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Barrick moving with $87M program at Donlin Creek mine

by Tim BradnerAlaska Journal of Commerce

Barrick Gold is pushing ahead with an aggressive $87 million exploration and development program at the big Donlin Creek gold project and is on course to have a feasibility study completed by early October, said project manager Stan Foo.

If the feasibility study shows the project is viable, Barrick's board of directors will give the go-ahead to proceed with the project during a November meeting.

�Before beginning the Environmental Impact Statement, we plan several months of outreach efforts with stakeholders,� Foo said. �We want to get as much input as possible from people before we make our applications.�

Foo said the company hopes to apply for state and federal permits and to begin an EIS process next spring.

The only fly in the ointment is a lawsuit brought by NovaGold Resources, Barrick's partner in the project, which claims Barrick will be unable to comply with terms of an agreement between the two companies. If an Alaska Superior Court rules in NovaGold's favor, that company will resume management of the project as the majority owner, NovaGold president Rick Van Nieuwenhuyse said.

NovaGold managed the project for several years during its exploration phase and now owns 70 percent, with Barrick, the current manager, owning 30 percent. Under the agreement between the two companies, Barrick has an option to buy an additional 40 percent to increase its share to 70 percent. That won't happen if NovaGold wins the lawsuit.

Van Nieuwenhuyse said the dispute would not affect development work at the mine. NovaGold is pleased with the team Barrick has assembled for the project, and with the work Barrick is doing with local communities in the region, Van Nieuwenhuyse said.

The Donlin Creek gold deposit is located near Crooked Creek village on the Kuskokwim River, northwest of Anchorage. Exploration has been underway since Calista Corp. discovered gold there in the early 1980s. Calista is the Alaska Native regional corporation for the Yukon-Kuskokwim region of Southwest Alaska.

Foo said three years might be needed to complete a federal Environmental Impact Statement and to secure the necessary permits. This schedule would see the project in construction in 2012 and in production after 2015.

Barrick's $87 million budget for 2007 is up substantially from $50 million spent in 2006. The company has six drilling rigs at work at the project site, with an objective of confirming estimates of gold resources that were made earlier. The plan is to drill 80,000 meters of this year, Foo said.

Donlin Creek now holds an estimated 19.5 million ounces of gold in the �measured and indicated� category, an estimate based on extensive core drilling in which there enough confidence that a project can be financed. There is an additional 2 million ounces of gold that are inferred by widely spaced drill holes.

The current official estimate does not include results from Barrick's 2006 drilling program of 42,000 meters. Those results, which will likely add to gold resources in the measured and indicated category, will be included when the feasibility study is completed.

An objective of this year's drilling is to confirm more of the 2 million ounces of inferred resources. That will make it easier for Barrick and NovaGold to take the project to the financial markets.

Meanwhile, Barrick has about 120 people at work at the project who were hired from Yup'ik villages in the region. About 85 percent to 90 percent of the overall Donlin Creek workforce was hired locally, Foo said. The landowner, Calista Corp., works closely with Barrick and a Calista subsidiary, Chiulista Services Inc., provides support work at the mine that includes logistics and camp services as well as recruitment, training and employment of most of the workforce.

NovaGold agrees with the development planning Barrick is doing with one exception, Van Nieuwenhuyse said. He believes Barrick's plan for shipping large quantities of diesel fuel to the mine up the Kuskokwim River is too costly and unsound from an environmental point of view. Van Nieuwenhuyse supports Barrick's plan for developing a wind power project at Donlin Creek as a supplement to diesel-fueled generation.

Foo said Barrick now has two years of data on local wind conditions and the wind power project looks promising. It could supply up to 30 percent of Donlin Creek's power requirement, which is now estimated at between 100 megawatts and 140 megawatts, he said.

The only problem with supplementing wind with diesel is that wind can't be counted on. A diesel plant would still have to be built, and large quantities of fuel will still have to be shipped in.

If NovaGold resumes project management, Van Nieuwenhuyse said he will pursue a long-distance electric transmission line to connect the project with the existing Fairbanks-Anchorage power grid, most likely near Nenana, 60 miles southwest of Fairbanks.

�We have always believed a long-distance transmission line connecting Donlin Creek to the main grid will be cheaper and we think it will help Alaskans in the railbelt,� by putting more demand on the system, creating efficiencies. �If we're connected to the grid we can generate power with wind and send �green electricity' to the railbelt over the transmission line,� Van Nieuwenhuyse said.

Foo said one recent change in Barrick's plan for Donlin Creek is development of a possible alternative road route and river port site. Previously the company planned a road from the mine to near Crooked Creek village with a port on the Kuskokwim River near that community. The plan the company is now considering would have a longer road to a site downstream from Crooked Creek, known as Birch Tree Crossing.

This location would involve a longer road but would give access to an area of the river that is deeper, which would allow the use of larger barges and fewer barge trips on the river. The longer road would add to the mine's capital cost, but would be offset in lower operating costs by a more efficient barge transportation system, Foo said. Fewer barges operating on the river would also lessen environmental hazards.

 

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