North of 60 Mining News - The mining newspaper for Alaska and Canada's North

With access granted and exploration permit in hand, Usibelli Coal Mine Inc. has started a drill program at its Wishbone Hill property 10 miles northeast of Palmer, Alaska.

The fourth-generation, family-owned company said the estimated 14 million tons of bituminous coal at Wishbone Hill can fill an important market need among electric utilities that are committed to generating cleaner power. The bituminous coal produces high-heat, yet is ultra-low in sulfur.

This summer's drill program will provide information needed to complete a feasibility study in hopes of beginning operations in the historic mining area as early as 2012.

If Alaska-based Usibelli decides to develop Wishbone Hill, some 500,000 tons a year of the cleaner-burning coal will likely be shipped to Japan via newly constructed loading facilities at Port MacKenzie on the west side of upper Cook Inlet directly across from Anchorage.

Wishbone Hill is expected to pump millions of dollars annually into the local and state economy.

According to a socioeconomic impact study completed by the Institute of Social and Economic Research, 93 potential employees at Wishbone Hill would average earnings between US$70,000 to US$90,000 per year. In addition to the US$7.8 million of annual personal income generated from the direct and indirect mining jobs created by the coal mine, the local borough is expected to collect about US$440,000 in property taxes and the State of Alaska is expected to receive US$1.25 million a year in royalty payments.

Borough leases access

In June, the Matanuska-Susitna Borough granted Usibelli Coal Mine a 25-year lease to 60 acres of land that provides a transportation link between the Wishbone Hill Mine and Alaska's road system.

Borough assembly members weighed economic opportunities that the mine could bring to the borough with concerns of local residents about possible negative environmental effects of coal mining and hauling from Wishbone Hill.

Some residents living near the potential mine site worry about the effects of coal mining on their property values and the environment.

"It is my judgment that we will look back, I will look back, at a future date and know that this was a good decision, for the jobs, the community, the company, for the betterment of this borough. I believe that to be the case. If I didn't believe it would be better, if I didn't believe that it could be done correctly, if I didn't believe that it could be done without affecting the environment, I wouldn't do it," Assemblyman Ron Arvin said.

The assembly added a half-dozen requirements to the lease based on concerns of area residents. These include paving the 0.6 mile, or 1 kilometer, section of road passing through borough land as soon as commercial hauling of coal begins; covering coal trucks to eliminate coal dust; cleaning truck tires before trucks enter the leased road; and purchasing US$1 million in pollution insurance.

The long-term lease on the key real estate paved the way for Usibelli to complete an exploration trail to the mine.

Feasibility begins

While Usibelli crews were working on building a road capable of transporting a drill rig across the newly acquired land, the Alaska Department of Natural Resources Division of Mining, Land and Water approved an exploration permit for Wishbone Hill.

Though the new authority allows up to 20 holes to be drilled at Wishbone Hill, Lorali Carter, the project's spokeswoman, told Mining News that Usibelli only plans to drill six to eight holes this summer.

Two holes will test areas where the company plans to build facilities on the property and the remaining holes will be used to assess coal quality. The information gained from drilling will be incorporated into a recently initiated feasibility study.

"We will get some updated environmental information, including coal quality tests," Carter said. "The exploration program is certainly a major piece of the feasibility study."

The feasibility study will be based on 6 million tons of coal reserves identified in Mine Areas 1 and 2. Usibelli plans to excavate 500,000 tons of coal annually for about 12 years from these two regions.

In addition to information gained from the drilling, the company will take a bulk sample of the coal to update the washing analysis.

"It's bituminous coal as opposed to sub-bituminous like we are mining in Healy, and so we can probably wash it to a product close to 12,000 Btu," Usibelli Vice President of Business Development Steve Denton told Mining News.

The feasibility study also will include analysis of transportation options, updates to project permits and gathering additional environmental information.

The environmental data collected this summer will supplement more than 20 years of baseline studies that have been conducted at Wishbone Hill.

Denton said Usibelli anticipates completing the feasibility study early in 2011 and depending on its results, could begin mining Wishbone Hill coal as early as 2012.

Ship-loading a success

J-Power, a Tokyo-based company that operates 67 power plants with a total output capacity of about 17,000 megawatts of electricity, is collaborating with Usibelli on the feasibility study and is expected to be the purchaser of coal mined at Wishbone Hill.

"J-Power has been identified as the most likely purchaser of the coal. They have expressed interest in purchasing all of the output from Wishbone Hill," Carter said. "They currently buy coal from Healy. So this coal would be in addition to what they already purchase."

As part of the feasibility study, the JP Azure, a super-Panamax ship, was loaded with Usibelli Coal at Port MacKenzie in May. Too large to transit the Panama Canal, the vessel, laden with 76,000 tons of coal loaded in Seward, successfully docked at the Matanuska-Susitna Borough-owned port where another 1,250 tons trucked down from Healy topped off its load. The massive freighter transported the coal from the upper Cook Inlet facility to J-Power's plants in Japan.

"This confirms every effort we've been making at Port MacKenzie -the economic studies, the investment, the prediction that if we built a rail to tidewater and a deep draft dock we would begin exporting bulk commodities," said outgoing Matanuska-Susitna Borough Manager John Duffy.

According to the Mat-Su Borough-commissioned ISER report, fees collected for shipping Wishbone Hill Coal via Port MacKenzie would total about US$818,440 per year.

The day before the big ship arrived, the State of Alaska set aside US$35 million for the Port MacKenzie Rail Extension, a rail line that would link the port to Alaska's existing rail system. Another US$750,000 was earmarked for completion of an expansion of the barge dock.

By linking the port to the rail system, the borough hopes it will be economically feasible to export Healy coal and other natural resources directly to global markets.

"The new Port MacKenzie Rail line will help make Alaska coal more competitive on the world market. Beyond that, the rail line will create up to 5,000 Alaska jobs in construction, mining, and support services," Duffy said.

In addition to moving Wishbone Hill coal through the port, Denton said the rail extension to MacKenzie could increase Usibelli's capacity to ship Healy coal to world markets.

The company shipped a record 803,572 metric tons of coal to buyers in Asia and Chile in 2009.

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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