Company says gold mine shows promise despite hurdles

Posted: Friday, November 09, 2001

ANCHORAGE (AP) -- Alaska's Pogo gold deposit is worth pursuing although the effort is barely economically feasible, given high project costs and low gold prices, a TeckCominco executive said.

The deposit, northeast of Delta Junction, contains at least 5.5 million ounces of high-quality gold, Klaus Zeitler, senior vice president of TeckCominco, said Thursday at the Alaska Miners Association convention in Anchorage.

Price, permitting and design considerations will determine whether Pogo becomes an active gold mine or just another investment opportunity competing with other projects TeckCominco is eyeing, Zeitler said. Gold prices would have to rise or remain stable and government permits would need to be approved quickly for a 50-mile road, power line and wastewater treatment system.

Another necessity would be a favorable tax climate, Zeitler said.

TeckCominco has already invested $70 million for exploration and design at Pogo. The total cost of bringing Pogo into operation is estimated at $250 million. The major reason Pogo is so costly is the road and power line it requires.

TeckCominco hopes to begin production in 2004, and mining would occur for about 12 years, the Anchorage Daily News reported.

Financially, the mining industry overall has performed poorly over the past decade, with return on capital investments in the single digits. Determined to buck that trend, TeckCominco will no longer approve projects unless they can yield at least a 10 percent return. Under those conditions, Pogo barely meets the mark, Zeitler said.

The mining executive warned about recent efforts to incorporate rural areas near the mine into a borough government that would collect property taxes. The Pogo project could shoulder increased taxes.

''That could be a deal killer,'' Zeitler said.

TeckCominco runs the huge lead and zinc Red Dog mine near Kotzebue.

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