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Mining on Native Lands

Balancing resource development with ancient ways


For thousands of years, the Inupiat people of northwest Alaska have thrived in the cold, remote region by coming up with innovative ways to answer challenges. In the past few decades, they faced another challenge, one that was brought by the discovery of world-class deposits of zinc, copper and lead, as well as gold and silver on their lands. Would it be possible to balance an ancient way of life with modern mining techniques?

That’s a question NANA Regional Corp. leaders wrestled with 30 years ago. Jobs were scarce and costs high, but mining companies were very interested in the enormous mineral wealth on NANA’s lands, which include one of the richest zinc deposits in the world at Red Dog Creek.

In the end, NANA leaders decided Red Dog was an integral part of their future and that it could be developed in a way that would create sustainable communities and economic opportunity while protecting shareholders’ subsistence way of life.

NANA signed an agreement with Teck Alaska and Red Dog Mine went online in 1989. In the past 23 years, it has become the basis for the region’s economy. It is a balancing act that requires both partners to work closely together to achieve their goals while keeping their values intact.


Red Dog Today

Today, Red Dog is to the NANA region what Prudhoe Bay is to Alaska, according to Dr. Lance Miller, vice president of natural resources for NANA Regional Corp.

“Mining is part of the culture, balanced with subsistence,” Miller said.

Red Dog provides significant local jobs. It is the sole “taxpayer” for the Northwest Arctic Borough, providing $8.9 million payment in lieu of taxes in 2011, Miller said. The State of Alaska receives mining taxes and the Alaska Industrial Development and Economic Development Association collects fees for the road that connects Red Dog with the coast.

The state’s regional and village corporations also benefit under the Alaska Native Claims Settlement Act’s 7(i) revenue-sharing clause. About 65 percent of NANA’s net revenue from Red Dog is distributed to the other corporations, which came to $82 million in fiscal year 2011. NANA itself received $169.9 million in net proceeds from Red Dog. Shareholders benefit from dividends, scholarships and training programs, social and cultural programs and projects to boost energy efficiency in the region.

The goal of resource development is to provide jobs and opportunities for residents of northwest Alaska so that they can remain in the region and help sustain their culture, said Shelly Wozniak, communications manager for NANA Regional. NANA has more than 13,000 shareholders, more than 7,500 of whom live in northwest Alaska. More than half of Red Dog’s workers are NANA shareholders.

“It shows the significance of responsible mineral development to the region,” Wozniak said.

One such success story is Jason Rutman. Rutman’s family is from Noorvik and he grew up in the NANA region, graduating from a four-year development program in environmental management. He worked at Red Dog and later became the first NANA shareholder to be transferred to a different Teck project, the Pogo Gold Mine northeast of Delta Junction. He worked as an environmental manager for various entities and is now the liaison between NANA and NovaCopper, which is exploring mineral deposits in another part of the NANA region.

“Red Dog was my stepping stone and provided the foundation for my career,” Rutman said.

Other Alaska Native Corporations, as well as indigenous peoples around the world now look to NANA as a model for economic development for native peoples.


Donlin Gold

In Southwest Alaska, one of the largest known undeveloped gold deposits in the world has the potential to transform a region much as Red Dog has in northwest Alaska. Exploration in the past 15 years has uncovered more than 33 million ounces of gold in the Donlin Creek area.

The surface land is owned by The Kuskokwim Corp., a consortium of 10 villages. The subsurface belongs to Calista Corp., a regional Native corporation that encompasses 56 villages in the Yukon-Kuskokwim region.

Donlin Gold, a partnership between NovaGold and Barrick Gold, decided in July to begin the permitting phase of the mine, according to Kurt Parkan, external affairs manager for Donlin Gold.

“I know that this will have a huge impact on the Y-K region as there isn’t any other kind of industry at all,” Parkan said. “This will have a very positive impact on jobs.”

Calista supports responsible resource development and has experience orchestrating a successful drilling project that employed shareholders and descendants, Thom Leonard, communications manager for Calista, said in an email. Calista is already working with Donlin Gold and Yuut Elitnaurviat, a Bethel-based public-private consortium that provides vocational training, to plan for workforce development needs.

“The potential impact of the project at Donlin Creek is massive,” Leonard said. “The opportunity for year-round, full-time employment is rare in one of the most economically challenged areas of the country, and thousands of families would benefit from steady income. The income provided would help families pay the highest energy and fuel costs in the nation. And with the nearest supermarket hundreds of miles away the families will be able to better afford the fuel needed to continue a subsistence lifestyle.”

Donlin Gold has a hiring preference for shareholders and local residents.

“We’ve made a commitment to our landowners to hire locally,” Parkan said. “We’ve got a really good record over the past 17 years. Over 90 percent of our camp workers were local hires.”

In the remote area, with virtually no roads or other infrastructure, Donlin Gold must generate its own electricity. It plans to build a 312-mile pipeline to connect to natural gas lines at Beluga, on Cook Inlet, Parkan said. The pipeline will be buried and only temporary roads will be built during its construction. The natural gas will power a 150-157 megawatt plant.

Natural gas will provide the mine with more economic power and means that 80 million gallons of diesel will not have to be transported up local rivers to the mine site, which had been a source of concern for local residents. Natural gas is also cleaner burning than diesel. Whether residents can benefit from piped-in natural gas is unknown, Parkan said, but any energy project would have to come from a third party.


Consultation Key to Development

Decisions such as piping in natural gas instead of shipping diesel fuel come from close consultation with local leadership, residents and the corporations and are key to development efforts.

“All NANA projects require a great deal of consultation before any dirt is moved,” said NANA’s Wozniak.

The shareholders themselves support resource development, Wozniak said. NANA conducted surveys in 2009 and 2011 and more than 90 percent of shareholders said they supported mineral development and road construction. The main ore pit at Red Dog was mined out in 2010 and operations shifted to the Aqqaluk deposit, which is expected to operate through 2031. Now, with more than two decades of mining experience under its belt, NANA is looking beyond Red Dog to mineral deposits in the eastern part of its region.

“NANA has taken what it’s learned over the last 23 years,” Rutman said. “Taking that knowledge and experience and applying it at all levels.”

In 2011, NANA’s board of directors approved a resolution to form a partnership with NovaGold Resources to look into potential mineral resources in the upper Kobuk River region.


Upper Kobuk

Called the Upper Kobuk Mineral Project, NANA and a new company called NovaCopper are exploring a 70-mile belt of volcanogenic massive sulfide deposits containing mostly copper, zinc and lead. It is considered to be one of the most significant deposits in the world, with very high grades of ore, from 4 percent to 12 percent copper in some areas. The project is near three villages, Kobuk, Shungnak and Ambler and is about 250 miles northwest of Fairbanks.

“It’s the second big year for us,” Rutman said. “Last year was a pivotal year as far as drilling.” UKMP has four drills going this summer and is spending roughly twice as much money on exploration as it did in 2011. About half the workers are NANA shareholders.

NovaCopper may be new, but its president and chief executive officer Rick Van Nieuwenhuyse has extensive experience working with both NANA and Calista. He formed NovaGold in the late 1990s and focused on exploration in the Donlin Creek area. With that project entering permitting, he turned his focus to northwest Alaska, spinning off NovaCopper to spearhead exploration of the Upper Kobuk Mineral Project.

“Both (corporations) have been an integral part of the process,” he said. While NovaGold and NovaCopper work closely in cooperation with the Native corporations, the relationships are different.

At Donlin Creek, about 300 miles west of Anchorage, Calista owns the subsurface and The Kuskokwim Corp. owns the surface rights. Barrick Gold and NovaGold are operating the mine and paying royalties, a similar relationship to the one NANA has with Teck Alaska.

In the Upper Kobuk region, it’s more of a partnership with NANA, Van Nieuwenhuyse said. NANA owns the land at Bornite and NovaCopper is the landowner for the Arctic Deposit and several other parcels in the region. Both sets of claims are being worked under a joint arrangement, he said.

“It’s a ‘one plus one equals three’ story,” he said.

Outreach to the three villages closest to the exploration sites is an important part of NovaCopper’s business plan. “We’re constantly letting them know what we’re doing,” he said.

NovaCopper is always looking for opportunities to hire locally and provide training, which provides more local expertise, in turn helping both the residents and the exploration projects, Van Nieuwenhuyse said.

For instance, with the increase in people working at the UKMP this summer, NovaCopper needed another emergency medical technician. They identified a resident who had partial certification and provided the rest of the training so both the project and the region benefit long-term, he said.

NANA’s Miller emphasized that UKMP is a long-term project. “No mine is going to be built tomorrow; there’s no economic mine at this present time,” Miller said. It can take decades and $100 million to $150 million in exploration and feasibility work before a successful mine plan can be drawn up, he said. Two other major components, transportation and energy, also must be taken into account.

“Sort of the missing link in Alaska is there isn’t a lot of infrastructure,” Van Nieuwenhuyse said. Alaska Gov. Sean Parnell has proposed several “Roads to Resources” that would link areas of high petroleum or mineral potential to the road system. One of those roads would link the Ambler mining region with the Dalton Highway. Parnell included $4 million in his 2013 budget proposal for the project.

With a road, any future mine would have access to diesel and trucked-in natural gas that could help reduce energy costs in the region, he said. NovaCopper is also looking at the potential for hydro-powered electricity via the Ambler River.

“Every little bit helps,” he said. “Right now, at $11 a gallon, gas, diesel and milk all cost about the same.”

Julie Stricker is a writer living near Fairbanks.

The article first appeared in the September 2012 print edition of Alaska Business Monthly magazine.
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