Legislature(2013 - 2014)BUTROVICH 205
02/27/2013 12:00 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview: Mining Industry Briefing | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE RESOURCES STANDING COMMITTEE
HOUSE RESOURCES STANDING COMMITTEE
February 27, 2013
12:28 p.m.
MEMBERS PRESENT
SENATE RESOURCES
Senator Cathy Giessel, Chair
Senator Peter Micciche
Senator Click Bishop
Senator Lesil McGuire
Senator Anna Fairclough
Senator Hollis French
HOUSE RESOURCES
Representative Eric Feige, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Geran Tarr
MEMBERS ABSENT
SENATE RESOURCES
Senator Fred Dyson, Vice Chair
HOUSE RESOURCES
Representative Dan Saddler, Co-Chair
Representative Mike Hawker
Representative Craig Johnson
Representative Kurt Olson
Representative Paul Seaton
Representative Chris Tuck
COMMITTEE CALENDAR
OVERVIEW: MINING INDUSTRY BRIEFING
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MICHAEL SATRE, Executive Director
Council of Alaska Producers
Juneau, Alaska
POSITION STATEMENT: Provided information about the mining
industry.
KAREN MATTHIAS, Managing Consultant
Council of Alaska Producers
Anchorage, Alaska
POSITION STATEMENT: Provided information about the mining
industry.
DEANTHA CROCKETT, Executive Director
Alaska Miners Association
Anchorage, Alaska
POSITION STATEMENT: Provided information about the mining
industry.
ACTION NARRATIVE
12:28:50 PM
CHAIR CATHY GIESSEL called the joint meeting of the Senate and
House Resources Standing Committees to order at 12:28 p.m.
Present at the call to order were Senators Micciche, McGuire,
Fairclough, French, and Chair Giessel. Senator Bishop and
Representatives Wilson, Tarr, and Co-Chair Feige arrived shortly
thereafter.
^OVERVIEW: MINING INDUSTRY BRIEFING
12:29:13 PM
MINING INDUSTRY OVERVIEW
CHAIR GIESSEL said the only order of business was the mining
industry overview.
MICHAEL SATRE, Executive Director, Council of Alaska Producers,
said Alaska has seven producing large mines and over 60
exploration projects spending over $1 million a year (the point
at which they are starting to be serious). He said they provide
over 4800 direct jobs and it's growing. They have a $100,000
average annual wage, a significant economic component to the
state. He described where the mines are located, the furthest
north being the Red Dog open pit lead/zinc mine; Fort Knox is
the open pit gold mine and Pogo is the underground gold mine
outside of Delta Junction. The Nixon Fork underground
gold/copper mine is on the Kuskokwim region, the Usibelli Coal
Mine is in the Railbelt area, and Southeast has the Coeur Alaska
Kensington Gold mine just north of Juneau and the Hekla Greens
Creek Mine on Admiralty Island.
Several advance exploration projects are happening around the
state towards Red Dog; Kotzebue has the Upper Kobuk mineral
projects, a partnership with Nova Copper; NANA has the Livengood
Gold prospects north of Fairbanks, the Donlin Gold prospect on
the Lower Kuskokwim and the Pebble project in the Bristol Bay
area; Chuitna and Wishbone Hill are some coal projects;
Southeast has the Bokan Mountain Ucore Rare Earth project and
the Niblack copper/zinc/silver mine.
12:32:21 PM
KAREN MATTHIAS, Managing Consultant, Council of Alaska
Producers, said mining is a very global industry for two main
reasons; one is that the price of the product is determined not
by the cost to produce it but by global markets and two, because
the huge costs to explore and develop mines require a very large
investment base.
Looking at the commodities, she said that copper, lead and zinc
prices for the last 10 years had been very volatile. Along with
aluminum, those three base metals are the most widely used,
their prices being driven by industrial demand and more
generally by the global economy. The most common use for lead is
batteries and for zinc it's galvanized metals; copper is the
bellwether metal, because it is used in electronics and wiring.
So, when the economy is doing well and we're building houses,
buying cars and investing in infrastructure, the price of the
metals go up.
However, Ms. Matthias said the prices also reflect where
investors think the economy is going. So, macro-economic
uncertainty can impact those prices. Right now we are in a
period of macro-economic uncertainty; Europe is in crisis and
everybody is wondering what the US is going to do because of the
debt ceiling and sequestration along with what is happening with
China's growth.
MS. MATTHIAS said it is important to recognize the role that
China plays in commodity prices. In the 1980s they bought about
5 percent of the world's base metals; today it's 30 percent.
12:34:21 PM
MS. MATTHIAS said gold and silver prices looking at 2004 to 2012
are also very volatile. Precious metals also tend to be a safe
harbor in times of economic uncertainty, so those prices went up
in 2009 after the financial crisis and the economic recession.
They moved steadily up until 2011 when they dipped again. It's
very difficult to predict commodity prices and that makes it
very difficult to attract investment and to judge economic
feasibility for a project that might be 10 or 15 years away from
production.
She said Alaska has to compete for investment dollars with
mining projects all over the world. Since mining requires such
high upfront expenditures and high risk, investors tend to pull
back when commodity prices are low and invest when they rise.
She related where the exploration dollars go showing a graph of
exploration spending by region. From a total of $18.2 billion in
2011, the US accounted for 8 percent of exploration spending in
the world (down from 19 percent in the 1990s).
She said the Alaska Permanent Fund plays a role in mine
financing as well. Most think of their PFDs coming from oil and
gas, but over 292 metals, mining and fabricating investments
contributed over a half billion dollars to it as of last year.
12:36:35 PM
MS. MATTHIAS said looking at the volatility of commodity prices,
she was hoping to give the impression of the high financial risk
involved in mining exploration and development. Explorers spend
millions of dollars looking for the big find and hundreds of
millions on development and permitting costs. And because of the
uncertainty about commodity prices, once a mine actually comes
into production there is no guarantee there will be an immediate
return on investment. So, it's good for Alaska to attract
outside investment for these developments.
Over $2 billion has been spent on exploration in Alaska over the
last 30 years on dozens of projects, but it has only six large
producing metal mines. That is not because we don't have rich
resources, but a lot of other issues are taken into
consideration when looking at investing here. There's local
infrastructure, transportation and fuel costs, whether or not a
project is near an energy grid, labor costs and the regulatory
uncertainty. She then handed the presentation over to Mr. Satre.
12:37:51 PM
MR. SATRE discussed the individual commodities currently being
developed in Alaska beginning with gold that brought many
westerners to Alaska to begin with; and it is a more visible
piece of the mining industry these days. It has always been
historically significant as a measure of wealth and as a hedge
against bad times, but in the modern day it has many more uses
for computers and cell phones; it has wonderful anti-corrosive
properties and is used in medical procedures; and astronauts
wear the gold platted visors.
Alaska's reports over 40 million ounces of gold have been
produced since the 1880s. These days annual production is a
little over 900,000 ounces per year, supplying roughly a seventh
of the US production, but lagging behind the rest of the world.
He said the hard rock large miners are producing now - Fort Knox
was one that had completed reclamation of their True North Mine
while still investing in their current operations. It poured
about 360 million ounces of gold and invested significantly in
their equipment with nine new haul trucks, two shovels and one
loader. The Sumitomo Pogo metal mine continues to find more
resources around the existing mine and are starting to invest in
what it would take to develop those and lengthen their mine
life. They have produced over 2 million ounces of gold since
opening in 2006. A smaller operator, the Fire River Gold - Nixon
Fork Mine, came back in operation on July 4, 2011, and continues
to invest in their operation to make sure they have sustainable
production into the future.
The primary gold producer in Southeast is the Coeur Alaska
Kensington Gold Mine; they invested a significant amount of
money in infrastructure this year including commissioning an
underground pace plant; they built new administrative buildings
and warehouse and have gone into phase 2 of their tailings dam.
The Hecla Greens Creek Mine also produces gold as one of four
products they produce.
MR. SATRE said placer miners are the heart and soul of Alaska's
mining industry and there are about 300 placer mines scattered
throughout the state producing 85,000 ounces of gold annually.
12:41:38 PM
MR. SATRE said he would be here for the rest of the day if he
was going to talk about every single gold exploration project,
but the big ones are International Tower Hill (ITH) Mines
Livengood Project, Barrick and NovaGold that have invested in
the Donlin Gold Project in the Kuskokwim area, the Heatherdale
Resources Project in Niblack with gold being the major producer
and the Pebble Partnership in the Bristol Bay area with copper
as a primary product.
12:43:01 PM
MR. SATRE said Alaska is an incredible producer of silver,
having produced a total of over 140 million ounces; this year it
produced 13 million ounces. Many people thought silver would
crash once digital photography took over film and the lack of
interest in it as an investment metal, but it is an incredible
metal for use in medical applications and many electronic
applications due to its great conductivity. Worldwide production
is significantly more than in Alaska, but the two silver
producers, Hecla Greens Creek Mine and the Red Dog Mine, are
major producers. Greens Creek has 400 workers and it is a
significant property taxpayer in Juneau. They are currently
working on an EIS to expand their (dry stack) tailings storage
facility to allow for many more years into the future.
12:44:37 PM
MR. SATRE related that, while gold mines get all the credit,
zinc is one of Alaska's primary exports. It has wonderful anti-
corrosive properties and it is a key element for life, growth
and development. Lead has many uses, also, whether it's on
batteries or simply on the end of the fishing line to get it to
the right spot. About 155,000 tons of lead and about 700,000
tons of zinc are produced per year. The main producers are the
Red Dog Mine (one of the largest producers of zinc in the
world), Hecla Greens Creek, Heatherdale Resources' Niblack Mine
and the Novacopper in Upper Kobuk.
He said copper is another metal that is incredibly important to
the world economy and Alaska has produced over 1.3 billion
pounds of it, primarily from the Kennecott Mine with some minor
production from Fire River Gold. The world is producing close to
40 billion pounds on an annual basis and if Alaska develops some
of its copper projects it can join in and help supply the world
economy.
MR. SATRE said that Novacopper/NANA is expending a significant
amount of money in the Upper Kobuk mineral project
reinvigorating a historical district and maybe a potential
important copper producer. The Pebble Partnership is investing
in the Bristol Bay area in what is truly one of the world's most
amazing undeveloped copper projects; Heatherdale Resources at
Niblack has some copper as well.
MR. SATRE said coal was not necessarily part of the group he
represents (Deantha Crockett does), but they do have production
at the Usibelli Coal mine, a family owned business that has been
around for a long time and is an important part of the Railbelt
economy at 2 million tons per year (1 million of which is used
in Alaska for power generation and about 1 million exported).
Usibelli is working on projects at Wishbone Hill and the Chuitna
Coal project in Cook Inlet.
12:47:45 PM
MR. SATRE said rare earth elements have a lot of attention and
Alaska doesn't produce any of them, but it has some on the
horizon at Bokan Mountain Ucore project in Southeast Alaska.
Alaska could ultimately play a critical role in supplying these
to the US, just as it does in supplying the other metals.
MR. SATRE concluded saying he would hand the presentation over
to Deantha to talk about the local and statewide benefits the
mining industry brings.
12:48:11 PM
DEANTHA CROCKETT, Executive Director, Alaska Miners Association,
Juneau, Alaska, said she provided the committee with their
annual economic benefits of the mining industry brochure, done
by the McDowell Group. She said the report comes out in the
beginning of the year, so 2013 reflects their final 2012
numbers. She said $275 million had been spent on exploration for
60 projects; in addition there were $270 million in development
expenditures and $3 billion in gross mineral production.
She said with all the emphasis on the oil industry, it's
important to recognize what the mining industry contributes; for
instance, it provides 4,800 direct jobs and 9,500 total indirect
jobs. It has a $650 million total payroll and the average annual
wage is $100,000. These are very high paying jobs that are year-
round and often times in communities without another economy.
12:50:32 PM
MS. CROCKETT said each year the mining industry does $500
million in business with only Alaskan businesses: suppliers,
contractors and vendors that really depend on the mining
industry's activity to make a go. Mining paid a total of $21
million to local governments in 2012 and is the only taxpayer in
the Northwest Arctic Borough, paying $13 million in lieu of
taxes last year. Mining contributed $5.2 million to the
Fairbanks North Star Borough and $2.7 million to the City and
Borough of Juneau.
She said $80.4 million was paid to the state government in
royalties rents, fees and taxes in 2012 in addition to $56.9
million to other state government entities such as to the Alaska
Railroad for moving coal, sand and gravel, to the AIDEA-built
road from the Red Dog Mine, the Skagway Ore terminal and to the
Mental Health Trust from activity on their land.
She listed the benefits to Alaska Native Corporations; nearly
all benefits from 7(i) and 7(j) royalty sharing and business
partnerships (like the NANA Linden Trucking operation at Red
Dog). She said there were $124.7 million in net proceeds from
Red Dog last year; $76.4 million was paid to NANA and
distributed to ANCSA corporations throughout the state and
nearly 60 percent of Red Dog jobs are held by NANA shareholders.
Donlin has also done an amazing job with their camp at Donlin
Gold where 95 percent of the employees are Chulista
shareholders.
MS. CROCKETT said every ANCSA region in the state has some form
of mining potential or activity happening on it. She hoped they
would remember that mining works for Alaska; it has for a long
time and it will continue with all the mines they had talked
about and those on the horizon. What they do is important to the
entire world and the local benefits they provide are extremely
important to state's economy.
12:53:25 PM
CHAIR GIESSEL noted the need for the Lake Dorothy hydro project
due to Greens Creek's electrical needs, which would benefit all
consumers in terms of the kilowatt hour. Mining contributes in
so many ways to the economy of communities.
She noted the presence of Co-Chair Feige and Representatives
Peggy Wilson and Tarr saying they had joined the committee a
while ago. She also noted that zinc was good for preventing
colds.
12:54:49 PM
SENATOR MICCICHE asked with all the energy challenges our state
has, what happened to coal.
MR. SATRE responded that he would pass that question to Usibelli
and Chuitna, but like any other project in the state, access and
infrastructure mean everything. It's expensive to get to it and
there may not be a ready market; but Alaska has incredibly
significant resources.
CHAIR GIESSEL said she heard the DNR commissioner say if Alaska
was a country we would be 10th in the world in terms of our
resources. She thanked the presenters.
12:56:12 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Joint House/Senate Resources
Committee meeting at 12:56 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Joint Resources - Mining Industry Overview 2013.02.17.pdf |
SRES 2/27/2013 12:00:00 PM |