Hailed as a landmark ruling, the U.S. Supreme Court voted 6-3 to uphold Coeur d'Alene Mines Corp.'s tailings disposal permit at the Kensington gold mine located about 45 miles, or 73 kilometers northwest of Juneau.

The June decision came in response to a challenge to a permit issued by the U.S. Army Corps of Engineers that allows Coeur d'Alene Mines' Alaska subsidiary, Coeur Alaska, to dispose of mine tailings into Lower Slate Lake.

The Southeast Alaska Conservation Council and other environmental groups fought the miner's plan for wet disposal of the tailings and sued the Corps, arguing that the permits were illegal.

The State of Alaska, Coeur Alaska and federal regulators countered that the tailings, properly classified as fill, met requirements of the 404 permit issued by the Corps.

The High Court decision ended four years of litigation and paved the way for the Idaho-based miner to complete tailings facilities at Kensington and begin producing gold.

"There is an extensive list of groups and individuals to thank for their efforts and continued support of Kensington. The company looks forward to getting back to accomplishing the main objective, which is to construct and operate a world-class gold mine that all stakeholders will be proud of," Coeur President and CEO Dennis Wheeler said.

Coeur gets green light

The U.S. Army Corps of Engineers Aug. 14 re-issued the long-disputed tailings permit to Coeur Alaska, and after some discussion of the validity of the permit, the EPA gave the project the green light a week later. Modifications to the permit extend its expiration to 2014, offsetting the four years it was tied up in litigation.

U.S. senators Mark Begich D-Alaska and Lisa Murkowski, R-Alaska, who quickly contacted the EPA Administrator Lisa Jackson when the agency questioned the validity of the permit, applauded the Corps' decision to grant the modified permit.

"I am pleased to hear that, after reviewing the facts and more than 8,500 public comments, the Army Corps of Engineers made the right decision," Begich said. "The Corps has extended the permit issued in 2005 to Coeur Alaska authorizing the company to construct a mine tailings storage facility in Lower Slate Lake at the Kensington gold mine in Southeast Alaska."

"This is a decision that's both good for the environment and Southeast's struggling economy," Murkowski said. "Kensington will provide hundreds of badly needed jobs and tax revenue, while having a minimal affect on the environment."

Nearly 300 workers will be needed to complete construction of the tailings facility, and once in production, the mine will employ about 200.

Construction begins

With the hard-earned permit in hand, Coeur immediately began mobilizing the equipment needed to finish the tailings facilities at Kensington.

Coeur d'Alene Mines Senior Vice President of North American Operations Leon Hardy said, "Once we got the Army Corps of Engineers go-ahead, within one week we had our contractors mobilized from Anchorage to build the tailings dam."

A joint venture between Alaska-based contractor AIC and Kake Tribal Corp., one of Alaska's 220 Native village corporations, has been awarded the civil and piping contract for the tailings facility. Electrical work for the project went to Juneau-based ALCAN Electrical & Engineering Inc.

"We are pleased to make this award to these highly skilled Alaska-based union contractors and look forward to bringing Kensington into production next year," said Kensington General Manager Tom Henderson.

Coeur has already spent about US$300 million developing Kensington, and it estimates remaining construction and mine-related capital costs to bring the mine into production will cost another US$70 million. The Idaho-based miner expects to finish construction of the tailings facility in time to begin production in the third quarter of 2010.

"We are on target for a July startup on the plant. We are projecting 40,000 ounces (gold) next year." Hardy said.

Kensington is expected to produce about 120,000 ounces of gold per year over a 12.5-year mine life, based on the 1.5 million ounces of proven and probable gold reserves in the Kensington Zone of the underground mine. Cash operating costs are projected to average US$475 per ounce.

Upgrading reserves

With the legal battle behind them, Coeur plans to add to the reserves at the Kensington Zone and explore other district targets on the property.

Coeur Senior Vice President of Exploration Don Birak said, "The exploration program (at Kensington) in 2008 was fairly small. We are planning on increasing this again in 2010 as we now have the green light to go forward and there are plenty of exploration targets we have on our books."

Most of the exploration at the Southeast Alaska mine over the past four years has concentrated on upgrading the resources and reserves at the Kensington Zone.

"Most of the inferred resource is on the edges and at depth. We have done a lot of drilling over the past three or four years to improve the estimate quality from inferred up to indicated and measured, and as we access the deposit on various levels we will convert more of that to higher confidence measured resource and proven reserve."

The exploration VP said the best mineralization at Kensington is where shear veins and extensional vein arrays are found together. The company will seek this combination as it explores other targets in the area.

The Kimberly Vein will be one of the first targets for the revitalized drill program in 2010. Kimberly is accessed alongside the main drift between the Jualin mill-site and the Kensington Zone. The company also plans to target Horrible and Elmira zones with underground drilling in 2010.

Main objective

The startup of Kensington in the latter-half of 2010 will mark the third mine Coeur has put into production in about two years. San Bartolomé, the world's largest silver mine, started operations in 2008. The Bolivian mine is expected to produce about 9 million ounces of silver in 2009. In March the Idaho-based miner is expecting to begin production at the Palmarejo silver mine in Mexico. The company also operates underground mines in southern Chile and Argentina and one surface mine in Nevada; and owns a non-operating interest in a mine in Australia.

"There is an extensive list of groups and individuals to thank for their efforts and continued support of Kensington. The company looks forward to getting back to accomplishing the main objective, which is to construct and operate a world-class gold mine that all stakeholders will be proud of," Wheeler said. "Kensington represents Coeur's third new mine in the past two years. This transformation to these large, long-life mines will continue to provide shareholders with further growth in production and cash flow."

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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