Legislature(2005 - 2006)BELTZ 211
04/27/2005 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB121 | |
| HB27 | |
| SB188 | |
| SB179 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 27 | TELECONFERENCED | |
| + | HB 121 | TELECONFERENCED | |
| *+ | SB 188 | TELECONFERENCED | |
| = | SB 179 | ||
SB 179-MINERALS TAX/PAYMENTS TO MUNIS IN LIEU
CHAIR GARY STEVENS announced the committee would hear a Donlin
Creek Project update that relates to SB 179.
JAMES FUEG, Technical and Permitting Coordinator for the Donlin
Creek joint venture, gave a review of the Placer Dome mining
company and an overview of the project. He said he would touch
on the highlights of a larger presentation.
2:10:54 PM
Page 2
Project Location
The Donlin Creek project is located about 12 miles north of the
village of Crooked Creek and 180 miles up the Kuskoquim River
from Bethel. The location is remote and all materials are
supplied by air transportation. If the mine goes forward, all
supplies for construction would be barged up river to a point
about five miles from the mine. The company would construct a
road to transport goods the final five miles to the mine site.
Page 3
Donlin Creek Joint Venture
· Placer Dome Managing Joint Venture Partner
· Nova Gold Resources Joint Venture Partner
· Calista Regional Corporation is the subsurface estate owner
· The Kuskokwim Corporation - the regional village
corporation - owns the surface estate
Placer Dome has been in the area for ten years and has a strong
local hire history. Currently 50-70 people are on site, but the
number varies depending on what's going on. Typically 65-80
percent of the people in the camp are from the local area. A lot
of professional staff comes from Alaska and a local charter
company transports personnel to and from the site.
2:12:51 PM
Page 10
Current Resource Estimate:
Work began in 1995 and expenditures to date are on the order of
$58 million. Of that, Placer Dome has spent about $45 million
and Nova Gold Resources has spent about $10 million. The budget
for 2005 is about $11.5 million. The payroll directed to
shareholders in the area for the Month of March was about
$180,000.
In spite of the amount of time and money already spent the
company is still several years and millions of dollars from
making a final determination on whether or not to go ahead with
the project.
As it stands now the total resource amounts to about 25 million
ounces of gold of which 11 million ounces is measured and
indicated and 14 million ounces is inferred. Measured and
indicated is a reflection of the measure of confidence that is
needed to be able to do a pre-feasibility study. Not all of the
25 million ounces will necessarily be mined. The decision is
driven by economics that will evolve as the studies advance and
as the mine advances - if indeed it does goes forward.
2:14:43 PM
Page 12
Primary Issues:
There are three major issues upon which the project rests and
they are power, lime and logistics.
· Power: About 80 megawatts will be produced on site with
diesel generation plants with an anticipated 40 percent wind power
offset.
· Lime: A low-grade lime resource has been identified in
the region of the deposit and is being drilled out to determine
whether it will meet the requirements.
· Logistics: Up to 250,000 tons of consumables per year
would be required for operation. It would be barged up the
Kuskoquim River to a port location then over to Donlin Creek.
Page 13
Power - Potential Solution
· Current Plans require 80 MW Peak Load, 70 MW Average Load
(30k tons per day mill)
· Evaluated more than 10 options
· On site generation using diesel is current focus
· Potential to supplement with wind generation
· Wind option requires data collection for
validation
· Objective - offset ~40% of fuel requirement
Page 15
Logistics and Infrastructure
· Annual consumables (30,000 tons per day mill)
· General Consumables 50,000 tons
· Fuel (no wind generation) 140,000 tons
· Lime (assumes on site CCE) 20,000 tons
· Barge materials up the Kuskokwim River
· Port location at Jungjuk Creek
· All weather road to Donlin Creek
· Construct a new 6,000 foot airstrip near Donlin Creek
Page 16
Preliminary Process Outline
· Conventional open pit
· 2 pits (ACMA, Lewis)
· Track and shovel mining
· Evaluating 30,000 and 40,000 tons per day scenarios
· Logistical Supports
· Grade control/dilution issues
· Three stage crushing and primary ball milling
· Floatation/Pressure oxidation mill - This process cooks the
refracted ore out of the sulfide in giant pressure cookers,
which is why so much power is needed for the operation.
· Conventional tailings
2:16:54 PM
Page 17
Infrastructure
If the project moves ahead, approximately 25 miles of road would
be constructed from the river to the site. A port and laydown
area would be constructed at Jungjuk Creek as well as a 6,000
foot surfaced runway to fly personnel and equipment in and out.
The company will build all facilities associated with power
generation, including fuel storage and transmission lines, which
amounts to a significant part of the project.
2:17:34 PM
Page 18
Environmental studies have been ongoing including more than just
the project area itself. The entire access corridor up the
Kuskoquim River down to the shores of the Kuskoquim Bay must be
considered and evaluated to ensure that the project can be done
in an environmentally sound manner.
2:17:59 PM
Page 20
Project Description
· 30,000 to 40,000 ton per day mill operation
· Waste rock and initial tailings deposited in American
Valley where the deposit is located. Later tailings may be
deposited in Anaconda Valley if the first is filled.
· Supplies barged up Kuskokwim River to port at Jungjuk Creek
· Power provided by onsite diesel supplemented by wind
Based on current estimates, the direct costs of the project are
in the neighborhood of $1 billion. That is the cost of
purchasing equipment, constructing buildings, building
infrastructure. It doesn't include construction overhead so the
total cost will be significantly more than $1 billion.
This is a large project with large scope and he speculated that
if the project goes ahead, it would be the biggest private
industry project in Alaska after the pipeline. This is in an
area that would stand to benefit tremendously from the project.
Because of the remote location and the difficult nature of the
entire process, the capital investment would be huge. Therefore
a sound understanding of the process, and a well defined
economic model is necessary so the board can make a final
determination and get financing for the project.
Currently, one of the biggest unknowns in the economic model is
the element of local taxation. This is why SB 179 is so
important to Donlin Creek and any similar projects in the
future.
MR. FUEG concluded:
It's not an issue of us wanting to bypass the local
community. We recognize the concerns about imposing
agreements on local communities and we certainly
respect and share your concern about all these issues.
What we are doing, is asking for some mechanism that
we can use to negotiate and develop a tax certainty
that we're going to need to move this project forward.
CHAIR GARY STEVENS asked how many personnel are required now and
during full operation.
MR. FUEG replied during the summer between 40 and 60 people
would be employed on any given day. During construction the
estimate is for about 600 people for about two years. Depending
on final size, between 350 and 400 people would be employed
during operation.
CHAIR GARY STEVENS asked what happens to the ore when it leaves
the site.
MR. FUEG clarified this is strictly a gold mine. Gold bars would
be molded on-site and the finished product would be flown out.
2:22:12 PM
SENATOR STEDMAN asked where the crew would come from.
MR. FUEG replied the company would hire locally to the extent
possible and transportation would be similar to what's done at
the Red Dog. Flights would go to and from Anchorage and smaller
charter aircraft would provide transportation to and from the
various local villages. The rotation would likely be two weeks
on and two weeks off. The mine would run 24 hours a day 365 days
a year.
SENATOR STEDMAN asked about reclamation.
MR. FUEG said a reclamation plan is in progress. Although they
can't leave things the way they were before mining began, they
don't intend to leave issues behind once the mine has moved on.
SENATOR STEDMAN asked for the estimated lifespan of the mine
once it's operational.
MR. FUEG replied it depends on the mill size that is settled on
and the percentage of the reserves that can actually be mined.
The number they are using currently is 15 years, but it's worth
noting that mines typically run longer than the original
estimated life.
SENATOR WAGONER noted the concern associated with capping the
millage rate and whether 6 mills would be sufficient if the area
were to incorporate.
MR. FUEG said he could only speak to Donlin Creek as a Placer
Dome representative. That being said, $1 billion in direct
capital cost translates to $1 million per mill. That would give
the newly organized, rural, government a $2 million operating
budget. Assuming the area goes with the model borough, the
Kuspuk School District has about 1,500 people. Looking at other
rural boroughs in the state, that amount is more than in line
with the typical budgets.
SENATOR WAGONER remarked corporate and other taxes would amount
to another 9 or 10 percent.
MR. FUEG said in addition to corporate and mining license taxes
there is a royalty component that would go to Calista
Corporation.
CHAIR GARY STEVENS asked for some background information on the
company.
MR. FUEG explained that Placer Dome is an international mining
company headquartered in Vancouver, Canada. Currently the
company employs 18,000 people in mines that are scattered from
Africa, Indonesia, and Australia to North and South America. The
company operates several mines in Nevada and one in Montana.
Donlin Creek would be the only mine in Alaska.
Placer Dome has a history of building mines in undeveloped areas
such as Donlin Creek. The mine in Indonesia and the Mussel White
Mine in northern Canada are probably the most similar to Donlin
Creek and are located in completely undeveloped areas.
Placer Dome has a history of working successfully with Native
people in remote mine areas and a philosophical cornerstone of
doing business is their sustainability policy. They look at what
would be left behind and what the long-term benefits would be to
the community. They recognize that mining isn't a renewable
resource so it's a corporate policy requirement to leave behind
something positive. Typically that takes the form of a more
skilled and more highly educated workforce.
Placer Dome produces about 4 million ounces of gold a year plus
several hundred thousand tons of copper. Currently they have
three large projects at a similar stage of development as Donlin
Creek. One is in Chili, one is in the Dominican Republic and the
third is Donlin Creek.
2:30:37 PM
CHAIR GARY STEVENS questioned how far the mine site is from
Bethel.
MR FUEG replied it's about 180 miles away. The closest community
of any size is Aniak and the closest town is Crooked Creek,
which is 12 miles south.
2:31:10 PM
SENATOR WAGONER asked if he thought the mill rate is excessive.
MR. FUEG said the company was hoping for something a little
lower and they are still evaluating the effect. Certainly it is
a burden to the project, but they recognize their responsibility
to the local community. As a company they've taken a neutral
position on borough formation in the area. They want to meet
their commitment in terms of education and if a borough forms
they would like to contribute their fair share to the operating
costs of the borough while recognizing that they would draw no
services.
SB 179.was held in committee.
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