The future looks bright for Alaska’s commodities
Last winter, Trilogy Metals completed a pre-feasibility study on its Arctic project near Kobuk.
Alaska has always been a state that depends on natural resources. And while much of its history is based around mining, the industry is poised to play a large part in its future as well. According to Alaska’s Mineral Industry 2017, published by Alaska’s Department of Natural Resources Division of Geological and Geophysical Surveys, the value of the state’s mineral industry in 2017 totaled $3.15 billion, an increase of roughly 12 percent from 2016. And while numbers are just starting to come in for 2018, it looks like investment in this area will continue to grow.
How the State Ranks
According to the report, Alaska ranks in the top ten for global reserves and resources of major metals and coal. The state holds 12 percent of the world’s coal resources (the second most in the world) and 3 percent of the world’s lead (the sixth most in the world). It also contains 3 percent of its gold (ninth most in the world), 4 percent of its zinc (seventh most in the world), 2 percent of its silver (tenth most in the world), and 0.2 percent of its copper (eleventh most in the world).
There are currently six operating mines in the state, which include Teck Alaska’s Red Dog mine, one of the world’s largest zinc mines; Hecla’s Greens Creek mine, one of the world’s largest and lowest-cost primary silver mines; Northern Star Resources’ Pogo mine; Kinross-owned Fort Knox; Coeur Alaska’s Kensington Mine; and Usibelli Coal Mine. Zinc is the top metal produced, accounting for more than half of Alaska’s total metal production by value, followed by gold at 33 percent, lead at 8.8 percent, and silver at 7.7 percent.
And while the demand for these mined minerals stays steady, providing employment for the more than 9,000 direct and indirect jobs attributed to the industry according to Economic Impact of Mining in Alaska, prepared by the McDowell Group for the Alaska Miners Association, what’s even more exciting is that quite a number of advanced-exploration and development projects are underway—some at existing sites and some at newly discovered areas—that may bring even more mines to fruition in the near future.
It’s a bit ironic that even as society moves away from fossil fuels, investing more time and money into alternatives like solar and wind power, this new direction is creating an even higher demand for more mined commodities.
“Copper is a very unique metal given its physical properties as the best conductor of electricity apart from gold, which is very expensive,” explains Patrick Donnelly, vice president of corporate communications and development for Trilogy Metals. “Because of a concern with air quality, we are globally moving toward an energy future that relies less on fossil fuels. But electric vehicles, for example, are run by batteries that require copper.”
While typical vehicles use twenty to fifty pounds of copper, electric vehicles require much more, according to Donnelly, adding that the metal is also required for the infrastructure—such as charging stations—that these new automobiles require.
“As we move away from combustion engines to electric engines, the demand will increase significantly,” he says.
While much of the world’s copper comes from South America, Donnelly says that the market can expect to see a crunch on the supply side in the coming years. “These large mining companies have been developing underground mines—billion dollar projects—that are yielding lower grade product at a higher cost,” he explains. “These mines were developed to replace the current supply—not to add to it—because the demand for copper is so high.
“A number of places in southern Africa and in Mongolia, where they also produce a lot of copper, are politically unstable,” he adds. “Companies want to work with mining companies in a stable jurisdiction, and that bodes well for Alaska.”
Cobalt is another mineral that is becoming more in demand as it is one of the main ingredients in electric batteries. “There is not much cobalt in North America; 90 percent of it comes from southern Africa,” says Donnelly. “Unfortunately, the Democratic Republic of Congo is a corrupt, violent nation, and companies don’t want to bring in metals that aren’t ethically sourced or where there are human rights violations.
“We believe that there are approximately 77 million pounds of cobalt at our Bornite site, which, if mined, would be the only project producing cobalt in the United States,” he continues. “The US Geologic Survey has stated that cobalt is a critical metal for the United States, so this has significant implications for the state.”
Innovative uses for gold are also driving the demand for this mineral higher. According to the World Gold Council, gold is being used for everything from internet wiring to the creation of rapid diagnostic tests that are used to diagnose disease. Gold-based drugs have been used to treat rheumatoid arthritis, and research is ongoing to see what role it can play in cancer treatment. Visual display technologies, such as touch-sensitive screens, use gold nanotechnologies that may also have potential for use in data storage technologies, including advanced flash memory drives.
Wayne Hall, manager of community and public relations at Teck Alaska/Red Dog Mine, says that zinc is another mineral high in demand, especially for its use in galvanizing steel to prevent corrosion.
“We expect steady demand growth for zinc in 2019–2020, which bodes well for Red Dog and Teck,” says Hall. Red Dog Operations is one of the world’s largest zinc mines, producing both zinc and lead concentrate that is exported to various markets worldwide.
According to the Office of International Trade, in 2017 Alaska shipped mineral ores and concentrates, metal ores and concentrates, and coal to sixteen countries in Europe, North and South America, and the Asia-Pacific region. Export values totaled $1.81 billion, up nearly 17 percent from 2016 numbers.
Trilogy Metals has made a commitment to promote employment for NANA shareholders.
Hecla Greens Creek Mining Company is continuing to explore a number of areas on its 23-square-mile land package.
Exploration and Expansion
According to the Department of Natural Resources survey, mineral exploration rose dramatically in 2017, increasing to $120.8 million, nearly doubling what was spent in 2016. The majority of this investment was spent on undeveloped prospects and deposits in the state.
Donlin Gold’s project, located in Western Alaska in the Yukon-Kuskokwim region, is considered to have great potential. One of the largest known, undeveloped gold deposits in the world, the project has probable reserves estimated at 33.8 million ounces of gold, and the company estimates that the proposed mine could produce more than 1 million ounces of gold annually during operation. This production level would make Donlin Gold one of the world’s largest gold mines.
“We received most of our major federal and state permits in 2018 after a six-year environmental review process,” says Kurt Parkan, external affairs manager for Donlin Gold. “This is a major milestone in the project’s development, but we are still several years away from construction.”
Greens Creek is also looking to explore land related to its current mining operation.
In 2018, 8 million ounces of silver and 51,493 ounces of gold were produced at Greens Creek.
“We have a very specific area based on our land status that we can explore because we are in a national monument,” explains Mike Satre, manager of government and community relations, of the mine’s location within the Admiralty Island National Monument. “Our work is focused on an extension of the known ore bodies.”
He adds that the company is continuing to explore a number of areas on its 23-square-mile land package that could potentially lead to additional reserves and resources, further extending the mine life. In 2018, 8 million ounces of silver and 51,493 ounces of gold were produced at Greens Creek, with the majority of metal concentrates being shipped to smelters in Asia, including Japan, South Korea, and China.
Teck Alaska is also continuing to explore its Anarraaq and Aktigiruq deposits in the Red Dog District with the goal of determining the size and extent of the mineral deposits in order to assess whether it is economically and environmentally viable to extend mining operations beyond the estimated mine life of 2031.
Hall says that Teck was pleased with the mine’s 2018 results and in 2019 plans to continue upgrade and expansion plans.
“Work will continue on the $110 million mill upgrade project known as the Value Improvement Project 2, which is expected to increase average mill throughput by about 15 percent over the remaining mine life,” he says, adding that the project is expected to be completed in the first quarter of 2020.
Last winter, Trilogy Metals completed a pre-feasibility study on its Arctic project near Kobuk, with the goal of establishing a conventional open-pit copper-zinc-lead-silver-gold mine-and-mill complex for a 10,000 tonne-per-day operation.
The project is currently getting ready to enter the permitting stage. “We’re confident it will become a mine; the economics are outstanding, even in a weak copper environment,” says Donnelly.
The Bornite deposit, which is approximately 25 kilometers southwest of the company’s Arctic deposit, has been shown to have potential indicated resources of 900 million pounds of copper and inferred resources of 5.5 billion pounds of copper and 77 million pounds of cobalt. This project is still in the early stages; the company has drilled twenty-five holes in the last two years.
“There are no economics yet on Bornite; we will update the resource estimate by the end of February 2019, and we’ll see how it shakes out early this year,” says Donnelly. “When we put the economics on, we’ll see how it holds together—we think it will be a mine.”
As new uses for Alaska’s mined commodities continue to grow, so will the need for more exploration and expansion of the state’s current mining capabilities.
In This Issue
Meeting in the Middle
In January, when the Biden administration announced its ban on the future sale of oil and gas leases on federal land, the news understandably ruffled the collective feathers of Alaska’s oil and gas industry.