Donlin Gold decision about two years away, mining company says

Barrick Gold and NovaGold Resources, owners of the large Donlin Gold project in western Alaska, are still about two years away from a decision to build the big mine.

Gold prices must still show some improvement, however, for the mine to be economic, but the mine owners are also working on reducing costs, said Kurt Parkan, external affairs manager for Donlin Gold, the joint-venture project operator. Building the mine will require a capital investment over $6 billion.

But a lot of progress has been made. Donlin Gold is near to completion of a lengthy, 6-year environmental permitting process and has secured the most important federal approvals, including the U.S. Army Corps of Engineers Section 404 wetlands permit and a U.S. Bureau of Land Management right-of-way corridor for a 315-mile 14-inch natural gas pipeline built from the Matanuska-Susitna Borough.

Federal agencies have also agreed with Donlin Gold on a wetlands-impact mitigation plan, an important step. The project will affect about 2,800 acres of wetland but the mitigation plan will protect or improve about 6,000 acres.

Parkan said the mitigations plan for the gas pipeline includes construction of safety cabins along parts of the Iditarod Trail that are near the pipeline as well as a commitment to annual projects to support trail work for the race.

State permits must still be secured, including one major one, an authorization for a dam that will store tailings, or waste, from the mine.

The state dam safety permit will require additional geotechnical drilling and engineering, Parkan said. That will require several million dollars of additional investment. A water rights reservation must also be secured from the state.

The deposit is on Donlin Creek near the middle Kuskokwim River about 350 miles west of Anchorage. It has 33.9 million ounces of identified gold resources and the potential for far more, and is one of the world’s largest undeveloped gold deposits.

Donlin Gold is on land owned by Alaska Native corporations. Calista Corporation, the Native regional corporation for the Yukon-Kuskokwim region, owns the subsurface mineral rights. And sponsored the geologic work that led to the discovery of the gold deposit in then1970s. The surface lands are owned by The Kuskokwim Corporation, a consortium of small village corporations in the mid-Kuskokwim area.

If the mine is built it would produce about 1.1 million ounces of gold yearly.

But high cost and the remote location are still formidable barriers. Parkan said one option being explored is third-party ownership of infrastructure needed to support the mine, particularly the 315-mile gas pipeline planned to bring gas to the mine from Cook Inlet gas fields near Anchorage. The pipeline constitutes about $1 billion of the $6 billion-plus capital costs.

Another opportunity is for an investor to finance and own the 220-megawatt gas-fired power plant to provide power needed for the mine, which would cost several hundred million dollars.

“If we can get someone else to take on some of these investments we can reduce some of our front-end cost and pay for these as expenses through the operating life of the mine,” Parkan said.

The state of Alaska can also provide assistance in infrastructure financing through the Alaska Industrial Development and Export Authority, the state’s development finance corporation. AIDEA has a long track record in mine infrastructure financing beginning with the access road and port for the producing Red Dog lead and zinc mine in northwest Alaska, which is also remote.

Barrick Gold, which owns 50 percent of Donlin Gold, is the world’s largest gold mining company.

NovaGold Resources,which owns the other 50 percent, is a ”junior” mining company that has focused on exploration.