The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Strong metal prices mostly offset higher CapEx for future mine North of 60 Mining News - February 15, 2023
Core from drilling at Arctic, a volcanogenic massive sulfide deposit in Alaska enriched with copper, zinc, silver, and gold.
Trilogy Metals Inc. Feb. 14 reports that while rising costs and challenging supply chains have weighed on the economics of building and operating a mine at Arctic, an updated feasibility study shows that an open-pit copper-zinc-lead-silver-gold mine at this Northwest Alaska project continues to produce healthy financial returns.
Arctic is a high-grade volcanogenic massive sulfide deposit that is part of the district-scale Upper Kobuk Mineral Projects being advanced by Ambler Metals LLC – an equally owned joint venture between Trilogy and Australia-based South32 Ltd.
This 448,217-acre land package made up of state and Alaska Native-owned lands also hosts Bornite, a world-class copper-cobalt deposit that is expected to be the site of a second mine at UKMP, along with more than a dozen other copper-forward targets similar to the two most advanced projects.
A feasibility study finalized in 2020 outlined plans for a financially robust mine at Arctic.
While post-pandemic inflation and supply chain issues have certainly weighed on the economics of building mines over the three years since this study was completed, the primary reason for the update is to meet the U.S. Securities and Exchange Commission's new SK 1300 standards for mining companies listed on exchanges in the United States.
Just like in 2020, the updated feasibility study envisions an open-pit mine at Arctic feeding a 10,000-metric-ton-per-day mill. The new mine design, however, includes some environmental improvements to reduce water collection and treatment, and lower energy consumption. The open pit has also been extended slightly to avoid pit-wall instability due to talc and to capture slightly larger reserves.
The initial capital needed to develop this operation is calculated to be US$1.18 billion, which is nearly 30% higher than the US$905.6 million just three years ago.
When you add in sustaining capital, along with closure and reclamation costs, the total capital expenditure of building, operating, and closing a mine at Arctic comes to US$1.72 billion, which is 40% higher than the total CapEx calculated in 2022.
Despite these much higher development and operating costs, the economics of developing a mine at Arctic remain robust.
Using long-term metals prices – US$3.65/lb copper, US$1.15/lb zinc, US$1.15/lb lead, US$1,650/oz gold, and $21/oz silver – the after-tax net present value (8% discount) of the proposed mine at Arctic is US$1.11 billion and the after-tax internal rate of return is 22.8%.
This is only marginally less than the after-tax NPV (8% discount) of US$1.13 billion and after-tax IRR of 27.1% calculated in 2020
"Arctic continues to be an extremely robust project even in a high inflationary environment," said Trilogy Metals President and CEO Tony Giardini. "We have updated the capital and operating costs to reflect high-inflation and supply-chain challenges and yet the economics continue to stand out."
The primary reason that the economics of an Arctic Mine continue to stand out despite the significantly higher costs is a nearly commensurate rise in the long-term outlook for metals prices.
If you plug in current metals prices, the after-tax NPV (8% discount) increases to US$1.6 billion and the after-tax IRR is 27.8%.
The Arctic Mine is slated to produce 1.93 billion lb of copper, 2.24 billion lb of zinc, 334.8 million lb of lead, 423,000 oz of gold, and 36 million oz of silver over the 13-year mine life envisioned in the 2023 feasibility study.
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.
Reader Comments(1)
Eidolon writes:
Great. Now, we only need access to the Ambler mining district and about 175 more mines like this to begin to meet future copper demand.
02/17/2023, 6:30 am