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$250 million in state financing proposed to jump-start Southeast Alaska mines

Pat Forgey

JUNEAU -- A couple of Southeast Alaska mining prospects have struggled for years to put together financing that would enable them to begin production, but the state says a quarter of a billion dollars in state financing might be just the thing to get them going.

Mining has shored up the economy in the northern Panhandle for a number of years, but Alaska Gov. Sean Parnell says it could start bringing good-paying jobs to the depressed southern portion of Southeast as well.

In Ketchikan, and on Prince of Wales Island, unemployment rates have ranged from 2 percent to 10 percent higher than in the capital city of Juneau in recent years. This week Parnell signed Senate Bill 99, which allows financing through the Alaska Industrial Development and Export Authority.

'Open for business' or too risky?

One of the companies in line for state help said such actions show that "Alaska is open for business," but some skeptics have likened it to the state investing in speculative penny stocks.

Sen. Bert Stedman, R-Sitka, pushed for inclusion of the financing plans for the two mines, both located on Prince of Wales Island, west of Ketchikan, in the bill.

• Niblack is a gold, copper, silver and zinc mine that is well along in the exploration stage, state officials contend. Once in operation, as many as 200 jobs would be created, according to owner Heatherdale Resources, which is traded on the Toronto Stock Exchange. Senate Bill 99 allows AIDEA to authorize up to $125 million in bonds to finance the project.

• Bokan Mountain-Dotson Ridge is a rare-earth-element mine in early stages of development. It is anticipated to provide 190 jobs when in full operation, said Ken Collison, chief operating officer for Ucore Rare Metals, which also is traded on the Toronto Stock Exchange.

Among the most important uses for rare earth elements are to make magnets both light and powerful, which can be used in the construction of wind turbines and help make electric cars more efficient, he said.

The bill authorizes up to $145 million in AIDEA bonds for the project.

Stedman said the two projects could help Southeast replace the losses from the once-dominant timber industry, which employed as many as 4,000 people in 1982, before declining to 500 in the last few years, according to the state Department of Labor.

"Losing the timber industry set off a ripple effect in our communities, hurting everything from schools to local businesses," Stedman said.

Questioning state financing

But the Southeast Alaska Conservation Council has questioned state involvement in helping finance the two companies, which have only minimal resources of their own.

"I think any type of financing from the state of Alaska is entirely premature," said Guy Archibald, the Juneau-based group's mining and clean water coordinator.

"Neither one of these mines has shown themselves to be economically feasible, neither one of them has completely defined a proven reserve of ore, and neither one of them has been able to attract any kind of serious outside investment," he said.

Ucore Rare Metals' Collison acknowledged during the legislative session that his company does not yet have "proven" reserves, but does have "inferred" and "indicated" resources, which are common measures at this stage of a mining venture. With more work, Ucore hopes to be able to covert those to "proven" reserves, he said.

Stedman said the involvement of AIDEA will ensure state interests are protected. That's the way the successful Red Dog Mine near Kotzebue was done, with the state helping to finance critical infrastructure.

For the Niblack project, the AIDEA involvement would help build an industrial complex for ore processing on Gravina Island, across from downtown Ketchikan.

Archibald said that while the Southeast Alaska Conservation Council hasn't seen plans for the two mines yet, the locations don't automatically rule them out. But he still questioned state financial involvement

"They're not in huge, major salmon-spawning rivers, their locations are not horrible, like Pebble (Mine) was," he said. Still, he dislikes the idea of the state both investing in and regulating industrial developments.

"It sets up somewhat of a conflict of interest between being a regulator and an owner. Can the state of Alaska make a tough decision to require compliance that may or may not affect their profitability and their ability to pay back an AIDEA loan?" he asked.

390 mining jobs, more in construction

But Sen. Lesil McGuire, R-Anchorage, who sponsored the bill, said the two projects will provide a much-needed economic boost for the Ketchikan-area economy.

"Natural resources are the base of Alaska's economy," she said. The bill "further broadens that base by supporting responsible development and creating new jobs while giving a boost to industry in Southeast Alaska."

In addition to the 390 new jobs operating the mines, company and state officials say there would be even more construction jobs in the mines' early years, as well as royalties for the state.

It could also prompt other improvements, like transportation, water and electric systems.

Contact Pat Forgey at pat(at)alaskadispatch.com