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Tangen: Climate change may open access to new deposits

www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of March 15, 2015

NEWS NUGGETSCompiled by Shane Lasley

l R E G U L A T I O N S

Strongbow agrees to buy tin claimsStrongbow Exploration Inc. March 10 said it has agreed

to acquire a 100 percent interest in the Sleitat and CoalCreek tin properties in Alaska through the purchase of ThorGold Alaska Inc., a private company. The Sleitat propertyconsists of 3,520 acres of State of Alaska mining claimslocated roughly 85 miles northeast of Dillingham. This tinproperty was explored by Cominco America Inc. in the mid-1980s and Solomon Resources in the mid-2000s. In 1989,the U.S. Bureau of Mines estimated the Sleitat prospect tocontain 25.9 million tons at average grades of 0.224 percentto 0.37 percent tin. The Coal Creek property consists of2,400 acres of state mining claims located about 175 milesnorth of Anchorage and to the west of the Parks Highway.Past evaluation of the Coal Creek property was conductedby Houston Oil and Minerals in the early 1980s and BrettResources in the late 2000s, including 5,950 meters ofdrilling in 46 holes. In 1982, Houston Oil and Minerals esti-mated a preliminary geologic resource for the Coal Creekprospect of 4.77 million metric tons grading 0.27 percenttin. Estimates for both properties are historical in nature anddo not meet resource estimate guidelines in either the UnitedStates or Canada. Concurrent to the purchase, Strongbowintends to raise up to C$1 million through a non-brokeredprivate placement of 10 million units at C10 cents per unit.Each unit will consist of one common share and one half ofa purchase warrant. Each full warrant will allow the holderto purchase one share of Strongbow at C20 cents for a peri-od of 24 months from the closing date of the financing.Proceeds from the private placement will be used to financeinitial exploration programs at Sleitat and Coal Creek andfor working capital purposes. The private placement is inte-gral to the acquisition of Thor. Strongbow is a Canadianexploration company with a large nickel property in south-eastern Northwest Territories and two copper-gold propertiesin southern British Columbia.

Chandalar nears startupGoldrich Mining Co. March 9 said Goldrich NyacAU

Placer, a joint venture between Goldrich and NyacAU LLCwill begin mining activities at the 23,000-acre Chandalargold project later in the month. Work will begin with theresumption of stripping the overburden from gold-rich grav-els. Goldrich reported that an initial pit has already beenopened and a 1,800-foot haul road between the pit and theprocessing plant site is complete. Goldrich NyacAU Placerplans to use a winter haul road to transport seven 40-tonrock trucks to the northern Alaska placer gold mine in thenext few weeks, increasing its fleet to 13. Mining of paygravel is expected to start in May and initial gold processing

Mining Nome placersAlaska seeks to clarify process for renewing offshore leases; miners worry

By SHANE LASLEYMining News

A s marine placer miners prepare for anothersummer of plumbing the gold-laden seabed off

the coast of Nome, many of these intrepid individu-als are keeping an eye on potential new rules thatcould affect future lease renewals.

Proposals being considered by the AlaskaDepartment of Natural Resources are meant to clearup ambiguity in eligibility requirements for renew-ing offshore mining leases offered by the state.Currently, the rules primarily apply to nearly 24,000acres of marine placer gold prospects auctioned byDNR’s Division of Mining, Land and Water in 2011.

When awarded, the leases on these parcels weregood for 20 years and could be continued “for solong as there is production in paying quantities fromthe leased area,” but no real mechanism existed forrenewing the leases.

In 2012 the Alaska Legislature somewhat refinedthe process by passing a bill that allows offshoremining leases to be renewed if DNR’s director“determines that renewal is in the best interest of thestate.”

The law, however, does not provide guidelines todetermine “the best interest.” DNR is hoping to rec-tify the arbitrary nature of offshore mining leaserenewals with a clear process to guide future direc-tors’ decisions.

“The DNR needs a consistent process for deter-mining whether a lease renewal is in the state’s best

interest, and if the lessee is actively developing, min-ing, and producing minerals from the leased proper-ty. If a lease is not being developed properly throughexploration, mine planning and actual mining, thestate’s best interests may lie in re-offering the groundfor competitive lease sale rather than renewing alease that is not being developed,” according to thedepartment.

Best interestsDNR Mineral Property Manager Bill Cole said

the potential new rules governing offshore miningleases are meant to serve the best interests of lessorand lessee alike.

“A part of the objective is to provide lessees anidea of what they need to do during the initial termof their lease to demonstrate that they are diligentlydeveloping the lease so that renewal will be in thestate’s best interest,” Cole explained in a March 7email.

“Providing a consistent process that treats allapplicants equally is one of the objectives in writinga regulation,” he added.

“Providing a consistent process that treatsall applicants equally is one of theobjectives in writing a regulation.”

—Bill Cole, mineral property manager,Alaska Department of Natural Resources

see OFFSHORE LEASES page 11see NEWS NUGGETS page 11

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A jack-up barge operated by Phoenix Marine Mining Inc. provides a stable platform for mining gold-rich seabedsediments off the coast of Nome.

By J. P. TANGENSpecial to Mining News

“They’re rioting in Africa, they’restarving in Spain.

There’s hurricanes in Florida, andTexas needs rain.

The whole world is festering withunhappy souls.

The French hate the Germans, theGermans hate the Poles.

Italians hate Yugoslavs, SouthAfricans hate the Dutch.

And I don’t like anybody very much!”

–“The Merry Minuet,” by SheldonHarnick and popularized by the

Kingston Trio in 1959.

For some time I have been musingabout the global warming/climate

change conundrum because, as is often thecase, the proselytizers are so strident intheir conviction. To question their rhetoricis tantamount to heresy. Unfortunately,there are more than a few problems in mymind with the thesis.

In the first instance, it must be conced-ed, I think, that there have been ice ages onEarth for eons, and they have been inter-rupted by sequential warming trends.Within the most recent 20 millennia, thenorthern hemisphere has been covered byan ice sheet which lowered the sea levelsufficiently to allow migrations from Asiato North America to occur on dry land, atleast that is what most folks seem tobelieve, and I do not doubt that to be true.

A difference, however, between whatoccurred for the first 10,000 years sincethe last glacial maximum and the mostrecent 2,000 or 3,000 years (or maybe thelast 500 years, or the last 200 years – takeyour pick), is the “anthropomorphic contri-bution” to climate change.

It all began with the Industrial

Revolution, or the discovery of charcoal,or slash and burn farming, or something.In any case, mankind has sealed its ownfate by bringing us the toys and tools ofthe modern era. We certainly never hadany of these problems when we lived intrees and ate snakes.

The wide-eyed genius who first madefamous the concept that mankind wasdoing itself in was the Rev. ThomasRobert Malthus (Feb. 13, 1766 – Dec. 29,1834) an English cleric, influential in thefields of political economy and demogra-phy. His Essay on the Principle ofPopulation opined that sooner or later pop-ulation will be checked by famine and dis-ease, leading to what is known as aMalthusian catastrophe. He wrote, “Thepower of population is infinitely greaterthan the power in the earth to produce sub-sistence for man.” In other words, every-one who didn’t die of something else wasgoing to die of starvation.

In 1972, the Club of Rome (headquar-tered in Switzerland) weighed in with itsreport called The Limits to Growth. Thisvolume is a must read for everyone of the“Chicken Little” persuasion. The clubstates that its mission is to act as a globalcatalyst for change through the identifica-tion and analysis of crucial problems fac-ing humanity and the communication ofsuch problems to the most important pub-lic and private decision makers as well asto the general public.

Most recently, when Al Gore becameaware of anthropologically-caused globalwarming, he, likewise, took it upon him-self to ensure that everyone knew of theimpending new catastrophe, and that cudg-el has been used to bash the rest of us inthe face on a daily basis for most of thelast decade.

In my world, conservative thinkers seethe glass as half empty; liberal thinkers seethe glass as half full; and scientists see theglass as too big. Accordingly, when pseu-do-scientists begin to tell us how weshould fill the glass, no matter how muchalphabet soup they have after their names,they forfeit credibility.

Clearly, Malthus was not wrong, nor isthe Club or Rome, with all of its fearsomeconcerns. In fact, probably such apocalyp-tical seers are right on cue. What seems tobe missing from the equation is an answerto the mystical question, “Assuming thateverything that you say is true, so what?”

During the last great flood, between4,300 and 7,600 years ago, according tothe reckoning of some people, there were

10NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 15, 2015

NORTHERN NEIGHBORSCompiled by Shane Lasley

Canada expands mining tax creditCanada’s Department of Finance March 1 reported two mining-sector changes

to the Income Tax Act (Canada). In a speech to the Prospectors & DevelopersAssociation of Canada, Finance Minister Joe Oliver and Natural ResourcesMinister Greg Rickford said the federal government proposes to extend the 15percent mineral exploration tax credit for investors in flow-through shares toMarch 31, 2016. The credit was scheduled to expire on March 31, 2015. Thedepartment of finance said the mineral tax credit will support the efforts of juniormineral exploration companies. The government says this credit, referred to as the“lifeblood” of junior mineral exploration, has helped keep investment flowing.The Canadian government also announced proposed changes to ensure that thecosts associated with undertaking environmental studies and community consulta-tions that are required in order to obtain an exploration permit will now be eligiblefor treatment as Canadian exploration expenses. As CEE, these costs would beimmediately deductible for tax purposes and also be eligible for flow-throughshare treatment. In the case of eligible projects, they could qualify as well for themineral exploration tax credit. In the past, environmental studies and communityconsultations required to pursue an exploration project were not always eligiblefor CEE treatment. Canadians pride themselves on our country’s strong environ-mental protections, and meaningful consultation with local residents remains akey plank in Canada’s Responsible Resource Development plan. The governmentrecognizes that the associated cost of these requirements is part of doing businessin Canada, and it says these changes aim to make Canada an even better place todo business.

More diamond reserves at DiavikDominion Diamond Corp. March 6 reported an updated reserves and resources

statement, which adds 3.9 million metric tons containing roughly 13 million caratsto the mineral reserves at the Diavik diamond mine in Northwest Territories. As ofDec. 31, 2014, the Diavik Diamond Mine had 18.1 million metric tons of provenand probable mineral reserves containing 53.3 million carats of diamonds. At theA-21 pipe, 3.7 million metric tons containing 10 million carats has been promotedto proven reserve from probable reserve material. In addition, at the A-154 Northpipe, 0.24 million metric tons of inferred resources at depth were upgraded toprobable mineral reserve status. Within the remaining reserve at the A-154 Northpipe, 500,000 metric tons were promoted to proven reserves from probablereserves, supported by sampling in the active mine, which improved confidencefor production forecasting. Dominion said further conversion of resources toreserves is expected as ongoing work plans progress. Dominion owns a 40 percentinterest in the Diavik Mine. Diavik Diamond Mines Inc., a subsidiary of London-based Rio Tinto plc, owns the remaining 60 percent and operates the high-gradediamond mine.

Kennady Diamonds raises C$18.6MKennady Diamonds Inc. March 10 reported the closing of the final tranche of a

C$18.64 million non-brokered private placement financing. In this third tranche,the diamond exploration company issued 651,312 shares at C$3.55 each forC$2.31 million. Proceeds of the private placement will be used primarily for the2015 winter exploration program at the company’s Kennady North project locatedimmediately adjacent to the De Beers-Mountain Province Diamonds Gahcho Kué

Mining & thelaw

The author,J.P. Tangen hasbeen practicingmining law in J.P. TANGENAlaska since 1975. He can be reached atjpt@jptangen.com or visit his Web site atwww.jptangen.com. His opinions do notnecessarily reflect those of the publishersof Mining News and Petroleum News.

see NORTHERN NEIGHBORS page 11

l O P I N I O N

Rioting in Africa

causes climate changeAlthough global warming fear mongers would have us believe thatthe sky is falling, we may be able to put the pieces to good use

see TANGEN page 11

During a public comment period thatexpires March 27, DNR is asking the min-ing community and public at large for inputon renewal regulations that are efficientand equitable for miners with Alaska off-shore mineral leases, as well as meets thestate’s best interest.

DNR has offered some suggestions toguide this input:

What benefits should the state and peo-ple of Alaska derive from a renewed off-shore mining lease?

How can DNR best determine that theinterests of the state are being adequatelymet with regard to an offshore mininglease?

At what point are the state’s needs notbeing met?

What is an appropriate level of eitherproduction or exploration to demonstratethat the lessee is seriously developing thelease in the best interests of the state?

What requirements for lease renewalmight help the lessee further their ability toeffectively develop and mine the lease?

What requirements and documentationwill create the least regulatory burden onthe lessee?

What system of lease renewal applica-tion will be least burdensome for the lessee,and most efficiently administered by theDNR?

DNR hopes this process will end in a setof rules that provide clarity as to what isexpected from lessees regardless of who isdirector.

“Although the renewal decision is stillat the discretion of the director, the lesseewill have a clear idea of what they need todo throughout the lease term in order tohave the lease renewed, and can operate thelease with renewal in mind,” Cole said.

Some concernThe prospect of new regulations has

some miners who hold offshore leases wor-ried. Their primary concern is the proposednew rules, if codified into law, may allowthe state to cut short the original lease.

Robert Retherford, a co-founder ofSolomon Gold Inc., is among holders ofmarine placer gold leases off the beaches ofNome who are concerned about addinganother layer of rules.

He told Mining News that he does notbelieve DNR intends to create rules that areonerous to holders of the state’s offshoremineral leases, but he worries what mightcome out at the other end of the process.

“When you open the door for rewritingthe regulations, it may not necessarily be inyour benefit,” he said.

DNR’s Cole said the proposed rules arepart of an ongoing process meant to allowoffshore mining leases to be extended, nota mechanism to shorten their terms.

He said it was DNR that urged theAlaska Legislature to pass the 2012 lawthat allows offshore miners the opportunityto renew their leases, “in addition to the

ability to continue the lease through contin-ued production, which can still be done.”

Active leasesThe impetus to update the lease renewal

laws is not due to a lack of current activityon offshore mining leases.

During 2014, at least a dozen companiesand individuals had active programs onNome offshore gold properties leased bythe state. According to requisite filings,miners invested upwards of US$12 millionduring the year in mining the gold-richdeposits on Alaska leases offshore ofNome.

For the first two seasons after DNR auc-tioned leases to 84 tracts of state land inNome’s coastal waters, Placer MarineMining Inc. was the big spender. This jointventure between AngloGold Ashanti Ltd.and the De Beers Group invested roughlyUS$12 million on exploration, environ-mental baseline studies and other prelimi-nary work on its state leases during 2012and 2013.

Much of this work culminated in a pre-liminary economic assessment that identi-fies a mining plan for Placer Marine’s aptlynamed Nome Offshore project that thecompany believes represents a low capitalrisk solution for optimal mining of themarine gold placers. A mining system, pro-cessing plant and operation support wereincluded in the operation outlined in the2013 PEA.

A roughly US$1 million program car-ried out by Placer Marine in 2014 focusedprimarily on continued environmentalbaseline work. The company has previous-ly said it hopes to begin mining the gold-rich marine deposits on its state leases bythe 2017 season.

While Placer Marine’s investmentwaned in 2014, other miners stepped uptheir spending last year. Most notably,Pioneer Marine Mining invested roughlyUS$6.8 million in mining its offshore leas-es.

Phoenix Marine Mining, the operatingcompany for Pioneer, used two jack-upbarges unique among the typical flotilladredging the gold-rich placers off theshores of Nome.

The Phoenix barges, which lower legsto the seabed, provide a stable platform foran excavator, enabling a mining set-up sim-ilar to what you might find at a terrestrialplacer gold operation. The companyreports that the stable platform also signifi-cantly increases production time during anotoriously short mining season.

In addition to the ability to stay putwhen free-floating dredges must seek safeharbor from the rough seas that frequentthis region of western Alaska, PhoenixMarine reports that its jack-up barges allowthe company to get started earlier and staylater in the season. The company calculatesthese advantages provide it with 500 per-cent more production time than traditionalmarine dredges.

David Young invested roughly US$3.5million last year developing a similar set-up to mine leases offshore of Nome. l

11NORTH OF 60 MINING

PETROLEUM NEWS • WEEK OF MARCH 15, 2015

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diamond mine in Canada’s Northwest Territories and for general working capital. Theexploration program includes a 500- to 700-metric-ton bulk sample from the Kelvinkimberlite, delineation drilling at the Kelvin and Faraday kimberlites and explorationdrilling. Kennady Diamonds anticipates undertaking additional flow-through financingsover the next few months.

Silver stream funds Yellow Giant GoldBanks Island Gold Ltd. March 9 said it has entered a binding letter of intent with

SilverStream SEZC for the advancement of the Yellow Giant Gold project in BritishColumbia. SilverStream has provided Banks Island Gold an initial deposit ofUS$250,000 for the purchase of a silver metal stream from Yellow Giant. Under theterms of the agreement, SilverStream will purchase the silver produced from the projectat US$4.00 per ounce. A minimum of 6,667 ounces of silver will be sent toSilverStream each month and the streaming company will retain the option to purchase50 percent of the silver production greater than the minimum amount. This minimummonthly delivery will remain in place until 140,000 ounces of silver or payments inkind have been settled under the agreement. Silver delivery can be made in silver, gold-equivalent, or cash payments. Banks Island began production at Yellow Giant inFebruary 2014. The plant was down in late summer resulting in 277 days of productionfor the year. During this time, the mine produced 12,181 ounces of gold and 32,473ounces of silver. l

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OFFSHORE LEASES

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NORTHERN NEIGHBORS

survivors. Likewise, when the waters ofthe ocean rise to their maximum, assumingthat every single glacier melts to a puddleand the sea level rises 412 meters (more orless), it just doesn’t seem to me to be theend of mankind, or even a major incon-venience. Presumably, most people willrelocate to higher ground or build houseson stilts, etc.

What Malthus proved, and the Club ofRome corroborated is that mankind has away of adapting, especially when it comes

to slow-moving inexorable forces. The his-toric periodicity of the ice ages suggeststhat sooner or later the warming trend willreverse itself, and we will tumble back intothe next ice age, which doesn’t seem like ahappy consequence.

In other words, perhaps manmadegreenhouse gases will, in fact, save us allfrom freezing to death.

In the short term, we do know onething. In Alaska, the retreating glaciersreveal new ground that may have mineralpotential and may result in new mines, sothat is a good thing (if we are allowed toextract them). l

is planned for late June. Weather permitting, the plant is expected to run throughmid-September. Once at full capacity, the scalable recovery plant at Chandalar isexpected to process roughly 600 bank cubic yards per hour and will be realizedas additional gravel screens and gold recovery tables are added in stages through2016. The drill delineated portion of the Little Squaw Creek deposit is estimatedto contain 250,000 ounces of gold in 10.5 million cubic yards of alluvial gravelsaveraging 0.025 ounces of gold per cubic yard. The mineralized material atChandalar is not a mineral reserve as defined by the U.S. Securities andExchange Commission.

AIDEA taps new leadership The Alaska Industrial Development and Export Authority Board March 5

announced the appointment of John Springsteen as AIDEA executive director.Springsteen has served as infrastructure development officer for AIDEA sinceFebruary 2014. Prior to his work with AIDEA, Springsteen held the position ofnational director in the Houston, Texas office of Grant Thornton LLP in the eco-nomic consulting practice. Springsteen received his undergraduate degree fromthe Massachusetts Institute of Technology and holds a Master of BusinessAdministration from the Kellogg Graduate School of Management,Northwestern University. Ted Leonard, who served as executive director ofAIDEA since 2008, recently announced his retirement from 27 years of publicservice. Springsteen begins his new duties at AIDEA March 16. l

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NEWS NUGGETS

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TANGEN

12NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 15, 2015