Financial robust Arctic Mine confirmed
Study details feasibility of developing Northwest Alaska mine North of 60 Mining News – August 21, 2020
Last updated 8/22/2020 at 6:20am
A feasibility study for developing a mine at the world-class Arctic deposit in Alaska's Ambler Mining District details a financially robust operation that would produce 1.9 billion pounds of copper, 2.3 billion lb of zinc, 388 million lb of lead, 386,000 ounces of gold, and 40.6 million oz of silver over an initial 12-year mine life.
While high-grade volcanogenic massive sulfide deposits such as Arctic are typically mined from underground, the Arctic feasibility study details plans for a lower cost open-pit mine feeding a 10,000-metric-ton-per day mill.
The initial capital needed to develop this mine is calculated to be US$906 million, which would be paid back after 2.6 years of production. When you add in the $114 million in sustaining capital and US$205 million in closure and reclamation, the total capital expenditure of building, operating, and closing Arctic comes to US$1.22 billion.
Using long-term metals prices – US$3.00/lb copper, US$1.10/lb zinc, US$1.00/lb lead, US$1,300/oz gold, and $18/lb silver – the after-tax net present value (8% discount) of the proposed mine at Arctic is US$1.1 billion and the after-tax internal rate of return is 27%.
If you plug in current metals prices the after-tax NPV (8% discount) increases to US$1.3 billion and the after-tax IRR is 29.6%.
"Arctic is a special project due to its unique high-grade polymetallic nature. The only other time that I've seen a project of this quality where the grades were similar was in an underground mining scenario. However, Arctic is mineable in an open pit scenario," said Trilogy Metals President and CEO Tony Giardini. "I also want to highlight that Arctic contains a significant amount of gold and silver."
The feasibility study forecasts the mine at Arctic will produce an average of more than 155 million lb of copper, 192 million lb of zinc, 32 million lb of lead, 32,165 oz of gold, and 3.4 million oz of silver per year.
When combining the value of the gold and silver, the mine would produce 80,000 gold-equivalent oz per year.
"At current spot metal prices, the precious metals output represents almost 20% of its revenue," added Giardini.
This really accentuates the flexibility of a polymetallic deposit like Arctic to produce revenue from both precious and base metals.
Strong Arctic partnerships
The economics detailed in the Arctic feasibility study released by Trilogy on Aug. 20 was calculated on the basis of 100% ownership, but Trilogy has two strong partners – NANA Corp. and South32 Ltd. – in the district-scale Upper Kobuk Mineral Projects that encompasses this and other rich mineral projects in the Ambler Mining District.
"Arctic is located in the extremely prospective Ambler Mining District, in a mining friendly jurisdiction, in Alaska, USA, where solid environmental regulations and a balanced permitting process is established," said Jim Gowans, a director of Trilogy. "I am also very pleased that we are working with NANA Regional Corporation Inc., who understand mining and have an established record of working at the Red Dog Mine."
In 2011, NANA and Trilogy Metals formed the Upper Kobuk Mineral Projects (UKMP), a partnership that brings together the world-class Bornite copper-cobalt deposit and a number of other mineral-rich prospects on NANA-owned lands with Arctic and dozens of similar volcanogenic massive sulfide prospects located on Trilogy's adjacent lands in the Ambler Mining District.
Under this agreement, once a construction decision is made for Arctic, NANA has the right to either purchase a 16 to 25% direct interest in the mine project or receive a 15% net proceeds royalty. NANA will also receive a 1% net smelter royalty in exchange for the use of surface lands in the UKMP area.
In addition to adding economics of scale by combining the multiple world-class deposits in the mineral-rich but remote Ambler District, this partnership with one of the most successful Alaska Native Claims Settlement Act (ANCSA) regional corporations offers a close working relationship with the most important group of stakeholders in Northwest Alaska.
NANA, which is also a partner with Teck Resources Ltd. at the Red Dog Mine about 170 miles northwest of Arctic, encourages mine projects in its region that respect the environment and the tradition values of its more than 14,000 Iñupiat shareholders.
"We are into mining," NANA President and CEO Wayne Westlake told Mining News. "In other words, when people think about mining in Alaska, you can't help but to not think of NANA."
Australia-based South32 brings the financial wherewithal and technical expertise of a global mining company to Arctic and the rest of UKMP.
Under a joint venture agreement finalized earlier this year, South32 invested US$145 million to be a 50% partner with Trilogy in Ambler Metals, a JV company formed to develop Arctic, Bornite and other UKMP deposits.
"We look forward to furthering our partnership with Trilogy Metals and NANA Regional Corporation, the Iñupiat-owned Alaska Native corporation in the region, as we work together to advance the Arctic and Bornite deposits and further test the significant regional potential across the Ambler Mining District," said South32 CEO Graham Kerr.
Westlake said the benefits of having a company like South32 involved in UKMP will extend beyond the Ambler Mining District.
"This joint venture is an investment in the future – not only for the UKMP but for NANA shareholders and the people of Alaska," he said. "Continued exploration offers opportunities for economic growth, allowing NANA to further fulfill our mission to improve the quality of life for our people."