Donlin Gold project has fresh momentum; Mat-Su will be staging point for 315-mile gas pipeline built west to Kuskokwim River

A big project that will bring construction jobs and new industrial tax base to the Matanuska-Susitna Borough has new momentum. It is the Donlin Gold mine on the Kuskokwim River west of Mat-Su.

A 315-mile natural gas pipeline to supply gas to the project will be built from Mat-Su to the planned mine, which means construction of the pipeline will be staged from the region. The pipeline could cost a billion dollars and once built will add substantial new industrial tax base for the borough.

The gold project is on Donlin Creek on the Kuskokwim River, near the community of Crooked Creek. With 39 million ounces of estimated gold resources it is one of the biggest undeveloped gold deposits in the world.

Several thousand people would be employed in construction. The pipeline from Mat-Su is a major part of the project.

Todd Dahlman, new general manager at Donlin Gold, the company developing the mine, updated members of the Resource Development Council at a meeting Sept. 4.

Dahlman said work is under war this year on drilling for resource evaluation and to obtain geotechnical information. An updated feasibility study for the project will be soon underway, Dahlman said in the briefing. That will provide an updated cost estimate for the mine and the pipeline.

Meanwhile, a new ownership structure for the project is giving fresh momentum to the project, he said. The new structure involves NovaGold Resources, which previously owned 50% of the project, increasing its share to 60% and Paulson Advisors, a major investor in NovaGold, acquiring a 40% share. Barrick Gold, previously 50% owner, exited the project last summer to focus on other priorities, Dahlman said.

Calista Corp., the regional Alaska Native corporation for southwest Alaska, is the subsurface resource owner with surface lands owned by The Kuskokwim Corp., a consortium of small village corporations in the area.

Dahlman said Paulson is an experienced investor and has a deep knowledge of Donlin Gold through its involvement with NovaGold. A better alignment of interests among the owners has given the project fresh momentum, he said.

This pace of activity at the project has picked up. Four drill rigs are at work this summer with 15,000 meters of drilling and 50 test holes planned to gather more information for resource modeling as well as geotechnical information for designing the “pit walls” of the mine.

Drilling is also planned to locate pits for gravel resources, Dahlman said. This is significant because it signals that the project is moving into construction planning. The company has about 70 people at the site this summer, many of them hired locally from 19 communities in the Yukon-Kuskokwim region of Southwest Alaska.

The known gold resource is sufficient to support 1.1 million ounces of gold production for 22 years of mine life now estimated. There is additional gold potential in the area but the company’s focus now is on bringing the known deposit into production, Dahlman said.

Typically, once a mine gets in production additional resources are found and the mine life is extended. This has happened at other Alaska mines, such as at the Fort Knox gold mine near Fairbanks, where Dahlman was previously general manager.

If it moves into construction Donlin Gold will be a very large project and management of logistics will be critical to its success. The main supply corridor will be up the Kuskokwim River from Bethel. An existing airstrip at the site that supports exploration will have to be expanded, and facilities to support operations and 600 to 800 personnel will be needed.

Dahlman acknowleged the concerns over pending declines in gas production from Cook Inlet gas fields that will supply the mine through the pipeline but said Cook Inlet has potential for new gas discoveries. Donlin Gold would be a large new customer for explorers and gas producers in the Inlet with a steady, year-around demand. This will provide major incentives for explorers to find new gas, he said.

There is a long history to the Donlin Gold project. The deposit was originally discovered over 40 years ago by geologists working with Calista Corp. to help guide Calista in selecting lands under its land entitlement from the 1971 Alaska Native Claims Settlement Act.

Calista worked for several years to interest a major mining company in exploration and in the 1980s was able to bring in Placer Dome, which did substantial drilling over several years. For corporate reasons Placer scaled back its work and NovaGold, a “junior” exploration company, stepped in to invest in further exploration.

NovaGold found more gold, earning a 50% share of the project. Barrick then acquired Placer Dome and its 50% share and became the project operator under the Donlin Gold Joint Venture.