he current state of Alaska’s mining sector could be summed up in three words: pandemic, production, and progress. Mining has been deemed an essential business activity here, meaning the state’s operating mines have been allowed to keep operating through the pandemic. Unfortunately that doesn’t mean they’ve been untouched by the novel coronavirus. When cases of COVID-19 began popping up in even the most rural corners of the state, Alaska’s mining companies swiftly implemented new, stricter health guidelines to ensure exploration, development, and production activities could continue while also protecting the industry’s more than 2,600 full-time workers, their families, and communities.
In Southeast, Kensington Mine owner Coeur Alaska released a list of rigorous safety protocols with policies that include visitor pre-approval, quarantine requirements, social distancing, and a host of additional precautions for everyone coming to and from the Kensington site. Additionally, any employee with a temperature above 99.6°F will be denied access to the site.
Along with following recommended health and safety guidelines, Hecla, owner of Greens Creek, “took steps to de-risk all aspects of the business, which now puts us in a position to respond to COVID-19,” Hecla President and CEO Phillips S. Baker Jr. said in a release. The company proactively implemented a fourteen day quarantine for all employees coming to Admiralty Island in an effort to stop the virus from ever reaching the mine. The company also put in place a strict safety regime.
Red Dog Mine, located in Northwest Alaska and owned by Teck Resources, quickly established enhanced COVID-19 response measures after multiple employees and contractors tested positive for the virus. As of mid-September the company said all personnel at the mine site have been placed on Teck’s Worker Protection Program, meaning they must wear a KN95 mask, maintain social distancing, dine in their rooms, and are required to have two confirmed negative COVID-19 tests before departing the site. The company has also installed a "real-time" body temperature monitoring system including four thermal imaging cameras as a means of early symptom detection.
Meanwhile in Fairbanks at Kinross Gold’s Fort Knox mine, employees are being recognized for their efforts to curb COVID-19 through the Kinross “COVID Champions” program that launched in mid-May. Kinross implemented more than 140 employee suggestions at Fort Knox that encourage social distancing such as staggered shift start times; a reduction in the number of employees on buses with staggered seating; and replacing daily meetings with email updates, video calls, and radio dispatch, among other changes.
In Healy, Usibelli Coal Mine is working to maintain its stellar safety record by implementing many of the same safety measures as its fellow miners, saying of its COVID-19 response, “The flexibility and perseverance of UCM employees have allowed the coal mine to successfully operate as critical infrastructure in the state during the COVID-19 worldwide pandemic. Our employees worked hard to ensure a reliable source for heat and power was provided to the homes of Interior Alaska residents and businesses.”
Even while implementing stiffer safety protocols at its mine site, Pogo Mine owner Northern Star Resources donated more than $1.5 million to communities in Alaska, with a particular focus on the greater Fairbanks and Delta Junction regions. And though the company (like so many others) saw an outbreak of COVID-19 at the Pogo mine during the second quarter, mine officials and workers acted quickly to contain the cases and put in place additional safety precautions, all while improving quarter-over-quarter gold output.
For its part, the state stepped in to help out by suspending state-required payments until September 2021. The State of Alaska Department of Natural Resources Commissioner Corri A. Feige said in a September statement that “it is in the best interest of the state to grant affected persons a one-year extension for payments required by AS 38.05.210 and AS 38.05.211, and associated regulations.”
COVID-19 presents an untold number of challenges to every industry and has presented some opportunities too, especially for gold miners. Gold, which is largely considered to be a safe and (often countercyclical) investment, has seen record setting prices this year, helping offset some of the costs related to COVID-19.
At the Fort Knox gold mine, the Gilmore project continues to “progress well and is on schedule and on budget,” with the new Barnes Creek heap leach set for completion by the end of the year, Kinross reports in its second quarter results. The project is now approximately 80 percent complete with initial ore expected early next year. Kinross says stripping continued during the first quarter and supply procurement and delivery to the site are complete.
Kinross also announced plans to acquire a majority interest in the Peak Gold project from Royal Gold, Inc. for about $94 million. The Peak Gold project is expected to commence production in 2024 as an open-pit mine. It’s located about 250 miles southeast of the Fort Knox mine and has estimated measured and indicated mineral resources of approximately 1.2 million ounces of gold with a grade of 4.1 grams per tonne, and an estimated inferred resource of 116,000 ounces of gold with a grade of 2.7 grams per tonne.
Joining Kinross in the acquisition market in 2020 is Northern Star Resources, which announced it will acquire Saracen Mineral Holdings in a move that will create the world’s eighth largest gold miner. Both company boards say they back the $4.14 billion deal, set for a January 2021 vote.
Pogo Mine “delivered quarter-on-quarter improvements throughout the year” despite experiencing an outbreak of more than three dozen positive COVID-19 cases, Northern Star Resources reports in its 2020 Annual Report. The mine produced 174,307 ounces of gold during its fiscal year and sold 173,036 ounces. The company expects to see up to a 25 percent negative impact at Pogo as long as COVID-19 remains at current levels in the United States.
And that is a statement echoed throughout the mining industry, not just in gold, and not just from certain companies. Every one of the six operating mines included here either experienced a COVID-19 outbreak, COVID-19-related shut downs, project and materials delays, or all of the above.
Despite that, Pogo’s quarterly production combined with soaring gold prices resulted in record cash flow for the year.
Coeur’s Kensington gold mine saw production dip slightly in the second quarter year-over-year to 33,058 ounces. This, however, was a modest quarter-over-quarter improvement driven largely by positive grade reconciliation from the Kensington Main deposit as well as an increase in throughput from the higher-grade Jualin deposit. Jualin accounted for about 16 percent of Kensington’s total second quarter production, increasing from approximately 8 percent the prior quarter. For the full year, Jualin is expected to account for up to 20 percent of Kensington’s total production. Coeur anticipates producing between 125,000 and 135,000 ounces of gold in 2020.
Hecla has also benefited from rising precious metals prices with the company reporting that, despite the pandemic, the company had its second highest quarterly silver production since 2016 which, combined with higher prices, resulted in almost 25 percent more revenue compared to the prior year and generated about $27 million of free cash flow. Silver production increased 14 percent year-over-year for the nine-month period ending September 30 to about 8.2 million ounces. Gold production at Greens Creek was down 7 percent during the same time frame to about 38,000 ounces. The mill operated at an average of 2,366 tons per day, which is slightly higher than the second quarter of 2019.
Unlike precious metals prices, the price of zinc dropped from more than $1 per pound heading into 2020 to $0.80 in late March and a year-to-date average through October of $0.97, according to US Zinc. A drop in zinc demand (and subsequently prices) combined with the same COVID-19 problems faced by the rest of the industry helped contribute to a roughly 47 percent reduction in zinc production at Red Dog mine during the second quarter to 83,900 tonnes compared to 158,000 tonnes in the second quarter of 2019.
Lead production was also down in the second quarter to 21,500 tonnes, a 26 percent drop compared to the same period in 2019.
As the state’s only operating coal mine, Usibelli Coal Mine (UCM) fuels more than 30 percent of the Interior’s electrical generation, according to the Resource Development Council. UCM is a privately-held, family-owned business employing about 100 workers. Mine production averages between 1.2 million and 2 million tons of coal annually. UCM supplies coal to six Interior power plants and over the years has exported coal to Chile, South Korea, Japan, and additional Pacific Rim countries.
From a purely financial standpoint, COVID-19 has wreaked havoc on the economy and cost millions of jobs. Alaska’s mining operations have responded by implementing effective safety precautions that allow them to keep operating and operating in the black. This bodes well for the many exploration and development projects in the works. The Donlin Gold project; the Pebble Project; the Livengood gold project; the Upper Kobuk Mineral Project; the Palmer Project; and Graphite One Project are all in various stages of development and/or permitting that continues to move forward, one EIS at a time. 