Peninsula could cash in on Pebble mine project

Posted: Thursday, February 17, 2005

Although the economy of the Kenai Peninsula is heavily dependent upon the oil and gas, fishing and tourism industries, interest has turned lately to the promise of a proposed major mining project in the borough next door.

Northern Dynasty Minerals Inc. is edging toward completion of a feasibility study and state permit acquisition to build an open-pit mine known as the Pebble Gold-Copper Project north of Lake Iliamna in the Lake and Peninsula Borough west of Cook Inlet.

The company is risking millions, but geologic surveys indicate the payoff could be huge in gold, copper, molybdenum, silver and other metals.

It is the potential ripple effects of the project that have the attention of residents and government officials in much of Southcentral Alaska, including the Kenai Peninsula. Northern Dynasty is considering various operational scenarios, all of which could mean jobs for Southcentral Alaska residents and perhaps lucrative contracts for local supply businesses.

The mine's prospects are thought to be far more than "pie-in-the-sky," but at this point, the Canada-based firm isn't making money. Future profits rest below a still-distant horizon. If all goes as planned, the first ore to be extracted from the Pebble site won't see daylight until 2009.

Nevertheless, optimism is high, based as it is on assessments that last fall showed an excellent potential for a long-life mine with large-scale, low-cost metal production, according to the company.

The highest of three production rates studied by company analysts suggested an open-pit mine could unearth 200,000 tons of ore per day, resulting in an annual average of 470 million pounds of copper, 674,000 ounces of gold, 15 million pounds of molybdenum and 2.5 million ounces of silver during the first 10 years of a 31-year mine life.

Such potential lends itself to economies of scale. Recently, the company said, "Continuing studies indicate that the Pebble resource is large enough to potentially utilize the largest, most cost-effective and efficient grinding equipment currently available."

Northern Dynasty President and CEO Ronald Thiessen said the mine could return between $1.047 billion and $2.091 billion on investments at long-term average metal prices.

Currently, the company is doing engineering and environmental-socioeconomic work necessary for completing the feasibility study this year. Meanwhile, the company has joined with Homer Electric Association in a study to determine how best to delver electrical energy to the mine site.

The company also is working with state officials to secure the necessary permits and to ensure environmental safeguards.

The Kenai Peninsula Borough's Community and Economic Development Division has had the project centered on its radar for some time. The borough has facilitated meetings between community leaders and businesses across the borough and representatives of the mining company, focusing the company's attention on the many services and facilities the borough has to offer the Pebble project.

"The Pebble project will develop what appears to be a world-class gold, copper, silver and molybdenum deposit through an open-pit mine and mill that will process between 100,000 and 200,000 tons per day of raw ore," said Bill Popp, the borough's liaison to the oil and gas industry.

Popp recently completed the 2004 annual report on the Cook Inlet oil and gas industry, but included "other projects" including the Pebble mine. Popp said the mine would have ripple effects in the local economy, including in the oil and gas industry.

The mine will need "several infrastructure components," Popp said, including a road connecting the mine to Cook Inlet (roughly 85 miles), and an improved port at its terminus, as well as "a support industry base able to offer skills and services specific to the mine operations."

Also needed would be a power generation and delivery system capable of delivering 200 megawatts of electricity.

Such infrastructure and work force improvements could have positive effects on the economy and on the Cook Inlet oil and gas industry on several levels, he said. For instance, businesses now focused on supply and support activities for the oil and gas industry might expand the scope of their services to the mining industry.

Popp said hundreds of jobs produced by mining operations directly or by its peripheral influence on the economy would likely be filled by Kenai Peninsula workers. Residents of the Lake and Peninsula Borough and other communities of the Bristol Bay area probably would get first shot at many of the estimated 2,000 construction jobs and 1,000 permanent jobs, he said, but with the general population of that area hovering around 8,000, "it is highly unlikely that the local population of the region could provide the entire work force needs of the project," Popp said.

The Kenai Peninsula's substantially larger population, its trained work force and the availability of training facilities in Kenai, Seward, Soldotna and Homer puts the borough in "an excellent position to fill a significant portion of the work force needs of the Pebble project," Popp said.

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