Web posted Friday, August 26, 2011

NANA, Nova may partner on Northwest mine projects

By Tim Bradner
Alaska Journal of Commerce

NANA Regional Corp. is close to an agreement with NovaGold Resources Inc., of Vancouver, B.C., on a partnership to jointly explore and possibly develop copper and zinc resources in the Ambler mining district of Northwest Alaska.

The plan was approved in concept by NANA's board last January but final details are still being worked out, said Lance Miller, NANA's vice president for natural resources.

NovaGold and NANA would combine resources owned by the Kotzebue-based Native regional corporation in the Bornite and Ruby Creek prospects on the upper Kobuk River with NovaGold's Ambler project, in the Ambler mining district in the same region.

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NANA owns patented mining claims at Ruby and Bornite, as well as lands in the immediate area. Kennecott Exploration Co., the previous owner at Bornite and Ruby Creek, has estimated there are about 50 million tons of ore with grades of copper ranging from 1.2 percent to 4 percent.

NovaGold's Ambler project is estimated to hold 16.8 million tons of ore indicated by drilling with average values of 4.1 percent copper and 6 percent zinc, and an additional 12 million tons of ore that are inferred, or estimated by wider-spaced drilling, with an average grade of 3.5 percent copper and 4.2 percent zinc.

NovaGold took over the Ambler project from Kennecott after that company had spent several years on exploring the deposit.

Miller said the region is mineralized and contains a number of volcanogenic massive sulfides deposits, a kind of metal sulfide ore deposit, similar to that in the Greens Creek Mine in Southeast Alaska, and which can contains copper, zinc and lead and also precious metals.

"The Arctic deposit (held by NovaGold) is a significant deposit and the copper and zinc in the ground there is estimated to be very high grade material. Bornite, south of the Ambler Mining District, may also be a source of copper," Miller said.

Exploration is under way at both sites this summer, with camps at Dahl Creek at the Arctic deposit and at Bornite. About 45 people are employed on the exploration, half of them NANA shareholders, Miller said.

NANA has been engaged with zinc and lead mining at the large Red Dog Mine, in the DeLong Mountains north of Kotzebue, since 1989, but the decision to form the partnership with NovaGold is a strategic move to get involved and influence development in the Ambler Mining District, an area of mostly state-owned lands east of Kotzebue.

What is significant about this is that it signals willingness to consider road access to the Ambler district, and potentially other parts of the region. A road connection to the Ambler region has been discussed for years but the villages of the region have seen concerned about any road that would more access to the region by sports hunters and fishermen, possibly affecting local subsistence resources. The issue is being discussed with villages in the region, Miller said, and leaders will take its cue on a road policy with advice from its shareholders.

Attitudes are changing, however.

"In our 2009 shareholder survey, there was strong support for roads, with 77 percent supporting road development. This was a drastic change from 1989, when the majority of our shareholders were opposed to roads," Miller said. "A lot has changed since then. The energy crisis is affecting our region, raising the cost of everything from food to fuel. It is 61 percent more expensive to live in Kotzebue than in Anchorage. NANA is actively working to address this.

"The discussion is being held at the village and regional level, and we are happy with the approach being taken by the state Department of Transportation and Public Facilities with regional outreach," Miller added. "No route has been selected yet and it is premature to select one. The department is consulting with the communities and we are committed to that consultation process."

Road access to the region will be a challenge. The area is essentially blocked from the east by federal land units and although there is a provision for a transportation corridor across federal lands in the Alaska National Conservation and Lands Act passed by Congress in 1980, whether one can actually be obtained is uncertain. An alternative is a more southern route that skirts the federal lands, but this adds distance and costs.

Road access from the west, up the Kobuk River valley, is another possibility.

Miller said that more higher-grade ore would have to be found at both the Arctic and Bornite deposits to support a road. The ore grades at Arctic and possibly Bornite are high enough to support mining and trucking of ore concentrates, but substantially more resources will be required.

At the Red Dog Mine, for example, the zinc and lead ore are rich enough to support trucking and there are substantial ore reserves of about 150 million tons.

"We're not there yet with the Arctic deposit. We need more," Miller said.

In theory, the best transportation mode to use with development of base metals mines like copper and zinc are railroads, and a railroad to Northwest Alaska also has been discussed for years.

Railroads have some advantages because they also allow for more control of public access, an idea that finds acceptance among Northwest Alaska residents who are concerned about access to local fish and game by sports hunters and fishermen.

However, the capital cost of a railroad means that even more ore, and mines, will have to be discovered.

"It would take production from four mines the size of Red Dog to support a railroad," Miller said.