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

The Alaska Industrial Development and Export Authority is asking state lawmakers whether it should move ahead with the Ambler Mining District Industrial Access Road, a proposed 200-mile transportation corridor that would link the Ambler Mining District in Northwest Alaska, with the Dalton Highway to the east.

This question comes under the auspice of Administrative Order No. 271, a temporary suspension of all "mega-projects" being funded by the state, signed by Gov. Bill Walker in December.

"On Dec. 26, I took immediate action. I issued an administrative order directing that all 'mega-projects' stand down until we can assess their overall costs and benefits to the state," Walker explained during his State of the State address in January.

AIDEA estimates that the state would need to provide an additional US$6.8 million to complete an Environmental Impact Statement for the Ambler Road. Though the authority does not need any of these funds to be appropriated in the current budget, it is providing state lawmakers with future funding requirements if an EIS is initiated.

"We were prepared to file the EIS permit application, but pulled back in response to Administrative Order No. 271. We are now basically in a holding pattern pending further direction from the governor and the Legislature," AIDEA external affairs executive Karsten Rodvik told Mining News Feb. 11.

The question on how to proceed with the Ambler Road project comes at a time when Alaska lawmakers are wrangling with how to reconcile a sharp state budget deficit during a period when oil is only fetching US$50 per barrel.

AIDEA, however, reminds lawmakers that a relatively modest investment to get the project to a permit decision could pay exponentially larger returns in the form of jobs, taxes, royalties and dividends.

Little upside to quitting

In a response to Gov. Walker's request, AIDEA has laid out what Alaska has to gain or lose based on how state policymakers decide to proceed with the Ambler Road.

The options put before lawmakers are to move ahead with the EIS, put the application on hold, or cancel it altogether - AIDEA, however, concludes that the ultimate outcome of delaying or cancelling the permitting is essentially the same.

So far, the state has approved US$26.25 million in funding for the Ambler road. Not all of these funds have been spent and AIDEA estimates that roughly US$8.2 million could be put back in the kitty if lawmakers chose not to move ahead with the EIS process. This re-appropriation of funds, however, is the only upside the authority could find to not advancing the Ambler Road into the permitting process.

AIDEA said cancelling the process would result in the roughly US$18 million that the state has already invested in environmental, engineering and other studies being for naught.

AIDEA, which signed a memorandum of understanding with NovaCopper Resources Inc. regarding permitting the road, is also concerned that the uncertainty created by a sudden end of the project would damage the authority's reputation in the eyes of future companies that may otherwise want to partner on big budget projects in the state.

Paying dividends

AIDEA contends that a US$6.8 million investment to complete the Ambler EIS process could pay big dividends for the state.

While described as an Alaska mega-project, the some US$250 million needed to build the road would not come out of the state budget. Instead, AIDEA would leverage its Standard and Poor's AA+ credit rating to obtain long-term, low-interest bonds to finance the road, which would be repaid by tolls or fees charged to users of the thoroughfare.

A similar arrangement for the Delong Mountain Transportation System, a road and port facility linking the Red Dog zinc-lead mine to world markets, has proven to be successful.

Like Red Dog, a number of mining prospects in the Ambler Mining District would likely be economically feasible to develop if they had some sort of surface transportation.

Over the past decade NovaCopper has invested roughly US$55 million on advancing copper-rich deposits in the Ambler district, including work completed by its predecessor Novagold Resources. This work has primarily focused on the exploration of Arctic and Bornite, two deposits rich in copper.

Arctic, for which the economics of building a road to Ambler would be weighed against, is the most advanced of these projects.

A preliminary economic assessment completed for Arctic in 2013 outlines a mine that would produce 125 million pounds of copper, 152 million lbs. of zinc and 24 million lbs. of lead, along with 2.5 million oz of silver and 29,000 oz of gold annually over a 12-year mine life.

Such a mine is estimated to pay more than US$300 million in taxes and royalties to the state.

NovaCopper is currently initiating a feasibility study on developing a mine at Arctic, a final step before determining whether to move ahead with developing a mine at the metal-rich deposit.

While the economics of building the Ambler Road would be weighed against the mining of Arctic, development of the other projects near the proposed road's terminus could continue to yield dividends to AIDEA after the initial capital was paid back. In turn, this would mean another source of future cash for state coffers.

AIDEA pays up to 50 percent of its revolving fund net income into Alaska's general fund. Including the US$17.65 million dividend for 2014, AIDEA has paid US$373.5 million to the state.

More jobs

While paying dividends to Alaska and its citizens is a testament to AIDEA's financial savvy, the development authority has a higher standard for measuring its success - an AIDEA-supported project must contribute to economic growth and have the support of the local communities.

The Ambler Road itself would require an estimated 490 jobs per year during its four-year construction period and 50 full-time jobs for maintenance thereafter. At the same time, some 1,300 workers would be needed to develop the Arctic Mine and a workforce of up to 1,000 people would be needed to operate the mine.

Many of these jobs are expected to be filled by shareholders of NANA Corp., the Alaska Native regional corporation that represents the Iñupiat of Northwest Alaska where the Arctic deposit is located.

NovaCopper, which signed an agreement with NANA to explore and potentially develop deposits on Native-owned lands adjacent to the Ambler mining district, has established a record of local hire.

To date, roughly 55 percent of the work force on its Ambler projects has been NANA shareholders. Since 2011, NovaCopper has paid US$1.4 million in wages to residents of villages in the Upper Kobuk region where the Arctic and Bornite deposits are located.

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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