Web posted Friday, August 26, 2011

Livengood mine gives boost to Fairbanks area

By Tim Bradner
Alaska Journal of Commerce


  A drill rig is at work at the proposed Livengood gold mine, a potential $1 billion mine north of Fairbanks. Photo Courtesy of International Tower Hills   

A possible $1 billion new gold mine north of Fairbanks will be a big shot in the arm for Interior Alaska's economy, if it proceeds.

International Tower Hills' gold exploration project in Livengood, 70 miles north of Fairbanks, would provide a lot of new jobs and business for suppliers and service companies, if it moves forward. It would be larger than Fort Knox, another gold mine northeast of Fairbanks that is now producing.

"We're in the middle of our pre-feasibility study now. This will be our first look at engineering, metallurgy, our processing design and the infrastructure needed. We expect this to be out in mid-November," said Karl Hanneman, general manager of the project.

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Exploration and development of a large mine is done in a phased process. The steps in the project development include the pre-feasibility study, usually followed by further work to optimize the design and add more detail, Hanneman said. This is followed by the feasibility study itself.

"The difference between the two is the greater level of detail," he said. "The pre-feasibility study would include estimates of capital expenditures, for example, while the feasibility study would require actual quotes from two or three vendors. There's a greater degree of accuracy in the estimates."

Typically the feasibility study and the National Environmental Protection Act review occur on parallel tracks, and usually, at the end of both, the project is sanctioned and moves to production. This is followed by production and, ultimately, closure.

The pre-feasibility study define the schedule for the following steps, and also would include operating cost and capital investment estimates and expected production rates.

International Tower Hills also just released a new Preliminary Economic Assessment, or PEA, a requirement of the Canadian Securities Administrators that must be done following the end of an exploration company's fiscal year, which was the end of May for ITH.

A PEA was issued in August 2010 and 2011, Hanneman said. This year's will include a higher level of estimates for the project economics compared to last year's filing.

The company is drilling to provide information for the pre-feasibility study and to further define the resource, as well to continue exploration work, Hanneman said. The resource definition aims to move resources from "inferred" to "measured and indicated."

"We are basically improving the quality of our information about our resources," Hanneman said.

"Inferred resource" is an estimate based on results from relatively widely spaced drill holes. The confidence level is lower than a "measured and indicated" estimate, determined through a more tightly spaced pattern of drilling, giving a higher degree of accuracy.

Bigger than Fort Knox

As of last March, the company had "measured and indicated" 397 million tons of resource containing an estimated 10.6 million ounces of gold and an additional "inferred" resources of 104 million tons containing an estimated 2.7 million ounces of gold. New resource estimates are expected to be published soon.

Overall, the ore body is believed to be about twice the size of the Fort Knox Mine, and the grade appears to be similar, Hanneman said.

"Fort Knox is currently milling ore of slightly lower grade than our estimated average ore grade. That is quite encouraging for us," he said.


  Stream sampling is underway in the waters near the planned Livengood gold mine in Interior Alaska. Photo Courtesy of International Tower Hills   

There are some other differences with Fort Knox.

"Our host rocks are quite different. The ore at Fort Knox is in granite and is generally consistent through the ore body, which means the feed to the mill is generally consistent. We have a more complex ore in sedimentary and volcanic rocks, with changes in the ore at different levels," Hanneman said. "As we advance to deeper layers there will be some changes. This means we have to do good testing work to develop an optimal process. It's a complexity we have to manage."

The ore also has arsenopyrite associated with the gold mineralization, similar to the ore being mined at the Pogo Mine near Delta, east of Fairbanks.

"This means we'll have to manage the arsenic in the ore, but fortunately arsenic is relatively easily removed through a water treatment process," he said. "We'll also have to manage the water runoff through the (soil and rock) overburden," in and around the mine.

The depth of the ore body is defined in some areas, reaching as deep as 1,000 feet. This doesn't mean the ore can be economically mined to that depth, however.

Lands in the ITH Livengood property covers 50 square miles, land owned by the state and federal governments (managed by the Bureau of Land Management) as well as the Alaska Mental Health Land Trust. A key portion of the deposit is on the BLM lands. Hanneman said there doesn't appear to be any major federal or state issues that would complicate the permitting for the mine.

Access and process

The company is still studying the gold ore processing options, but the economics so far point to a big mill, rather than a heap leach process, for example. A mill requires large amounts of power, however, and ITH is still working on the power requirements.

A long-distance transmission line is the favorite method to get power to the site, although the company has evaluated on-site power generation. Connecting to the grid is best for the community in the long run, Hanneman said. ITH will probably build the transmission line, as was done at the Pogo Mine and Fort Knox, but is open to the local utility stepping in.

Having access to the grid also would give the mine access to renewable energy on Golden Valley Electric Association's system, including wind power from Bradley Lake, Eva Creek and maybe someday Susitna.

"Livengood is a long-term project and we have to think long-term. If we can help bolster the power generation capacity for the entire grid, we can benefit the community and help make it sustainable," Hanneman said.

Having road access and available infrastructure is a big advantage.

"Livengood is an old mining district where gold was first discovered in 1914. There was a lot of placer mining in the area and the miners pushed hard for a road, the Elliot Highway, which was built in the 1930s to serve the mining district," Hanneman said.

The low grade deposit was known by the early miners. In fact, the miners named Money Knob, the major geographic feature in the exploration area, because of the known gold there. However, the gold was low grade and the technology to develop the ore wasn't available.

Now the technology is available, and the price of gold is at high levels. Roads and trails have been built all through the area, "and this is infrastructure we can now take advantage of,"

The company is also taking advantage of a former Alyeska Pipeline Service Co. construction camp, which includes shops, dining facilities and living quarters that have been refurbished. The Trans-Alaska Pipeline System is only four miles away and a fiber-optics cable built in the TAPS corridor allows for enhanced communications for people working at the exploration site.

Mining jobs

The number of employees needed will come with the pre-feasibility study. The $1 billion capital investment would require roughly 1,000 construction workers, and 500 to 600 for operations.

The project employed about 150 this summer, with about 110 still working in August. Seven drill rigs were at work this summer, a few more than last year.

Fairbanks houses a good pool of trained workers, and more workforce development is under way.

ITH has already worked with the state Department of Labor and Workforce Development in a drill helper training program, and the University of Alaska Fairbanks offers ample training ground.

Where employees will be housed is still being worked out, although some may commute the 70 miles from Fairbanks.

"The economic benefits of the project will be spread wide in the community," Hanneman said. "There is a good support industry and a good network of vendors in Fairbanks created for the oil industry and Fort Knox and Pogo" that will also be able to support Livengood. "These are people who know this business and what our needs are."

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.