors' meetings."

Anselmo has been accused in the media of exaggerating Silverado's achievements in news releases and paid advertorials. In a release Dec. 17, the company announced that it had developed "a technical breakthrough in the production and utilization of low-rank, coal-water fuels (LRCWFs). With these latest advances, LRCWF's combustion characteristics, through a more rapid ignition and more complete carbon burnout, more closely approximates a petroleum flame than one from coal. Since the advanced formulation truly enables the low-cost production of a clean petroleum substitute from coal, the company has filed for a trade mark. ... Watch for our fuel's new name."

The technical breakthrough is complicated to explain, Willson told Mining News, but "it has to do with how we let down the pressure in the system." However, potential customers will only get excited about the green fuel if Silverado can produce thousands of tons of it at bargain basement prices for them to test, Willson said. For that to happen, the demonstration plant must be built. "I feel very confident the technology is based in reality," Willson added.

"LRCWFs are non-hazardous, easily transportable liquid fuels that avoid all the stability problems of dust generation and spontaneous combustion associated with low-rank coals," Willson writes in a project summary. "LRCWF is produced by treating a slurry of pulverized low-rank coal at temperatures up to 300º C and the corresponding saturated steam pressure in water, hence the name hydrothermal treatment."

On the other hand, KFx "has remained totally focused on making a dry-bulk product, which is much more friable, easily broken, and hard to transport," Willson told Mining News.

"Placer Dome and Usibelli hired me to look into a number of coal-drying processes, but it just turns to dust.

I am very disappointed that the governor promoted KFx, to invite KFx and only KFx to participate in the Taiwan talks, and none of the shareholders.

I couldn't believe they would do something that blatant, it didn't make any sense.

You'd think they'd want to put forward many applicable technologies for the Taiwanese to have a look at.

It left a real bad taste in my mouth and I wondered what we did wrong to make everyone unhappy with us."

A 22-page complaint from 2003 about Silverado to the Securities and Exchange Commission from a maverick website called probably hasn't helped. The complainant says Silverado misled investors about its gold reserves and portrayed the green fuel as exclusive, proprietary technology when this was not the case. In response to an enquiry about the complaint from Mining News, an SEC spokesman said the commission could not comment publicly.


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