Permitting to start on Ambler copper prospect early next year

More than 60 years after it was initially prospected, Trilogy Metals is almost ready to apply for the major environmental permits it will need for the first project in one of Alaska's premier areas with mining potential.

Trilogy Metals Inc. CEO Rick Van Nieuwenhuyse said Oct. 4 that the company has started pre-permitting work with the U.S. Army Corps of Engineers for its Arctic copper, zinc and precious metals prospect in advance of an environmental impact statement that should be initiated in the first half of 2019.

The Clean Water Act Section 404 wetlands fill permit from the Corps — large enough to trigger an EIS — is likely the only federal permit the mine will need, Van Nieuwenhuyse said, noting the Environmental Protection Agency has oversight of the water and air quality permits issued by the state of Alaska.

The Arctic prospect is roughly in the middle of the extensive Ambler mining district. Stretching for about 75 miles along the southern flank of the Brooks Range, there are more than 30 known metal deposits in the district, but its remoteness has precluded significant development.

The Alaska Industrial Development and Export Authority is leading development of a 211-mile industrial road to access the mining district. The Bureau of Land Management is writing a separate EIS for the road and the first draft of that document is expected in March 2019, with a final EIS following late next year, based on the current schedule.

"This project is in the middle of nowhere and this road has been studied, discussed, many, many, many times," Van Nieuwenhuyse said.

The road project, which is separate from Trilogy's mine work, has drawn stiff opposition from residents of the area and environmental groups who are worried the project will disrupt caribou migrations, which Van Nieuwenhuyse acknowledges is the most significant subsistence food source in the region.

The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage.

The National Park Service is also preparing an environmental and economic analysis that is expected to be finished next spring.

AIDEA estimates constructing the most basic single-lane gravel road would cost between $305 million and $346 million. It would be financed by the authority with bonds that would be paid back through tolls paid by Trilogy Metals and any other companies that would develop one of the other prospects in the Ambler mining district.

The plan is very similar to the Red Dog mine-DeLong Mountain Transportation System — also an AIDEA-owned and -financed mine access road — in far Northwest Alaska that development proponents have cited as a model for other isolated resource prospects in the road-scarce state.

At its core, the Arctic prospect is about as good as undeveloped metal deposits come these days, according to Van Nieuwenhuyse. With just more than 43 million metric tons of probable reserves averaging 2.3 percent copper, 3.2 percent zinc and smaller amounts of lead, gold and silver, it's "about 10 times the average grade being mined in open pit copper mines today," he said.

"It's not a huge mine, but it produces metal above its weight class because of the grade — 160 million pounds of copper annually, 200 million pounds of zinc, 33 million pounds of lead, over 3 million ounces of silver and 30,000 ounces of gold."

Those numbers are based on a short, 12-year mine life. According a pre-feasibility study released in February, Arctic would generate costs of $911 million to build and operate over that time but with roughly $450 million in annual free cash flow would have just a two-year payback.

"We don't need higher metal prices to make this thing work," Van Nieuwenhuyse said. "We just need a road."

The mill and other facilities at Arctic could also be used for Trilogy's other, larger but less explored Bornite copper and cobalt prospect about 20 miles to the southwest or other undeveloped prospects in the area, he added.

The company currently estimates Bornite contains upward of 6 billion pounds of copper, a figure that could grow this coming winter when the results from this year's drilling campaign come out.

The last two years of exploration at Bornite have been funded by $10 million annual payments from the Australian mining company South 32, which, after a third payment, will have the option of investing another $150 million in the project and forming a 50-50 joint venture with Trilogy, according to Van Nieuwenhuyse.

Trilogy has spent $122 million exploring its Alaska prospects overall.

The company also has a partnership with NANA Regional Corp., the Northwest Alaska Native regional corporation, which owns land at Bornite. NANA can receive up to a 2.5 percent royalty on the ore concentrates produced from Trilogy's mines under the partnership, according to a company presentation.

Another open-pit prospect, Bornite holds about 125 million metric tons of reserves with about 1 percent copper, but there is potential for an underground mine with 58 million tons of 3 percent copper, he noted.

Bornite was also discovered in the 1950s by a prospector well known in mining circles named Riney Berg, according to Van Nieuwenhuyse, who offered a brief anecdote about his work.

"He was out there looking for uranium; he had worked at the Kennecott mine so he knew what copper minerals looked like, found some on the surface, did some trenching and got the Kennecott guys all excited. They eventually wrote him a check for $6 million," he said, noting the value of that much money roughly 60 years ago. "Riney, being a good prospector, spent it all on prospecting. There's probably a dozen different prospects in northern Alaska that have his name on it."

Trilogy is also finishing up a study to see if ore sorting systems used by recycling companies can be applied in mining Arctic. The process uses sensors similar to magnetic resonance technology that "recognize what rocks have copper, silver, lead and what rocks don't," Van Nieuwenhuyse said. "If we could just mine the stuff we want we could get 3 percent copper, not 2 percent," he said.

The sorting process is proven to work, it's just not proven to be economic yet, he added.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.