Alaska is a great place to do business
Global mining companies agree with appraisal of Last Frontier Mining Explorers 2019 – Published Nov. 1, 2019
Last updated 8/14/2020 at 9:41am
When it comes to mineral exploration incentives, currency exchange and infrastructure, Alaska is at a disadvantage in the realm of attracting exploration investments from Canada and Australia, countries that are home to the majority of mining companies. The Far North State's vast and underexplored mineral potential, however, trumps these handicaps in the minds of a growing number of miners and mineral explorers.
Mining executives from around the globe perennially rank Alaska among the richest mineral provinces on Earth in the Fraser Institute Survey of Mining Companies, including third in the most recent survey.
"You guys are seriously blessed by Mother Nature here – the geology of Alaska is fantastic!" Northern Star Resources Ltd. Executive Chairman Bill Beament said during a recent visit to Alaska.
With Northern Star leading the charge, more than US$170 million is being invested into exploring this fantastic geology during 2019.
For Beament, whose company accounts for roughly 20 percent of this mineral exploration spending, Alaska possesses more than great rocks.
"Alaska is a great place to do business," he said.
Massive potential, less competition
In some ways, the incentives and unfavorable currency exchanges that encourage Australian and Canadian exploration companies to invest domestically are beginning to work to Alaska's advantage.
This is because the intrinsic value for Australian and Canadian exploration companies to explore domestically has created a crowded field, making quality mineral assets on home turf hard to come by and expensive to acquire.
Instead of paying a premium for assets in the countries where their corporations are headquartered, many Australian and Canadian mining companies are looking at the rich, underexplored and easy to acquire mineral properties Alaska has to offer.
In addition to Perth-based Northern Star, at least six Australia-based companies – South32 Ltd., Sandfire Resources NL, PolarX Ltd., White Rock Resources Ltd., Nova Resources Ltd., Northern Cobalt Ltd. and Jurassic Mining Ltd. – are actively exploring or acquiring mineral properties in Alaska during 2019.
The same crowding that is causing Australian companies to look north is causing Canadian mineral explorers to move west to Alaska, despite the tantalizing financial incentives domestic exploration has to offer.
With one Canadian dollar only fetching US76 cents, however, it is expensive for these companies to invest on the Alaska side of the border.
Flow-through financing is another Canadian edge that causes exploration companies to think twice before jumping across the border into America's northernmost state.
Under the Canada's Income Tax Act, flow-through financings allow exploration companies to transfer exploration expenses to individual investors that purchase flow-through shares. These investors, in turn, can apply their portion of the exploration expense to reduce or eliminate personal tax liabilities.
The catch for Canadian junior's considering Alaska as an option is that flow-through dollars raised must be invested in exploration in Canada.
This has fostered high competition for mineral properties in Canada, which is one reason so many Australian companies are looking at Alaska.
"I think locally in Canada there's already a lot of Canadians exploring at home, which reduces the number of opportunities available for foreign explorers to enter. When you look over the Canadian border into Alaska, you see the same rocks but far fewer companies exploring them," PolarX Executive Director Jason Berton told Mining News. "There's nothing really different about the geology but on one side of the border there's plenty of mining development and on the other very little. That's the scenario I look for, massive mineral prospectivity but less competition."
Crossing the Border Fault
Despite the financial edge exploring in Canada offers, British Columbia-based Tectonic Metals Inc. agrees that Alaska has numerous other advantages that more than offset the otherwise higher costs of doing business there.
And, considering Tectonic is founded by former executives of Kaminak Gold Corp., a gold exploration junior that had outstanding success at the Coffee Gold Mine project in the Yukon, the new junior exploration company has seen both sides of the coin.
Tony Reda, former vice president of corporate development of Kaminak is the president and CEO of Tectonic Metals. He is joined by Eira Thomas and Rob Carpenter, both former president and CEOs of Kaminak.
Though these former Kaminak executives hold Yukon and its vast untapped gold potential in high regard, and Tectonic owns properties in the territory, they have decided to focus their exploration prowess on eastern Alaska, an area less than 70 miles west of Coffee Gold but with large swaths of land wide open for acquisition and staking.
"For guys like us, looking for district-scale deposits, it was pretty crowded to get into the Yukon," Reda said.
The overcrowding in the Yukon compared to relative quiet in eastern Alaska has given rise to a tongue-in-cheek theory that there must be a major fault separating the mineral rich lands in western Yukon from barren lands west of the border.
This apparent "Border Fault," however, is not a major geological structure. Instead, it represents a socioeconomic divide between one of the top mining nations on the planet and a country that has done less to nurture its mining sector.
"Alaska has always intrigued us, and that political border is by no means a geological border," Reda told Mining News.
The region of eastern Alaska where Tectonic has optioned three large properties – Northway, Seventymile and Tibbs – is being validated by the global players exploring there.
This includes two of the world's largest mining companies – Freeport-McMoRan and Rio Tinto – quietly grabbing interests in copper-gold projects in the region.
Freeport-McMoRan has entered an agreement to option Tanacross – a porphyry copper-gold project that lies right against the Yukon border about 50 miles northeast of Tok, Alaska – from Kenorland Minerals, a privately held project generating explorer.
Tanacross shares many similarities to Western Copper and Gold's Casino in the Yukon. Located about 100 miles Southeast of Tanacross, Casino hosts 1.12 billion metric tons of reserves containing 4.5 billion pounds of copper and 8.9 million ounces of gold.
Prior to Freeport-McMoRan's involvement, shallow drilling had outlined 68.3 million metric tons of inferred resource at Taurus, one of the deposits at Tanacross, averaging 0.28 percent copper, 0.03 percent molybdenum and 0.17 g/t gold.
While Freeport is keeping its exploration program and results close to the vest, the company has been busy at the property over the 2018 and 2019 seasons.
At the same time, Kennecott Exploration, the exploration arm of Rio Tinto, is exploring the Oreo Mountain copper project about 10 miles southwest of the Tanacross property.
Kennecott optioned Oreo Mountain from Tubutulik Mining Company during 2018 and has drills turning on the property this year.
David Hedderly-Smith, owner of Tubutulik Mining, said Oreo Mountain shows the potential to host a Casino-sized deposit only about 20 miles north of the Alaska Highway.
"They are there because Oreo Mountain has the potential to host a significantly large copper-molybdenum-silver-gold porphyry system and is very close to Alaska's road system," Hedderly-Smith told Mining News.
When you add in Peak Gold, where Royal Gold Inc. and Contango ORE Inc. have outlined 9.2 million metric tons of measured and indicated resources averaging 4.08 g/t (1.21 million ounces) gold and 14.19 g/t (4.2 million oz) silver in two adjacent skarn deposits, this eastern Alaska section of the Tintina Gold Belt has been validated in terms of mineral potential.
While Alaska's vast and largely untapped mineral wealth is celebrated, the Far North state has lessor known and not as widely understood advantage over many other mining jurisdictions – an Aboriginal land claims settlement that many consider to be the most successful on Earth.
Signed into law by U.S. President Richard Nixon in 1971, the Alaska Native Claims Settlement Act (ANCSA) organized Alaska Natives into 12 regional corporations, with each of these corporations having its own geographical regions based largely on heritage and shared interests.
Over the past 48 years, these ANCSA regional and associated village corporations have grown to business titans that hold 17 of the top 20 Alaska-owned businesses listed on the Top 49ers, an annual list published by the Alaska Business magazine that ranks Alaska-owned businesses by gross revenue.
As provision of ANCSA, Alaska Native regional and village corporations were able to select roughly 45 million acres of lands across the state, making them major landholders with some of the prime mineral real estate across the Last Frontier.
Red Dog, which accounts for roughly 5 percent of the global zinc mine production, for example, is located on lands owned by NANA Regional Corp., the regional Alaska Native corporation for Northwest Arctic.
Donlin Gold, a 39-million-ounce gold mine project situated on lands owned by Calista Corp. and The Kuskokwim Corp., is another example of the rich mineral tenures ANCSA corporations identified and selected for ownership.
ANCSA corporation ownership of lands was among the deciding factors for Tectonic Metals when it chose Alaska as a jurisdiction to build a world-class gold exploration company.
"We saw an opportunity to work with the Native corporations in Alaska," Reda told Mining News.
Two of Tectonic's gold properties – Seventymile and Northway – are optioned from Doyon Ltd., an ANCSA Regional corporation that also happens to be the largest private landowner in Alaska.
While both properties show the potential for large gold deposits, neither has been explored in nearly two decades.
And Northway has the Alaska Highway running through its entire length.
Reda says he cannot think of anywhere else on the planet where an exploration company could find such a promising gold property along a paved highway and have such a great working agreement with the original peoples in the short time that Tectonic has been working in Alaska.
"We are going into a jurisdiction where the rocks are the same (as Coffee Gold) and we have a highway trucking right through our property – an actual highway!" the Tectonic Metals CEO told Mining News.
More information on ANCSA, as it relates to mining, can be found in An Alaska Native claims primer for miners in the February 2019 edition of North of 60 Mining News.
Beyond the beaten path
While Northway and many other mineral projects in eastern and southern Alaska are on or near roads, much of Alaska's vast expanse is well beyond the beaten path.
Lying west of the highway linking Anchorage and Fairbanks, and the road continuing from Fairbanks to the oil-rich North Slope, is a roadless and mineral-rich expanse about twice the size of California.
This lack of infrastructure, which makes it costly to explore and even more expensive to establish a mine across large swaths of Alaska, is not lost on mining executives.
In the most recent Fraser Institute mining survey, these leaders ranked Alaska a paltry 62nd when it comes to quality of infrastructure.
While the costs associated to exploring for and developing mines in remote regions of the Far North State presents challenges, the Alaska Industrial Development and Export Authority (AIDEA) is helping mining companies bridge the gap between tremendously rich but isolated deposits and a world that needs the metals these projects have to offer.
Red Dog, for example, is extremely remote and far north, yet it is the single top supplier of mined zinc to global markets. There are two reasons for Red Dog's success – AIDEA helped fund the road and port that delivers zinc-, lead- and silver-laden concentrates to world markets; and the ore mined at this Northwest Alaska operation over the past three decades has averaged more than 15 percent zinc, which is more than rich enough to pay for infrastructure and the rigors of mining in the arctic.
Delong Mountain Transportation System (DMTS), the 52-mile road and port facilities linking Red Dog to world markets, is the most successful AIDEA- funded project to date and a model for future partnerships with companies looking to develop mines off Alaska's beaten path.
For Teck Resources Ltd., operator of Red Dog, AIDEA's US$267 million investment in building, upgrading and maintaining DTMS helped reduce the upfront capital needed to get the mine into production in 1989.
Over the ensuing three decades, the development authority has more than recouped its investment and pays a dividend to state coffers from the profits it gets from ongoing tolls.
Each year, roughly 5 percent of the world's mined zinc supply traverses DMTS, including roughly 1.3 billion lb of zinc and 217 million lb of lead trucked over the transportation system and onwards to world markets during 2018.
NANA Vice President of External and Government Affairs Liz Cravalho said Red Dog is a prime example of the benefits mining can bring to the local governments, businesses and residents of rural Alaska.
"The mine was an opportunity to responsibly develop resources in this area of the state and provide economic development to the communities," she said. "The mine continues to have a significant impact on the NANA region."
Another AIDEA funded road that is proposed to link the extremely metal-rich Ambler Mining District to global markets could bring an additional economic boost to the NANA region.
The 211-mile Ambler Mining District Industrial Access Project (AMDIAP), the official name of this transportation corridor colloquially known as the Ambler Road, is a key piece of infrastructure needed to begin realizing the vast potential of this minerals-rich region of Northwest Alaska.
Much of this potential is found on the Upper Kobuk Mineral Projects (UKMP), a partnership that brings the Bornite copper-cobalt deposit, along with several other copper-rich prospects on NANA-owned lands, together with the world-class Arctic Mine project, and dozens of similar volcanogenic massive sulfide prospects located on Trilogy's state, federal and patented mining claims in the Ambler Mining District.
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, these projects 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.
Trilogy and South32 are advancing these deposits in tandem, which is expected to improve the economics of both.
The UKMP partners, however, are not the only companies exploring the Ambler District.
Valhalla Metals Inc., a private Alaska company, is exploring Sun, a 10.7 million metric ton VMS project at the eastern end of the district rich in zinc, lead, copper and silver.
The proposed Ambler Road runs across Sun's doorstep on its way to UKMP.
Realizing the potential of this metals-rich district is dependent on a means to deliver the metal-rich concentrates to global market.
AIDEA filed an application for rights of way, permits and other authorizations needed for the Ambler Road in 2015 and the U.S. Bureau of Land Management, the lead agency for permitting the project, began the Environmental Impact Statement (EIS) in 2017. This process is on pace to be completed this year.
"The completion of the federal EIS process for the Ambler Mining District Access Road represents a significant milestone for the company and is a demonstration of what Governor Dunleavy has stated clearly many times: 'Alaska is open for business,'" said Trilogy Metals Senior Technical Advisor Rick Van Nieuwenhuyse.
Much like the DTMS, AIDEA plans to use funds raised from private investments to build and maintain the Ambler road and be paid back by collecting tolls from Arctic, Bornite and other mines developed in the Ambler District.
Size offsets costs
Two near-development projects – Donlin Gold and Pebble – are examples of where the sheer size of remote Alaska deposits helps to offset the costs of developing a mine beyond the state's road system.
Situated about 300 miles west of Anchorage, Donlin hosts 39 million oz of gold in measured and indicated resources that average 2.24 g/t gold.
A 2011 feasibility study for Donlin Gold envisions a 53,500-metric-ton-per-day operation that would produce an average of roughly 1.1 million oz gold annually over a projected 27-year mine-life.
This mine would singlehandedly double Alaska's yearly gold production.
The price tag to build this mega-mine, however, was calculated at roughly US$7 billion, which includes a roughly US$1 billion pipeline to deliver natural gas to the enormous gold project.
Barrick Gold Corp. and Novagold Resources Inc., equal partners in the Donlin Gold project, are investigating ways to reduce upfront costs and improve the overall economics of this project.
"With permitting largely complete, we are shifting more focus on integrating scoping-level optimization work into a study that will serve as the basis for an updated project development plan," Novagold Resources President Greg Lang said earlier this year.
One of the options being considered is to start out with a somewhat smaller mine that focuses on higher-grade portions of the deposit, an operation that could be scaled up in the future.
Pebble Partnership is taking a similar approach at Pebble, an even bigger deposit of metals in Southwest Alaska.
Considered the largest undeveloped copper and gold deposit on Earth, Pebble hosts 6.46 billion metric tons of measured and indicated resource averaging 0.4 percent (56.9 billion lb) copper, 0.34 g/t (70.6 million oz) gold, 240 parts per million (3.4 billion lb) molybdenum and 1.7 g/t (344.6 million oz) silver.
Pebble Partnership, however, is permitting an environmentally optimized operation that considers mining roughly 10 percent of this resource over two decades.
Even so, this operation is expected to produce 5.74 billion lb of copper, 6.4 million oz of gold, 260 million lb of molybdenum and 32 million oz of silver over this 20-year mine life.
The reason for this modest mine in relation to the deposit size is to address concerns over potential impacts to the salmon fisheries in the region of Southwest Alaska where Pebble is located.
"We have stated that the project must co-exist with the important salmon fishery in the region and we believe we will not harm the fish and water resources in Bristol Bay," said Pebble Partnership CEO Tom Collier. "Now we have a science-based, objective assessment of the project that affirms our work."
Unlike Donlin, however, Pebble will need to deliver metal concentrates to refineries in order to extract the copper, gold, molybdenum and other metals. This necessitates surface transportation linking the mine to a deep-water port. A combination of roads and an icebreaking ferry across Iliamna Lake is the plan for linking the nearly 50-mile gap between the Pebble Mine and a proposed port on the west side of Cook Inlet.
U.S. Army Corps of Engineers, the lead agency for permitting Pebble, is scheduled to have the final EIS for the mine and transportation corridor completed by early 2020 and the record of decision for developing this copper-gold-molybdenum project by mid-year.
Much of the uncertainty surrounding the Pebble permitting process was dispelled with a July decision by the U.S. Environmental Protection Agency to scrap an earlier pre-emptive veto determination that threatened debilitating restrictions on development of a mine at this world-class project.
The finalization of the pre-emptive veto under consideration by EPA would have set a precedent that would have likely weighed heavily on the minds of mining companies considering investing in Alaska and across the U.S.
"We are glad to see the EPA has removed this proposed determination and that fair and due process is back on the table for Pebble," said Alaska Miners Association Executive Director Deantha Crockett. "Development proposals must be stringently evaluated, and only fair reviews of project proposals will ensure continued investment in Alaska's economy."
And, with Pebble being located on state land, the project will contribute to Alaska coffers.
Pebble said the smaller, environmentally optimized mine it submitted for permit approvals is expected to generate tens of millions of dollars in state government revenues each year at a time when Alaska is facing a fiscal crisis. The proposed mine is also expected to support some 2,000 Alaska jobs, with an income average for the mine workers at Pebble topping $100,000 per year.
"This is a magnificent mineral deposit that would bring substantial revenues and jobs to Alaska at a time when we need both more than ever," Crockett said.
EPA's reversal also removes one more concern for Australian and Canadian companies hoping to explore and develop the other magnificent mineral deposits Alaska has to offer.