Red Dog generates strong Q1 revenues
Teck and NANA benefit from strong zinc prices, production North of 60 Mining News – April 29, 2022
Last updated 7/27/2022 at 5:53am
With zinc prices on the rise and strong production of the galvanizing metal, the Red Dog Mine in Northwest Alaska generated strong profits for Teck Resources Ltd. and revenues for NANA Corp., the Alaska Native Claims Settlement Act (ANCSA) regional corporation for Northwest Alaska.
During the first quarter of this year, Red Dog produced 131,600 metric tons (290.1 million pounds) of zinc, a roughly 10% increase over the 119.7 metric tons (263.9 million lb) produced during the first three months of 2021.
First-quarter lead production at Red Dog was 21,500 metric tons (47.4 million lb), down 17% from the 25,800 metric tons (56.9 million lb) produced during the same period last year.
Teck says the increased zinc output is due to higher grades and mill recoveries, which was offset slightly by lower mill throughput.
This uptick in Red Dog's zinc production comes at a time when the price of this metal, critical to a broad range of industrial sectors, has climbed to record-high territory.
Going into 2022, zinc was selling for around $1.63/lb, about 26% higher than the $1.29/lb going into 2021. Teck averaged $1.65/lb for the zinc it sold during the first quarter.
With zinc production lagging behind the demand being driven by improvements in the manufacturing, automotive, construction and infrastructure sectors, zinc prices have continued to rise this year. On April 19, the price for a pound of zinc hit an all-time high of US$2.04/lb.
As a result of strong zinc production and prices, Red Dog generated C$524 million (US$409 million) in revenues for Teck during the first quarter. This is more than double the C$237 million (US$185 million) of revenue generated during the first three months of 2021.
Likewise, Teck's profit from the Red Dog Mine was C$236 million (US$184 million) during the first quarter of this year, which is more than double the C$100 million (US$78 million) during the first three months of 2021.
NANA, which receives a 35% net proceeds royalty from the metals produced at Red Dog, realized an even larger percentage increase in revenue from the zinc mine on its lands in Northwest Alaska.
For the first quarter of Red Dog production, NANA received C$137 million (US$107 million) in royalties from Teck, nearly four times the amount paid to the ANCSA regional corporation during the first quarter of 2021.
This healthy payment to NANA will benefit all 12 ANCSA regional corporations and the villages within them.
Under ANCSA, which was passed by the U.S. Congress and signed into law by President Nixon in 1971, NANA shares its revenues from the Red Dog Mine with the 11 other Alaska Native regional corporations.
ANCSA Section 7(i) requires regional corporations to distribute 70% of net revenues from resource development on ANCSA lands among all 12 regional corporations. In turn, Section 7(j) requires that half of the Section 7(i) payments be distributed to the respective village corporations within each of the ANCSA regions.
This means that proceeds from Red Dog flow to every corner of Alaska.
NANA's net proceeds royalty from Red Dog increases by 5% every five years, up to a maximum of 50%. The next increase to 40% will go into effect later this year.