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PHASE I
RESOURCE INVENTORY
August, 1983
MINERAL EI,EMF.NT
STATE OF ALASKA
Department of Natural Resources
4420 Airport Way
Fairbanks, Alaska 99701
U.S. DEPARTMENT OF AGRICULTURE
Soil Conservation Service
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EXECUTIVE SUMMARY
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The ·Tanana Basin includes 21 million acres of land along the
Tanana River stretching from the Canadian border on the east to the
Yukon River on the northwest. As shown in Figure 1, it includes the
most populated area of Alaska's Interior. The area which this plan
addresses includes all state selected, tentatively approved and
patented land within the Tanana Basin Boundary exclusive of those
areas which have had area plans completed or which do not have state
in-holdings.
The analysis presented here indicates that there are
areas of land in the Tanana Basin with high mineral potential.
of these areas have been and continue to be very productive.
large
Many
This report estimates the net benefits of minerals in the Basin
to be on the order of 89.4 million per year currently. Current
mineral activity also generates approximately $198 million annually
in income effects and almost 1100 jobs in the Basin. Within the
industry, gold generates both the largest producers benefit and the
largest income effect, while exploration probably employs the most
people.
The principal change expected in the industry within the next
20 years is the addition of major base metal mining to the gold,
sand and gravel and coal activities which have been the basis of the
industry for the past several decades. Base metals could become the
most important commodity in terms of economic impact, considerably
increasing producers benefits, income and employment. Gold, sand
and gravel and coal also have considerable potential for expansion.
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Figure I.
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TANANA
BASIN
AREA
8
SCALE IN MILES
0 12 24
The Tanana Basin Planning Area.
SuJDJD.ary of Current EconoJDic Effects
of Mining in the Tanana Basin
Producers
' Mining Benefits Income Employment
Activity by {Milllions (Millions (Person-
Commodity $/year) $/year) Years)
Precious Metals 4.4 64.0 140
Industrial and
Structural
Commodities 0.9 43.0 410
Coal 0.9 51.3 125
Exploration and
~ Development 39.4 390
Activities
Total 6.2 197.7 1,065.0
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Su:nunary of Potential EeonoJDic Effects
of !Wining in the Tanana Basin
Mining
Activity by
Commodity
Precious Metals
Placer
Hard rock
Total
Base Metals
Industrial and
Structural
Materialsb
Coal
Medium Scenario
Total
Producers
Benefits
(Millions
$/year)
6.4
1 6
s.o
12.0
0.9
Income
(Millions
$/year).
94.
19.
113.
700
43
142
998
Employment
(Person-
Years)
220
30
250
900
410
155
1465
aRounded to nearest 10 person-years.
bcurrent effects are shown as a minimum estimate.
GRounded to nearest $1 million.
dRounded to nearest 100 person-years.
CONTENTS
Chapter 1
·chapter2
Chapter3
Chapter4
ChapterS
Chapter6
Appendices
BihHopaphy
Introduction ....................................... 1-1
Past, Current and Planned Mining Activity ............... 2-1
Mineral Potential of the Tanana Basin ................... 3-1
Supply of the Resource ............................... 4-1
Benefit-Cost Analysis ................................ 5-1
Management Recommendations ....................... 6-1
4A. Geography and Geology of the Tanana Basin
SA. Placer Mining Model (Both Precious and Base Metals)
5B. Alaska Tax Structure
5C. Mine Models
50. Consumer Benefits from Coal Used for Power Generation
5E. Value of Coal for Space Heating
SF. Energy Cost per Million BTU's (1982 Dollars)
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Chapter I
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Introduction
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This report completes Phase I of the Alaska State Department of
Natural Resources Tanana Basin Area Planning process. The report
inventories in format ion on minerals in the Basin and it will serve
as the basis for the continuing phases of the planning process.
This information is part of a resource inventory of seven
resources including fish and game, agriculture, forestry, minerals,
outdoor recreation, settlement (land disposals) and water. The
information included in this report was gathered by the Tanana Basin
Area Planning staff of the DNR Division of Research and
Development. People who participated in the production of this
report include, Susan TOdd (Project Manager, Tanana Basin Area
Plan); Glenn Miller (Mining Engineer, Division of Minerals and
Energy Management); and Jeffrey Pederson (Research Assistant).
The information presented here is not an exhaustive study of
minerals in the Basin; such a study is beyond the scope of the
Tanana Basin Area Plan. Due to the very nature of minerals, it is
difficult to say with any confidence exactly where they are located
or how much they are or will be worth. However, we have attempted
to pull together much of the information available and present it in
a way that will supplement existing information and be a useful 'tool
for planriers in developing resource policies.
1-1
Chapter2
Issues and Local Preferences
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CHAPTER2.
ISSUES CONCERNING STATE LAND MANAGEMENT
I. Introduction
Issues and local preferences are important pieces of
information which must be incorporated into the planning
process. Issues concerning the use of a specific resource
provide a focus and frame~mrk for the planning process;
local preferences show how the public feels these issues
should be resolved. In-this section of this report, issues
and local preferences are documented for incorporation in
the planning process through the work of the Planning Team
Members.
A. Issues
An issue is something which is debated. For example,
the amount of land to be disposed of is an issue; some
people favor more land and others would prefer less.
Another issue is the effect of agriculture on fish and
game; some feel that the effect is positive, others feel
that it is negative or neutral. The purpose of this paper
is simply to report the issues objectively without siding
with any particular viewpoint. These issues are then to be
addressed in the Tanana Basin Area plan which will create
policies to deal with them. The issues reported here are
those which the plan can affect through classifications or
management guidelines.
The issues identified in this chapter were collected
and summarized from three sources. -The public meetings
that were held in the Tanana Basin during the spring of
1982 was the first source of issues used for this chapter.
Planning team members, after reading the comments from the
public meetings developed a series of issues concerning the
resource they represent. The Tanana Basin Plan sketch ele-
ments were a second source used to identify issues. The
sketch elements were developed in 1981 to provide a start-
ing point for the Tanana Basin Area plan. The issues iden-
tified in the sketch elements were based on conversations
with agencies, resource experts and public interest
groups. The third source was interviews with agency repre-
sentatives.
B. Local Preferences
~; Local preferences about how these issues should be
addressed were determined from two principal sources. One
of the sources which will be used in the planning process
for developing local preferences is a series of community
-originated land use plans. Several communities are
~ ----------c·urnm_t_l_y-wo-rKt-n-g-on-----p-roposeapians for state Ian d-in the i'_r ______ _
area; others have already submitted proposals to DNR.
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These local land use plans provide a clear indication of
what a community prefers. This is particularly true when a
proposal receives endorsement of · village councils, city
councils, native corporations, and other interest groups in
the area.
The possibility of doing land use plans was mentioned
at the public meetings and in a newsletter that was sent to
all communi ties. Only a few of the communi ties, however,
have decided to submit proposals. Most of these proposals
will not be completed until February, but some have been on
file with the State Department of Natural Resources and are
included in. this report.
The Tanana Basin Public Meetings are the other source
of information on local preferences. Public meetings were
held in all communities in the Basin in the spring of 1982
to discuss the Tanana Basin Area Plan. The notes from
these meetings were then given to members of the planning
team who then developed the summaries included here. The
summaries represent the planning team members'understanding
of how residents want state land in their area managed for
a specific resource.
These sources of local preferences are not as accurate
as a public survey, but in most cases, they represent the
only information available. They should not be considered
to be representative of the entire community; they are
simply indications of the opinions of some of the resi-
dents.
A survey now being conducted by the Alaska Department
of Community and Regional Affairs will provide a better in-
dication of local preferences in the Tok area. The results
of this survey will be available to the planning team by
March of 1983.
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ISSUFS CONCERNING MINERALS
The following issues concerning minerals were drawn
from the public meetings, sketch elements and intervie\iS
with agency repr~sentatives:
ISSUE 1. The .amount of state land left open to mineral
exploration and mining.
ISSUE 2. Disposal of surface rights over lands with known
or potential minerals or energy resources.
ISSUE 3. The effect of recreation activity on mineral
exploration and development.
ISSUE 4. The effect of habitat and forestry classifi-
cations on mineral exploration and development.
ISSUE 5. The effect of agricultural projects on mineral
activity •
ISSUE 6. The effect of mineral-related activity on fish
and game resources.
ISSUE 7 • The effect of mineral-related activity on water
quality and the environment.
ISSUE 8. The effect of mineral-related activity on
recreation.
ISSUE 9. The effect of mineral-related activity on
forestry.
ISSUE 10. The effect of mineral-related activity on
agriculture.
ISSUE 11. The effect of mineral-related activity on land
disposals.
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MINERALS & ENERGY ISSUFS BY COMMUNITY
ANDERSON:
-we would like to see disposals open to mining on a
small scale if you own the land;
-no one can use the gravel except the state;
let free enterprise build the roads.
CANTWELL:
-The state should look at very long term leases for
minerals;
-Mining leases can be compatible with other uses. This
helps diversify the economy;
Fish and Game is too restrictive on the sediment in
streams. Nature does more damage than most miners •
DOT LAKE:
-Study the impacts of disposals on local areas; the
impact on the fish and game, minerals, communities and
state residents; .
-With mining, you should discourage something like
strip mining which destroys habitat;
HEALY:
The State shouldn't have mineral rights to the land.
When the state sells land, it should include the
minerals rights.
MANLEY HOT SPRINGS:
Seems kfnd of outrageous when the state creates mining
v. disposal conflicts. The state should look at
what's going on in the area at present before they
dispose;
-With oil and gas leases, the area will be
criss-crossed with trails, providing open access to
the area. It'll be a perfect place for people to get
to moose; not for moose to get away. The area will
look like California --roads and trails all over the
place;
-That oil and gas lease sale: given that geologists
place such slim chances on finding things -it seems
ridiculous to go ahead with the sale;
There is a lot of small mining activity in the area.
Although no one here tonight mines, there are a lot
of people in the area concerned about it;
MENTASTA LAKES:
MINTO:
There are some mines in the area like Slade Creek
which don't really disturb the area;
-The beaver have all moved out. There are no fish
·, because mining has bothered the rivers. No rat
~ ~ ~ ~-~· .. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~( ·MI:l·&~Fa~1:h I'le~·fl~~llh:r.J:.s • -~hav~~seerr·cm·±mai~s~~stm::x-~~-~~ ~~~ ~·~ ~
~ the mud because of mining.
_/ We lost some land to mining activity. Sand has covered
it.
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MINTO continued:
-There's a place where there used to be a slough -but
no slough anymore. Birch and Goldstream Creeks.
Mining filled it up~
-We used to go all the time up to Dunbar but it's no
creek anymore because of mining~
-All the lakes are getting filled up with sand. This
hurts the animals. Caribou, moose get caught in the
mud that is in all the creeks now~ they can't get out;
-We don't want to loose the land, that's all~
-If the state gives mining claims the should control
them and protect water~
-Put stronger control on mining~
-Hold off development just for a few yea~s while we get
our feet on the ground. All the people coming in, the
roads, the change. The old people know it is coming.
Just let it come slow. Give them a chance~
-Leave the Chatanika alone. It's a lifeline for us~
NENANA:
-Should be access to existing claims~
Development of minerals could be good for the area;
Oil development is compatible with agriculture;
Access to mineral areas may cause problems~
Farmers may not want compensation from mineral
development activities on their land, but may want to
keep their land instead~
Oil and Gas can co-exist with settlement and
agriculture~
In the plan, consider and allow for change in what is
considered a "significant mineral deposit"~
Keep settlement away from mineralized areas.
NORTHWAY:
-Mineral
areas.
just go
hunting
TANACROSS:
exploration doesn't really bother subsistence
Miners usually don't use heavy equipment and
through an area. But, in areas of good
and lots of pro~pecting there is a problem.
-(note) no specific comments on mining/minerals and
energy development, but concerned with habitat
protection.
TANANA:
-Concern over the impact of mining on lakes. Mining
filled up Fish Lake;
-Miners make a mining road out of a trail to Manley
which means it isn't food for dogs anymore;
-Mining is going on in the area --around Tozitna River
Valley. It's just the start of mining in this area;
-But it's only seasonal, which helps;
____ --=-_Ut> American CreekLTofty_the_r_e __ is_mining __ go_ing __ on_. ___ Lt ________ _
hasn't bothered me as long as they stay over there.
-The road to Tofty hasn't changed much here. We
haven't felt any impact.
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pauuu1d pou toa.1.1n~ ':JSUd
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This chapter discusses the past, current and planned
mining activity in the Tanana Basin. The information was
obtained in the unpublished report entitled The Geology and
Mineral Resources of the Tanana Basin, Alaska prepared by
the staff of the lJN.H., Division of Geological and
Geophysical Surveys (1984).
I. PAST PRODUCTION
Interest in gold placers of the Yukon-Tanana Basin in
Alaska and Canada began in 1~70 when prospectors ventured
north from southern Canada and the USA. Initially the
Fortymi le, Circle, and l:tampart districts were discovered
prior to the 40th century--no doubt aided by proximity to
navigable portions of the Tanana and Yukon l:tivers. Most of
the rest of the strikes in the Tanana Basin were 11 spin
offs" of the Klondike gold rush.
Gold was discovered in the Fairbanks district in 1904,
Bonnifield in 190~, Tenderfoot or Richardson in 1905, and
finally Liven~ood in 1914. Essentially all mineral pro-
duction that took place prior to 1950 involved activities
within these camps. The pat tern of development of the
11 yellow metal 11 in each area was similar. Initial dis-
coveries of rich deposits resulted in high grading by
individuals and small companies.
In most of the districts, underground driftin~ through
frozen 6round was the principal mining method. By World
War I, most of the rich deposits were exhausted. Coinci-
dentally many youn~ miners enlisted into military service
with America's entrance into the 'Great War' , and never
returned to the north country. By 1940 the gold industry
was only a fraction of the size during peak 190~-1910
years.
Construction of the Alaska Railroad from Seward to
Nenana--later extended to Fairbanks--was ordered by
President Woodrow Wilson in 1915. Eight years later,
President Warren Harding drove the golden spike at North
Nenana. This important transportation mode would have far
reaching effects on mineral development in the basin. In
194:J, the USS.H.&M Company acquired large tracts of placer
ground in the Fairbanks area with the intention of
establishin~ large scale floating dredge production units.
The company spent $48 million in exploration and
development projects that included construction of a
90-mile-long 'Davidson Ditch,' dredges, roads, and a large
power plant. The first dredge was in production in 1948
and by 1940 eight of these nuge gold boats were extracting
severn-··-hu:narea~~t-housarta. ounces of-placer goia-artnua-TTy
(Boswell, 1979). The electric
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Table3-1
Cu1D.D1ulative voluJDe and value of JDinerals, Tanana Basin 1880-1981 1
Value
Metals District Volume (in 1982 dollars)
-' Gold Fairbanks 7,940,000 oz 3,176,000,000
Hot Springs 440,000 oz 176,000,000
Tolovana 387,000 oz 154,800,000
(or Livengood)
Bonnifield 50,000 oz 20,000,000
Richardson 103,000 oz 41,200,000
Delta 2,500 oz 1,000,000
Tok 500 oz 200,000
Kantishna 65,000 oz 26,000,000
Subtotal 8,988,000 oz 3,595,200,000
Antimony Fairbanks 3,800,000 lb 3,850,000
Tolovana 344,400 lb 347,844
Tok 100,000 lb 101,000
Kantishna 5,000,000 lb 5,050,000
Bonnifield 50,000 lb 50,500
Subtotal 9,294,000 lb 9,399,344
Tungsten Fairbanks 4,700 short 564,000
ton units
., Tin Manley 700,000 lb 4,795,000
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Lead and zinc
Industrial minerals
2 Sand and gravez
Building stone
Coal
Fairbanks
Kantishna
150,000 lb
70 million tons
5 million tons
18 million tons
Total value
130,000
700,000,000
40,000,000
403,200,000
$4,753,158,344
1All values are estimates. Approximately 1 million ounces of silver have
been recovered as a by-product of gold refining; 250,000 ounces of silver
were produced from primary lodes at Kantishna. Gold production modified from
2Robinson and Bundtzen (1979).
Very rough estimates based on local interviews. Historical records are
very incomplete.
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dredges were furnished with power from a power plant in
Fairbanks, the largest in the state until World War II.
The source of the energy for the plant was the Healy coal
fields--110 miles south of town. Except for a brief shut
down in World War II, the USSR&M dredges operated until
1964, and seasonally employed 350-1,300 local area
residents.
Beginning in the mid-1970s, all of the historic placer
districts in the basin underwent a production revival.
Today at least 60 nonfloat mechanized operations employing
350 people are active.
Hard rock gold development in the basin never
seriously competed with placer operations. However, in the
Fairbanks area, several hundred lodes were discovered in
the Clear-Pedro Dome and Ester areas. Small stamp mills
wer erected and selected, high grade ores were milled from
at least 25 different deposits; the largest producing
property was the Cleary Hill mines at the base of Cleary
Summit (Hill, 1933). Other important producers include the
Hi Yu, McCarty, Newsboy, and Kawalita deposits on Cleary
Hill and the Mohawk, Ready Bullion, Billy Sunday, and Grant
mines on Ester Dome. A substantial portion of development
interest today centers on some of these lodes (see develop-
ment section; p. 20). Other hard rock gold developments in
the basin include the Old Smokey near Livengood, the
Liberty Belle deposit east of Healy, and the Tibbs Creek
area at the head of Salcha River.
Minerals other than gold and coal have been developed
in the basin. During World War I European nations needed
the strategic minerals tin, tungsten, and antimony.
Development of all three commodities occurred in the
Fairbanks and Manley areas. During 1915-18, lodes in the
Pedro Dome-Ester area were among the largest domestic
suppliers of antimony. Through 1971, antimony and tungsten
have been exploited in the Fairbanks, TOk, Bonnifield, and
Tolovana districts, coincident with the high price surges.
Tin has enjoyed the most stable price levels and has been
recovered annually since the 1920s as a by-product of gold
mining near Manley (Table 1).
A few carloads of lead-zinc-silver concentrates have
been shipped from two· lodes in the Fairbanks area, by-
product lead and zinc were shipped from silver-gold ores in
the Kantishna district prior to 1973.
Beginning with the early 1950s, production of coal,
~~~~.~~SandT aond-g~ravel increased enormOUSly, largely d result Of
demands from various military construction projects in the
interior. Coal production again surged with a decision by
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Golden Valley Electric Association
mouth power plant at Healy. Sand and
an all time high in the basin with
Trans Alaska Pipeline.
to construct a mine
grvel production hit
construction of the
Today the triad--gold, sand and gravel, and coal--
forms the cornerstone of the mineral industry in the Tanana
Basin.
D. CURRENT PRODUCTION
A. Metal Production
In 1981 the Tanana Basin as a whole accounted for
roughly 55,000 ounces of gold; about 40 percent of the
state's total output. Major producing areas were the
Fairbanks, Hot Springs, Richardson, and Livengood districts
(Bundtzen, 1982}. Gold was also recovered from the
Bonnifield and Delta districts. A new placer area was
opened near Bitzshtini Mountain on the western boundary of
the study area; at least three placer developments were
active in 1981 and 1982. Although previous investigations
indicated the presence of gold in this regiont there is no
known past production. Tungsten concentrates were shipped
from Gilmore Dome lode in 1981; there was no production in
198 2. However, tin concentrates were shipped from the
Manley area during both 1981 and 198 2. In format ion on
exact quantities of tin and tungsten produced is not
available.
B. Structural and Industrial Materials
In 1981, seven sand and gravel operators in the
Fairbanks area mined about one million tons of material for
landfill, construction, and road-building projects; the
leading producer was Fairbanks Sand and Gravel. Yutana
Construction Company operated the Browns Hill basalt quarry
on Badger Road. Mining methods include bench drilling and
blasting, grizzly and crusher processing, and mine haulage
similar to small-scale, open-pit mining methodology.
Remaining reserves are estimated at 30 million cubic yards.
At least 20 Fairbanks-area studio and production
potters use montmorillonite clays from the Healy coal field
for making a variety of pots and handcrafts. Us ibell i
Mines has, in the past, supplied railroad carloads of clay
to local users. As much as 40 tons of wet clay may be used
in a single year. value of the finished product is uncer-
tain, but may approach $75,000 annually.
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C. Coal Production
Usibelli Mines (Healy) was the only significant coal
mine in the state. Production in 1981 was about 800,000
tons, worth $17. 6 million, a 6 percent increse over the
previous year. Usibelli is involved in a significant
expansion into the Pacific Rim export market.
A contract signed in 1981 calls for delivery of coal
to Korea starting in 1982. The contract, which is for
200,000 tons in 1982 rising to 800,000 tons in 1984, covers
a ten-year time span. There is some doubt concerning the
completion of handling facilities to enable timely
deliveries.
Table3-2
Estbnated Current Annual Mineral Production
in the.Tanana Basin
Metals
Gold
Tungsten
Tin
55,000 ounces
actual quantity not available.
actual quantity not available.
Structural and Industrial Materials
sand and gravel
riprap, ballast and fill
montmorillonite clay
Coal
Peat
1 million tons
340,000 cubic yards
40 tons
800,000 tons
10,000 cubic yardsl
!Estimate based on interviews with local suppliers.
Source: ADNR, Division of Geological and Geophysical
Surveys, Geology and Mineral Resources of the Tanana Basin,
Alaska, 1982.
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III. PLANNED MINING PROJECTS
Two medium sized mining ventures within the Basin have
reached a development schedule, the Grant Mine on E:ster
Dome and the CNR placer operation near Livengood. Both of
these mines will contribute to the local economy if they
come into full production •
A.Grant Mine and Ester Dome Development, Tri-Con,
Inc., Fairbanks.
Tri-Con, Inc., operator for Silverado Mines, Ltd., of
Vancouver, British Columbia, has been engaged in an
aggressive development program on E8ter Dome (H miles west
of Fairbanks) for the last 3 years. The focus of the
development is the reopening of the old Grant Mine on tlappy
Road. Exploration and development of the mine have been
intermittent since the 19~0s. Prior to 1950, about o,OOO
tons of ore were selectively mined from the Irishman vein
(Roger Burggraf, personal communi cation, 1981). Tri -Con,
Inc. , has been developi n~ the property during the last
several years and now has a gravity feed mi 11 faci 1 i ty
there.
During 19~0, 870 tons of ore, with an average grade of
0.45 ounce/ton gold, were milled through the pilot plant.
In 1981, just under 1, 000 ounces of gold were recovered
from approximately 1,500 tons of ore. According to recent
estimates the company had blocked out about 76,000 tons of
mill-feed ore through December of 1981.
Under a late 1980 agreement with Range Minerals
Corporation, ~ti~ state mining claims immediately sur-
rounding the Grant Property were brought under control so
that Silverado now manages about 14 square miles on Ester
Dome. The company hopes to bring several auriferous veins
into production to collectively feed the mill at a rate of
100-500 Tt>D.
Underground development work continued from May 1980
to December 1981, but the Grant Mine remained inoperative
through the 1982 field season. Plans for 1983 are
dependent on resolution of financing. A crew of ~b,
including exploration per so nne 1, was employed during the
year. Total 1981 development expenditures exceeded $~
million.
B. CNR Placer Operations, Livengood District.
~ · ~ ~ ~--~ ~ ~-·· --~Li~v·en·g·ood· -Join·t V:e·ntures (LJV), consortium of Asamera
Minerals, Canadian Natural Hesources, and ~tanford Mine~ of
Canada and the United States, is attempting to develop one
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of the lar~est unworked placer deposits in the United
States. The Livengood ~old camp was discovered in 1!114,
and has si nee produced about 400,000 ounces of gold. By
1940, 1 arge bench deposits, which vary from 100 to 1, 000
feet in width and extend for at least 6 miles were dis-
covered on Livengood Creek. Drilling confirmed the
presence of about aUU,UOO ounces of gold reserves, and in
the 1940's a large dredge was moved i. n to the area.
The present LJV consortium has learned that all phases
of the gold-mining process cannot be feasibly completed
during the short summer seasons, especially because the
thick overburden must be mechanically moved by heavy
equipment. Heavy equipment has difficulty maneuvering the
thawed muck, and expensive mechanical failures and downtime
have hindered the project. In the winter of 1981, LJV
contracted Doyon, Ltd., to strip overburden from the bench
and construct a large settling pond; both projects were
completed in June. In 19~1, one of the first Caterpillar
U-10 tractors ever used in Alaska began work on the
project.
Annual production since 197~ varies from ~OU to about
a,OUO ounces, and a 10-million cubic yard block of ground
has been classified by LJV as their current reserve base.
The present washing plant consists of two standard sluice
boxes arranged en-echelon and fed by a do;.c;er or front-end
loader. For the project to sustain desired production
levels, additions to the present wash facility are
planned. A large washing plant acquired during 1981
operated through the 1982 season. LJV constructed a
200-man camp to serve their operation. Employment levels
vary from 50 to lOU personnel throughout most of the mining
season. Specific development figures have not been
released for this study, but 1981 expenditures are believed
to exceed $a million. Expenditures for this season (1982)
have not been released at the time of this writing.
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Chapter4
Mineral Potential of the Tanana Basin
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PART 1. PHYSICALCAPABILilY
Due to the nature of subsurface minerals, 'i.t is not
possible to give estimates of the amount of mineral
deposits in the Basin. Unlike many of the other resources,
minerals cannot be inventoried easily and new deposits can
be discovered in areas which were previously thought to
contain few prospects. However, through the examination of
several different pieces of information, areas with high
probability for certain types of minerals can be deline-
ated. This does not mean that minerals will not be found
elsewhere, it simply means that the probability is greater
that minerals will be found in these areas. Given new
research and information, additional areas may be added to
the map and this possibility should be kept in mind during
the planning process.
This report summarizes what is currently known about
the mineral resources in the Tanana Basin, including
descriptions of promising mineral deposits and current
levels of exploration • Commodities examined here include
base and precious metals, coal, strategic minerals and
industrial commodities.
I. CRITERIA USED TO PRODUCE THE MAPS OF PHYSICAL
CAPABILilY FOR MINERAL RESOURCES I
' '
The map showing the reg ion • s mineral potential
includes information on current mining claims, known
mineral occurrences and mineral terranes. The map itself
has not been reproduced for this report due to time
constraints, but is available at the DNR, Division of
Land and Water Management office in Fairbanks.
The map was based on methods described by Eakins and
others (1979) and supplemented by the University of
Alaska's AEIDC Mineral Terrane Map (Hawley, 1979). Private
sector input on recent developments and exploration was
also incorporated and gratefully acknowledged. The
DGGS-tURL Interior mining districts project provided
important new information on mineral potential in the
Fairbanks and Livengood areas. Much of the specific
resource data shown on the map was compiled from Cobb
(1973), Berg and Cobb (1964), MacKevett and Holloway (1977)
and Eberlien et al. (1977).
Four basic factors were integrated to determine
mineral potential for this study: ( 1) mineral terranes;
(2) exploration activities; (3) mine developments; (4)
, .. mining cl:aim, ·blocks-;-· (·5) known· re-serves-(·tra·sed on·-su·rr.:..
surface work); ( 6) production (past or present); and ( 7)
mineral indicators. Such factors can be scored in a
4-1 I
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·relative sense resulting in a mineral potential per unit
area of land. In 1978, DGGS completed evaluation of 15,000
townships statewide in such a manner (Eakins et ·· al.,
1979). The various.criteria used to evaluate each township
are summarized in Table 4-1.
It is important to keep in
assessments are dependent upon the
tion. The data base for most of
needs to be updated.
mind that such resource
availability of informa-
Alaska is deficient and
The concept of mineral terranes, which was one of the
criteria used to develop the map is discussed below. In
addition, current exploration activities are examined
here. Current mining activity and developments, which were
also used as criteria in the mapping process, were dis-
cussed in more detail in Chapter 3. A discussion of the
geology of the Basin is presented ~n Appendix A.
A. Mineral Terranes
Geologists recognize that specific types of mineral"
lodes occur within unique lithologic rock packages. For
example, most platinum, asbestos, chrome, and nickel lodes
occur within basic or ultramafic rocks formed at high
temperatures and pressu~es--conditions deep in the earth's
crust. Recognition of new discoveries of these rocks
usually leads to at least a cursory search for these
commodities. Geologists have formulated numerous models of
rock deposition that explain the distribution of mineral
lodes. In Alaska, it has long been known that such mineral
trends can be followed for many tens of miles along
strikes.
Under these assumptions, Hawley ( 1979) assembled all
available information on mine...ral resources of the 49th
state and produced a mineral terrane map of Alaska at
1:1,000,000 scale. The approach stresses the genetic
significance of many mineral deposits to both rock types
and their environment of deposition. A modified version of
these mineral terranes is summarized on the physical
capability map (available at DRD) and in Table 4-2.
Most of the mining activities prior to World War II
focused on placer gold districts. Prospectors and miners
searched using the often valid assumption that placer gold
was the geologic signature of many undiscovered metal
lodes. However, important mineral lodes do not always
produce sizeable placer gold in adjacent streams for a
variety of reasons.
----. ---- - - - - - - - - - - - - - ---------------------
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In the mid-1970s, modern mineral exploration conducted
by mining companies and geologic mapping programs by
·government agencies have contributed significantly to the
4-2
Table 4-1
Criteria Used in DGGS Township Level Mineral Potential of
Alaska, FroiD Eakins and Others (1979)
1. Industry nominations
2. Claim density
3. Exploration activity
4. Mineral indicators
5. Deposit types including lithology, stratigraphy,
age, trends, igneous association, structure,
ore controls and geophysical indicators.
A. Hydrothermal vein deposits
B. Ultramafic deposits
c. Marine evaporites and phosphorite deposits
D. Placer deposit~
E. Stratiform and syngenetic
F. Felsic igneous deposits
G. Porphyry deposits
H. Mafic igneous
6. Past production
7. Ore reserves
8. Unit value of ore
9. Ore processing requirements
10. Geophysical surveys
11. Regional geology
12. Tectonics: regional structure
13. Metamorphic grade
14. Strategic importance
15. Access
16. Transportation routes
17. Climate
4-3
Ta1tle4-2
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Mineral Terranes and CoJDJDodity Grouping for Tanana Basin,
Mineral terrane
Plutonic-igneous
Shales and·
carbonates
Coal bearing
Mixed igneous
and sedimentary
Modified froiD Hawley (1979)
Deposit types
Stockworks or dis-
seminated porphyry,
fracture fillings
Replacement, syngen-
etic-stratiform,
veins
Bedded, roll fronts
Stratiform, veins~
disseminated
4-4
Dominant mineral
Copper,molybdenum,
gold, silver,
tungsten, tin,
base metals
uranium, rare
earths, platinum
Lead, zinc,
silver, barite,
phosphate, in-
dustrial grade
limestone
Coal, uranium
Copper, lead ,
zinc, uranium,
gold, silver,
tungsten, tin
__ ,
Basin. By 1975, it became apparent to economic geologists
that certain volcanic and . sedimentary rock units in the
central Alaska Range (Bonnifield District) were not only
lode sources of placer gold but also hosts of significant
base metal stratiform mineral deposits (see Figure 4-1 for
a map of the mining districts). The primary host
lithologies have been members of the Totatlanika Schist,
but other units are mineralized as well. At least six
large deposits containing copper, lead, zinc, gold, and
silver were discovered using a model suggesting metal
accumulations in association with volcanic buildups on an
ocean floor over 330 million years old (Gilbert and
Bundtzen, 1979).
In 1977, geologists with Resource Associates of Alaska
(RAA) recognized that a specific belt of volcanic and
sedimentary rocks near Tok contained important metal
occurrences. These host lithologies are similar but
probably not identical to those found in the Bonnifield
district further to the west. At least 25 deposits of
significance have been discovered--in an area devoid of
placer gold and considered to have low mineral potential
prior to 1977.
During 1980-81, the DGGS and University of Alaska MIRL
jointly conducted a geologic assessment of the Fairbanks
mining district--historically known for placer and hard
rock gold-antimony-tungsten deposits. Prior to this work,
most geologists believed that hard rock gold and other
metal deposits were classic hydrothermal 'veins' eminating
from nearby igneous sources.
While most deposits in the Fairbanks area are cross-
cutting, metal bearing quartz veins, Smith and others
(1981) have shown that virtually all important mineral
deposits in the district are hosted in rock types of the
'Cleary Sequence,' a distinctive group of volcanogenic rock
particularly well exposed near Cleary Hill. Anomalous
metal content in rocks, soil, and stream sediments and high
arsenic values in ground water are ubiqutous indic~tors of
the Cleary Sequence. Recognition of the Cleary Sequence
has been and should continue to be an important factor in
the land use policies of the general Fairbanks are. Both
environmental quality and mineral potential need to be
stressed. A remarkably similar group of rocks was found by
Bundtzen (1981) to contain most of the mineral lodes in the
Kantishna mining district in the southwest portion of the
Tanana Basin.
______________ !ll __ J.98 2, the DGGS evaluated state lands ___ Ln ___ t_h~-----______ _
~ Livengood area for mineral potential as part of the
Interior mining district's study. This study has shown a
possible lithologic control for gold and base metals as
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Hot Springs
District
Kantishna
District
J l_ I ,j ;J
Bonnifield
District
Figure 4-1 Location of
M • • 1
·. o· t • t T B • . IRing IS ric., anana aSin
.J i...' L ' ""
Fairbanks
District
Delta
District
Richardson
District
0.._-===-...,;,4.::0==--==80 MILES
:.J
Tok
District
' J l. '
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well as an untested new model for gold placer deposits
(Robinson and others, 1982).
Similar studies in the Richardson district have shown
that recognition of a linear feature, the Richardson
Lineament, can aid in the discovery of new mineral deposits
(Bundtzen and Reger, 1977).
B. Exploration Activities
In addition to mineral terranes,
ties are an important indicator of the
the Basin. Exploration activities
separated by commodity.
I. Exploration for Base Metals
exploration acti vi-
mineral potential of
dis~ussed here are
Union Carbide, Phillips Minerals, Resource Associates
of Alaska, Anaconda Minerals Co., Resource Associates of
Alaska, Patino, WGM, Inc., and Northern Lights Exploration
spent an estimated $5.4 million exploring for base metals,
primarily along the north flank of the Alaska Range and in
the Yukon-Tanana Upland (Site A, Figure 4-2). Numerous
massive-sulfide deposits occur in a belt of deformed tuff,
metavolcanic, and exhalative units of probable Devonian age
in the eastern Alaska Range between the Tok and Robertson
Rivers (Delta mineral belt;. Tok mining district).
Geologists with Resource Associates of Alaska made the
original discoveries in 1976 and 1977, and an exploration
agreement was arranged with Anaconda Minerals Co. in 1980.
At least 35 prospects have been examined over the last few
years, and over $10 million have been expended in explor-
ation. These fine-grained, pyritiferous, base-metal
deposits have impressive strike lengths, contain high
precious-metal values, and crop out in 'rugged terrane.
Although Delta is a very promising district, no formal
announcements have been made. One consultant suggested
that several prospects could commence development by 1986.
Further to the west, work continues on stratiform,
polymetallic (copper, lead, and zin~) deposits in the
Bonnifield mining district east of Healy. In 1975 and
1976, Getty Oil and Resource Assocites of Alaska discovered
deposits near Anderson Mountain, Virginia Creek, and Dry
Creek (Site B, Figure 4-2). Reconnaissance diamond
drilling was completed on several of the properties by
1977. Exploration, at a cost of several hundred thousand
dollars, was completed in 1981. About the same level of
~-_ ---~~ ~-~~~l:_v}_1:_~-~~nti!l_~ec!_ i1!__~~8 ~. _____ _ ______ _
-'
4-7
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A YuJ:con-Tanana Upland
8 An~erson Mtn, Virginia Cr., Dry Cr.
C Salcha River Area
D Sh~ep Creek
I E Ester Dome
F Cle~ry Hill
I
I
L '' J
TANANA
BASIN
AREA a
SCALE IN MILES
() 12 24
Figure 4-2. Exploration Sites for Base Metals
Resource Associates of Alaska, Union Carbide, Hear
Creek Mining Company, and Houston International Minerals
Company (HIMCO) explored deposits containin;5 tungsten and
tin. HIMCO continued work on tungsten bearing skarn
mineralization north of ::>a lcha H.i ver and dri 11 i ng results
indicate encouraging amounts of mineralization (Site C,
Figure 4-~). Resource Associates of Alaska conducted
ground and airborne geophysical investigations near
Fairbanks in search of scheelite deposits.
Bear Creek Mining continued work on a massive sulfide
deposit, with anomalous tin zones, near Sheep Creek, 13
miles east of the railhead at tlealy (Site u, Figure 4-~).
This occurrence of tin constitutes a new type of target
that is poorly d6cumented in Alaska.
2. Exploration for Precious Metals
hard ruck gold exploration efforts in the Tanana Basin
include those directed by Resource Associates of Alaska,
St. Jbe Minerals, Placid Oil, Silverado Mines, Inc.,
Houston International Minerals, and Getty Oil. Interest in
development of the area's numerous gold lodes has recently
revived. Since i97Y, St. Joe American has completed
trenchi~g, samplingf ~nd 10,000 feet of diamond drilling on
the Ryan Lode on Ester Dome near Fairbanks (Site E, Figure
4-2). Past reserve estimates suggest that about~ million
tons of gold ore may exist on site, and St. Joe's efforts
have confirmed the presence of a large reserve of
undisclosed grade. Poor ground hampered underground bulk
sampling efforts in 1981, and a 500 foot long decline was
abandoned. The company plans further work on the Ryan
deposit in 198~; both open-pit and underground options are
being considered.
Tri -Con, Ltd. is exploring a large claim block on
Ester Dome in conjuncti6n with operation of the Grant Gold
Mine (Site E, Figure 4-2). A ~5-man crew was active in
1981. This company conceptually views the development of
several auriferous veins and shears that would provide feed
for a medium-sized mill (2V0-5VO TPD).
Placid Oil drove a 1,500 foot long adit into the
Kawali ta vein system on Cleary Hi 11 and began an under-
ground sampling program (Site F, Figure 4-~).
Twelve of an estimated 25 operators in the Fairbanks
district spent $400, OUO improving their reserve base with
......... ____ d.F_i))_~-~-~----~-t!_'! ____ ~~-~p_~y-~!_~al __ i.!_l~~-~-t,~g~~!<?I!.~. __ !_!! __ _!_~~-!:_• _____ -~Ll!!.<!.S_t . _ _ _________ _
$300,000 was expended for similar efforts in the Manley,
4-9
Livengood, and Rampart districts (see Figure 4-l). Long a
dormant region, the Bonnifield district east of Healy was
explored for placer gold by five companies.
Twelker, Fitch, and Associates and Sedcore, Ltd.,
conducted contract exploration activities using sonic
drilling techniques regionwide. This technological advance
in drilling appears to hold promise because, among other
advantages, normally expensive placer drilling costs could
be substantially reduced.
3. Exploration for Industrial and Structural
Materials
Although outside the Tanana Basin, the most signifi-
cant industrial mineral exploration in the general region
is focused on the asbestos deposits owned by Doyon, Ltd.,
at Slate Creek in the Yukon-Tanana Upland. These deposits
are at an advanced exploration stage.
Several companies are also exploring for agricultural
grade limestone suitable for use as a soil conditioner,
under the assumption that the production of grain near
Delta will eventually require a local source of mineral
fertilizers. No figures of expenditures or results are
available.
4. Exploration for Coal
Routine exploration is being conducted by Usibelli
Mines, Inc. near Healy in conjunction with coal produc-
tion. In addition, Canadian Superior examined coal
deposits on the north flank of the Alaska Range and
Fairbanks firm continued exploration and feasibility
studies of the Jarvis Creek coal field south of Fort
Greely. Published reserve-resource estimates are on the
order of 70 million tons of subbituminous coals, one-third
of which appear amenable to strip mining techniques (McGee
and Emmel, 1979). Present plans are to supply coal to the
Delta Junction area for local power generation and possibly
for agricultural grain drying facilities. Preliminary
demand estimates are on the order of 50,000 tons/year,
about one-twelfth the size of production at Healy.
C. Other Criteria Used to Produce the Map of Mineral
Potential
Other criteria used to map the mineral potential which
have not been discussed in detail here are presented in
~-_______ ~ _Table---4~1-and __ in __ chap_ter--3-·----------------------------------------------------------------------------
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ChapterS
Benefit · Cost Analysis
l
l.
INTRODUCTION
This chapter presents the results of a preliminary . study
which assesses the relative economic value of mining in the
Tanana River Basin. It is part of a study of the economic
value of managing state land for six different resources:
settlement, agriculture, fish and game, mineral develop-
ment, forestry and recreation. Each resource is examined
separately first; combined mahagement for multiple use will
be discussed in a separate paper.
The first part of this chapter discusses both the method
used to evaluate the economics of all the resources and the
specific application of this method to mineral develop-
ment. The second part of the paper presents the results of
the analysis.
The results are discussed according to five commodity
groups and exploration activities. The commodity groups
include 1) precious metals; 2) base metals; 3) industrial
and structural materials; 4) coal and peat and 5) oil and
gas. Exploration is included separately because often more
than one commodity is sought and because even if no miner-
als are found, there is a positive economic impact from
this activity.
The results of the benefit/cost analyses presented here are
not absolute. In fact, they represent only an order-of-
magnitude estimate of the economic value of the mining in-
dustry. Because this is a preliminary study, it is depen-
dent on relatively incomplete data and therefore it is not
possible to pinpoint the exact ·economic value. Neverthe-
less, this analysis indicates that the mining industry is
making a substantial contribution to the current economy of
the basin and it also has considerable potential.
5-1
PART 1. METHODS
I. General Approach To Eeonom.ie Analysis
Before discussing in detail the method used to evaluate minerals
some background is necessary on the general approach to the consistent
evaluation of all of the land management alternatives and the reasons
for examining the economic value of these alternatives.
There are three basic reasons for examining economic value.
First, economic Information complements the physical information
presented in Chapter 4 of this report and gives perspective on both
what is happening now in the Basin and what the potential is.
~ecoodly, economic data supply important information concerni og the
profitability of resource development; if a resource cannot be
developed profitably, it probably wi 11 not have a lasting ef feet on
the economy. Finally, because two objectives of the state government
are economic development and diversification, economic information is
needed to make decisions which may benefit the economy.
The economic value of a resource has several meanings.
~conomi sts define economic value as the worth of an i tern or ac ti vi ty
to society. This value can be measured in monetary prices in the
rnar.ket place or it can be non-monetary. In the case of a business,
its economic value can be measured in a relatively straight-forward
way, in the form of a financial analysis of the profi ta bi l i ty of the
enterprise. In other cases, such as recreation or hunting activities,
there are economic values to the society which are not measured
directly in monetary terms, but are imputed in people's behavior and
spending patterns.
Economic analysis at tempts to measure people's values, or the
worth they place on different things, in terms of their behavior. It
assumes that if people cherish something their economic behavior will
reflect this, and thus their behavior can be used to indicate the
worth which the people attach to something. In this respect, economic
analysis is an analogous to an attitude survey which at tempts to
measure people's values.
For example, a view of Mt. McKinley may be considered a
price less experience. However, many people place a great deal of
worth on this experience and expectedly, this worth is reflected in
their economic behavibr: the prices of homes with a good view of Mt.
McKinley are significantly higher than those without such a view.
Thus, the difference in the value of these homes compared to others of
similar quality can indicate the minimum worth which people attach to
the view. If the view were obstructed by some development, the
property value decreases significantly.
5-2
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A. Evaluation Techniques ...
There are two common methods available for determining the
economic effects of public policy decisions. The first is referred
to as cost-effectiveness and the second is benefit-cost analysis.
Cost-effectiveness is simply a method for finding the least
cost alternative for meeting a single objective. For example, if
the objective is to improve public health there may be several
alternative ways to meet this: more hospitals, better health
instruction in schools, etc. Each approach would be costed out and
the least cost alternative would be chosen. Unfortunately, this
method is not of use in choosing between objectives. If there is
not enough money to meet all objectives, then choices between
objectives will have to be made and this method will not be of
assistance.
For this purpose, benefit-cost analysis has long been the
preferred approach. First developed by the Corps of Engineers in
the 1930's, the method has become increasingly common to all types
of public policy decisions. In the 1950's, it was adapted to
private sector decision-making and is now used by most of the major
corporations to make investm~nt decisions.
It is not a panacea, but it does provide a systematic approach
and there is extensive literature which documents the ways in which
benefit-cost analysis has been used to examine a vast variety of
public policy questions. Therefore the benefit-cost approach is
used in this report.
B. Benefit-Cost Analysis Applied to Land Management Alternatives
The approach used below determines net benefits (benefits minus
costs) of each of six alterntive ways to manage land (mineral
development, recreation, agriculture, fish and game, settlement and
forestry). Each of these alternatives is examined separately at
this stage, and combinations will be discussed during the next phase
{Alternative Development) in order to evaluate the benefits of
multiple use. ·
First it is necessary to define who gains and who loses from a
particular land management alternative. Three groups are generally
identified: producers, consumers and government. Producers are
those who provide goods and/or services for a monetary return.
Consumers purchase these goods and services. The government often
incurs a cost for any land management approach and this is often
offset by revenues received from user fees. For each of these three
groups, it is necessary to know what their situation is now and what
the effect of a change in land management policy would have.
~ ------ ----~ ---~~---~ -------------~~ -----------------------------~,-----------------------------·---~---------------~ ------------------~ -------------------------------------------=
5-3
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For example, recreational users are receiving some benefit from
the use of state land. What effect would a decrease in the amount
of state land open to recreation have on these "consumers"?
Likewise, what would be the effect on local sawmills of an increase
in the state's allowable cut? Also, how much would it cost the
state to increase the amount of land disposals and what would be the
return to producers and consumers of doing so? Benefit-cost
analysis attempts to answer such questions.
The results of the analysis are aggregated over a period of 20
years. This period of time was used for three reasons. First, the
time horizon of the plan·is twenty years. Secondly, forecasting for
a period beyond 20 years is very speculative and thirdly, the
operation of the time value of money renders cash flows after 20
years insignificant. For example, $1000 received 40 years from now
is worth only $22 today at a discount rate of 10%.
The net benefits of any action must be discounted to arrive at
their present value. The need to discount the net benefits arises
from the fact that a dollar received several years from now is not
worth as much as a dollar received today. Before the dollars
received in different years can be added together, they must be
converted to today's dollars by discounting. This process is
similar to converting measurements in yards and feet, into inches
before adding them together.
The discount rate is generally set at the interest rate on
borrowed funds. For this study, a discount rate of 10% was used
which is the average interest rate charged on agricultural loans.
Because it is impqrtant to be consistent, this rate was also used
for the other resource evaluations.
Each major step of the analysis is described below. Producers,
consumers and the state government are examined separately first and
then the results are totaled.
I. Net Benefits to Producers
First it is necessary to define who the producers are. In this
study, they are defined as those who expect to make a financial
return on the use of a resource. For many resources, more than one
product may be involved, in which case the producers of each product
are examined separately first and then the results are summed. For
example, there are producers of lumber and producers of fuelwood.
The profits of each are examined separately and then the results are
summed •
5-4
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For each type of producer, net benefits are measured as
profits.l The profits of an operation, such as a sawmill or farm,
are measured in purely monetary terms. The first step in the
analysis, is to determine if the resource development is financially
feasible. If the development has been taking place for many years,
this step is very straightforward: what are the estimated profits
of the venture right now and what is the capacity for expansion?
If, however, there is no current operation or if the
development is expected to expand beyond current capacity, then a
detailed financial feasibility analysis must be done to determine if
the venture would be financially profitable.
For example, if local sawmills have been turning a profit for
many years, they can be assumed to be feasible. The next step is to
determine the.likely timber supply if all available forest land were
managed for timber. If the sawmills can already handle this
increase in supply, then it is simply necessary to estimate
profits. If they could not handle the supply, then it would be
necessary to do a financial analysis of the expected costs and
revenues to a new sawmill.
A brief summary of the financial analysis required for each
resource is given below:
Settlement is unique as the purchase of a homesite is assumed
to be "financially feasible". It is assumed that a person would not
buy a parcel for more than its financial value to him.
With forestry, preliminary estimates indicated that current
capacity is likely to be able to handle the foreseeable increase in
timber supply and therefore no detailed financial feasibility
analysis was necessary. Only current and projected profits of
existing operations were used.
With fish and game, the producers were defined as those whose
"principal" objective was financial return (guides, commercial
fishermen, and trappers}. These ventures are expected to be able to
handle the foreseeable supply and therefore no detailed financial
feasibility analysis was necessary. Only current and projected
profits of existing operations were used •
!The analysis is complicated by the fact that a producer may also be
contributing to the economy by such things as hiring people who may
otherwise be unemployed.· Due to limited time and data, these
opportuni~y costs were not evaluated in this study.
5-5
In mineral development, some types of minerals may be developed
or expanded and a preliminary financial feasibility analysis was
performed to estimate the likely returns to this industry.
With agriculture, the Delta farming area is now operating so it
is assumed to be feasible for present operators. Other areas in the
Basin may not be feasible so it was necessary to perform a detailed
financial feasibility analysis.
For recreation, there is currently no large group of producers
dependent on state land for recreational enterprises. There is some
interest in commercial alpine skiing ventures, and a preliminary
examination of the financial feasibility of this type of ventur1~ has
been included.
2. Net Benefits to Consumers
Consumers also stand to gain or lose due to changes in public
policy. Consumers are defined in this study as those who purchase
goods, services or "experiences" (as in the case of hunting or
recreation). Benefits to consumers arise from two factors: 1) a
decrease in the price of a good or an experience and 2) an increase
in the quantity available of the good or of the experience. As in
the analysis of producers, it is necessary to determine the status
quo and/or potential and then the effect of a change in policy on
consumers.
The benefit to consumers is an increase in the welfare or
standard of living of the State's citizens (benefits and costs to
non-Alaskans have not been counted in this analysis since state
policies are generally aimed at only the citizens of this state).
~ If a state policy changes either the price of a good or experience
or the quantity available, then the welfare of the consumers is
affected.
""'
The analysis of consumers' net benefits require~ an
understanding of the demand curve for a resource. As an example,
consider the market for fuelwood in Fairbanks. You may find someone
who would be willing to pay $120 per cord for a few cords because it
is that valuable to them. Someone else might pay up to $110 per
cord for a few cords, but if the price went any higher, they would
burn another fuel. Yet another person would consider $90 their
upper limit. If you could find each of these people and graph their
maximum willingness to pay against the cumulative number of cords
they would buy, the curve might look like the one shown in Figure
1. If the supply were 20,000 cords, then all of the people who
would pay $70 or more would have purchased wood. The person who
considered the wood to be worth only $69 per cord would not buy wood
until the supply expanded and the price fell to what she considered
the wood to be worth.
----------------------------------------------------------------------..---------------
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5-6
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The most difficult aspect of the analysis of the benefit to
consumers is to estimate the demand curve. Ideally, information
could be obtained on different people's willingness-to-pay (their
upper limit) and this would be graphed against the quantity of the
good or experience which they purchase. However, in many cases this
information is not available.
Willingness to pay information is generally obtained from one
of two sources: (1) through direct questions in a statistical
survey and (2) indirectly through records on how much people
actually paid for different quantities.! No accurate survey of the
willingness-to-pay was available for any of the resources. However,
it was possible to estimate the willingness-to-pay for hunting in
the Basin through analysis of fish and game records.
For the other resources, a less desirable but necessary
substitute was used, called replacement cost. This technique
assumes that people would be willing to pay an amount equal to the
cost of the next best alternative. For example, if no firewood were
available, people may have to switch to fuel oil and the cost of an
equivalent amount of heat in the form of oil could be used as a
proxy for the willingness-to-pay.
This technique is less than ideal for two major reasons.
First, it will underestimate what some people would be willing to
pay. Someone may want to burn wood for aesthetic reasons and they
will pay a lot for this pleasure. The willingness-to-pay approach
should reflect such lifestyle or aesthetic values which people
obtain from a resource. The replacement cost method assumes that
only financial reasons are involved in the value consumers place on
an activity or item, and is therefore a less desirable approach.
Secondly, the replacement cost value is not accurate for those
who would not switch to the assumed alternative but who would use
some other replacement. Therefore, the replacement cost is not a
precise estimate of the the true benefit to consumers (which is
represented by triangle ABC in Figure 2). However, it is often the
only alternative short of a detailed and expensive survey and it has
been used in this study to estimate the benefits to consumers for
each resource except fish and game (which had adequate data
available to use the willingness-to-pay approach).
3. Net Benefits to the State
The net benefit (or net cost) to the state was also estimated
in order to give decision-makers an indication of what it costs the
state, if anything, to provide benefits to producers and consumers.
!This occurs only when people pay different amounts to obtain the
-~ ______ s_ame __ go_o_d_,_s_e_r.Y_ic_e __ or_exp_er_Len_c_e_ ,_as __ in_th_e_cas_e __ of _hun_ting_or _____________ _
~ recreation when non-residents generally pay much more to enjoy the
same experience which Alaskans can enjoy everyday.
5-7
)
;
Dollars
10,000 20,000 CORDS
Figure 1. Dem.and Curve for Fuelwood
The shaded area in Figure 1 represents the value to each of the
consumers. The person -who was willing to pay $120/cord has gotten a
bargain because she only had to pay $70. The same is true for the
person who would have paid $110 and the one who would have paid
$90. , The one who would have paid only $70, however, must consider
the deal just marginal; there is no "surplus" for him as he paid
just what he thought it was worth. If the "surplus" for each
individual who was willing to pay more were added together, the
total value would be equal to the area of the tiiangle ABC shown in
Figure 2. This shaded area determines the net benefit to the
consumers.
Dollars
120
110
90
-7--------------------------------~------------------~--------------------------~--------------------
~ I
10,000 20,000
Figure 2. Hypothetical Consum.er Benefits from. Fuelwood
5-8
CORDS
The net return to the state from the land disposal program, for
example, is determined from the revenues obtained from the sale of
land less the costs of administering the program and surveying the
land.
If the costs of a program exceeded the revenues to the state,
then the decision maker should examine the total net benefits or
costs (the sum of net benefits to producers, consumers and the
state) to determine if the program has a positive effect overall.
C. Other Important Indicators of Economic Effects
Although benefit-cost analysis is the most thorough single
method available for determining the benefits and costs to society,
it does not cover all of the important economic effects which
decision-makers need to consider in allocating land to different
uses. Other important measures of the economic impact of resource
use are also evaluated in this study in order to give·a more
complete picture of the contribution of each resource to the
economy.
1. Income Effects
Income effects are an important measure of the impact of a
particular industry on the economy. These effects are important for
the· economic development of a region, which in many cases is an
objective for the management of a resource. Therefore, these
effects have been estimated for each resource.
2. Employment Effects
Another concern of many decision-makers is the effect on
employment of a change in policy. Estimates of these effects are
therefore included in the evaluation of each resource.
3. Net Fiscal Effects on Local Government
Although this study focuses on the benefits and costs to
Alaskan consumers and producers, the effects of state decisions are
also felt by local governments. Increases or decreases in tax
revenue to local governments, balanced against changes in costs due
to the policy, give an indication of the net fiscal effects to local
governments.
4. External Costs and Benefits
External benefits and costs are defined here as those social,
environmental and economic effects which are not quantifiable but
which are very important to decision-making.
No analysis is ever truly complete in documenting every
possible effect and evaluating each of them in some standa;-g~gfl_i_1:~ 9J_
j -----measurement-.--'i'hls-Tnaaequacy~Is--nowhere-more--evTaen.F than in the
5-9 .
""" )
evaluation of external costs and benefits. These include the
effects which even the most sophisticated analysis cannot quantify
with ease. Yet they are as important, if not even more important,
than the effects which are more easily quantified.
This study includes qualitative discussions of some of the
possible effects of resource use which must be considered by
decision-makers in determining land use allocations. These
discussions are inevitably inadequate because the effects cannot be
measured in dollar terms and therefore it is not possible to
indicate their magnitude relative to the effects discussed earlier.
Also, it is not possible to predict all of the possible external
effects of resource use.
However, we have attempted to document what some of the
possible non-quantifiable social, environmental and economic
benefits and costs may be for each resource and we hope that this
serves at a minimum to indicate the importance of these
considerations.
----------------------------------------------------------------------
5-10
=,,
:J
PART 2. RESULTS
I. PRECIOUS MET AIS
The U.S. Bureau of Mines defines precious metals as
the relatively scarce and valuable metals, such as gold,
si 1 ver and platinum. By far the most important precious
metal in the Basin is gold. The mining of gold represents
the largest mining activity in the study area in terms of
economic impact.
Precious metals occur in two types of deposits: hard
rock deposits where the metal is combined with other
minerals and requires processing to extract the metal; and
placer deposits where the precious metals have been mined
by the natural forces of weathering and erosion and have
been deposited, typically in sand and gravel.
Because of the differing nature of precious metal
deposits, the different methods employed in mining these
deposits, and the economic uniqueness of these different
mining activities; this section is broken down into placer
and hardrock subsections.
A. Current Placer Mining of Precious Metals
Fairbanks grew up with gold placers, and they are
still important, with 55 currently active placer mines in
the Tanana Basin. These operations annually produce rough-
ly 55,000 ounces of placer gold.
I. Current Net Producers Benefits
To determine current benefits of the placer
precious metals industry to producers, it was necessary to
determine the net profit after taxes of all the producers.
Due to the lack of information on the profits of individual
producers, it was necessary to construct a simple model of
a typical placer operation that occurs in the Basin and
examine the financial feasibility and profitability of the
model at selected gold price levels. The model is
described in detail in Appendix 5-A.
5-11
Using this model with an average world price
of $400 per troy ounce of gold (or an average value of $10
per cubic yard), the model placer operation would be highly
attractive compared to other investments. At the current
$445 per troy ounce, the return would be even higher. Net ·
benefits for the model operation, after taxes, were roughly
$80,000 annually.
If this typical operation's financial outcome
is used as an esti rna te of the average profit from the 55
active producing placer mines in the Basin, then the
producers benefit can be estimated at roughly $4.4 million
annually. The present value of this over a 20 year period
would be roughly $34 million at a discount rate of 10%, if
no major changes occurred in the industry.
2. Current Net Benefits to Consumer
There are some net benefits to consumers from
local refining and jewelry making which may lower the price
of manufactured products somewhat for local consumers. If
this is the case, there are consumer benefits.
3. Current Income Effects
Current gold production in the Basin is
approximately 55,000 ounces per year (Bundtzen, 1982). At
the current price of about $400 per troy ounce, this equals
$22 million in gross revenues.
The income multiplier for the mining industry
is 2.93 (Logsdon, et. al., 1977). This would mean that the
industry is creating indirectly $42 million dollars in the
income effects for a total income effect of $64 million.
4. Current Job Effects
John Sims of the Alaska Department of Commerce
and Economic Development reported at the 1982 Alaskan
Placer Miners Conference, that the average placer mining
opera t.i on emp.loyed 4. 5 people. For the Basin's 55 active
placer opertions, it can be estimated that 248 people are
employed for six months, so that direct employment effects
were roughly 125 person-years total. (Employment by local
r-efiners was not available, but may be in the range of 30
people).
,_,._ - - - - - - -----------------------------------------.--------------------------------------------------------------------------------
-"-
5-12
'rlle employment multiplier is estimated to be
1.~5 for the mining industry (Logsdon, et. al., 1Y17). The
total direct and indirect employment effects of placer
mining in the Basin is therefore about 140 person-years.
5. Current, Local Fiscal Effects
Currently there are no local property taxes on
placer mining activities on state lands, unpatented federal
claims or patented claims outside organized boroughs.
Also, few direct service costs are associated with placer
operations and therefore the net fiscal effect is probably
insignificant.
6. External Costs and Benefits
External costs include the effects of stream
siltation and erosion, soil disturbance, and scenic costs.
External benefits include provision of access
into new areas and the hunting and recreation benefits
which flow from this. Also, there are lifestyle benefits.
B. Potential Placer Mining Activity
The current level of activity was assumed to
continue into the future, with the addition of product.ion
activity from the Livengood. The potential production of
this mine is anticipated to be 10,000 to 1:5,000 ounces
annually. The mine's reserves are estimated at 300,000
ounces ( T. Bund tzen, Personal Communication). Total
production for the basin under this scenario would be
65,000 to 70,000 ounces annually for placer operations.
Prices were assumed to be high enough at $400 per
ounce to insure feasiblity of all operations. Also, this
potential assumes no si gni fi cant change in energy prices,
legislative environment, land status, taxes or technology.
I. Potential Producer's Net Benefits
If costs and revenues stay at current levels,
producers annual net benefits will be approximately .:j)b.4
million (20% of estimated gross revenues of a 27 million
average)l. The net present value of $:5.4 million over a 20
year period at a 10% discount rate is $46 million.
!Assuming a ~0% return on gross revenues of $~0 million.
(assuming $400 ounce).
5-13
2. Potential Net Benefits to Consumers
Since gold is not significantly cheaper
locally, there are few net benefits to local consumers from
gold product ion in the Tanana Basin. Therefore local
buyers do not· receive a significant benefit over imported
gold.
3. Potential Income Effects
Gross revenues from an annual production level
of 67,500 ounces equals $27 million (assuming $400 per
ounce gold prices). using the income multiplier for the
mining industry of 2.93 (Logsdon, et. al., 1977), yields a
total potential income effect of 79.1 million.
4. Potential Employment Effects
The potential employment scenario assumes 55
operations employing 4. 5 people on the average, plus 100
jobs created from the LJV mine. -Therefore, the total
potential direct employment is 348. Using the mining
industry employment multiplier of 1.25, the total
employment effects from this potential placer gold
production activity scenario is about 434 on a seasonal
basis, or about 217 person-years.
5. Potential Local Fiscal Effects
Currently there are no local property taxes on
placer mining equipment or on mining claims located on
state lands, unpatented federal claims, or patented claims
outside organized boroughs. With the growth of cities in
the Basin or the organization of currently "unorganized
boroughs", potential property taxes may be introduced, but
no fiscal effects are presently foreseen.
6. Potential External Costs and Benefits
External costs include the effects of stream
siltation, erosion, soil disturbance and scenic costs.
External benefits include provision of access
into new areas and the hunting and other recreation
benefits that flow from this. There are also, lifestyle
benefits.
5·14
C. Bardrock Mining of Precious Metals
I. Current Hardrock Mining Activity
The principal hardrock gold mine in the Basin
is the Grant Mine on Ester Dome, which produced about 1000
ounces in 1981. There are, however, many benefits from the
exploration and the development activities occurring at
sever a 1 sites. The economic si gni fi cance of these
explorations and development ac ti viti es is included under
Exploration and Development (Section VI).
2. Potential Hard Rock Mine Model
The model presented here assumes that the
Grant Mine is producing, and that there is a small amount
of precious metal by-products from other non-precious
hardrock mining activity.
per day
(Eakins,
330 days
a yearly
The Grant Mine
with an average
et. al., 1982).
annually. Twenty
could process 100 tons of ore
grade of .45 ounces/ton gold
Such an operation could run for
five people would be employed on
basis.
a. Potential producer's net benefits.
average grade of
gold production
would set annual
Processing 100 tons of ore per day with an
0.45 ounces/ton gold, would yield a daily
of 45 ounces. A work year of 330 days
production at roughly 15,000 ounces.
Fifteen thousand ounces of gold
per ounce yields yearly gross revenues of $6
Assuming a profit margin of 20%, net producer's
from the Grant Mine operation would be $1.2
annually.
at $400
million.
benefits
million
Therefore, the total potential producers
net benefits under this scenario would be $1.2 million
annually. Their net present value over 20 years at a 10%
discount rate would be $10.22 million.
b. Potential consumer's net benefits.
The benefits to consumers are difficult to
determine. Any benefits would be due to savings in the
price and quantity of gold available in-state as opposed to
outside.
5-15
c. Potential net income effects.
Potential gross revenues
were estimated at $6.0 million annually.
income multiplier of 2. 93 (Logsdon, et.
total income effects from this potential
million annually.
d. Potential employment effects.
for this scenario
Using the mining
al. , 1977), the
activity is 17.6
Twenty-five people were assumed to be
directly employed by this scenario. Multiplying this
figure by the mining industry's employment multiplier of
1.25 (Logsdon, et. al., 1977), the total potential
employment effects would be 31 people. These jobs would
be year-around.
e. Potential local fiscal impact.
Si nee the Grant Mine may be patented at
some future date, Borough property taxes could be levied
against this mining activity, but the amount of the tax
cannot be determined until the Borough completes an
appraisal.
5-16
~·
Table 5-1
Estbnated Current and Potential Econoudc Effects
Of Precious Metal Activity
Producers
Benefits Income Employment
Types of (Millions Millions (Person-1
Mining $/Year $/Year Years
Current Placer 4.4 64.0 140
Current Hard rock See Ex,2loration & Develo,2ment Section
Current Total 4.4 64.0 140
Potential Placer 5.4 79.1 220
Potential
Hard rock 1.2 17.6 30
·· ·· ·· Potential Total 6.6 96.7 250
1 Rounded to nearest 10 person-years.
5-17
II. BASE METAlS
The term base metals is usually applied to any of the
more common and more chemically active metals, e.g., lead
or copper. The non-precious metals which occur in the
Tanana Basin include copper, zinc, antimony, tungsten,
lead, tin and molybdenum.
Base metals, like precious metals, generally occur in
two types of deposits: placer and hardrock. Thus, like
precious metals, the base metal discussion is divided into
a placer subcategory and a hardrock subcategory.
A. Placer Mining of Base Metals
I. Current Placer Mining Activity -Base Metals
Although base minerals occur in placer
deposits in many areas of the Basin, their concentrations
are not high enough to be conducive to economic
exploitation at this time. Consequently, there are no
exclusively base metal placer operations in the Basin.
Some base metals, bowever, are produced as a by-product of
gold placer operations. The best known by-products of
placer gold production in the Basin are tin and tungsten.
Currently, only one operation in the Tanana
Basin has reported producing si gni fi cant levels of
by-product base metals. This operation recovered tin (as
cassiterite) as a by-product of gold mining in the
Manley-Tofty area (Eakins, et. al., 1982). The total value
of the recovered tin from this operation is estimated at
less than $20,000 (FOB mine mouth). However, no detailed
economic effects were calculated for this activity due to
lack of information.
2. Potential Placer Mining Activity-Base Metals
No large scale placer deposits of base metals
with economic significance have been identified in the
Tanana Basin. Future activity will probably continue to be
by-products of precious metal placers.
B. Hardrock Mining of Base Metals
I. Current Hardrock Mining Activity
Currently, there is no hardrock production
activity associated with non-precious metals in the Tanana
5-18
Basin. There are, however, many prospects in various
stages of development, such as Placid Oils underground
sampling of the Kawalita Vein System on Cleary Hill or the
Yellow Pup lode development on Gilmore Dome. Because these
operations are in the exploration stage, their economic
significance is included under the Exploration and
Development section.
2. Potential Hard Rock Mining of Base Metals
There are many problems associ a ted with
forecasting hard rock l;>ase metal mining activity. First,
there is the long lead time associ a ted with much of the
activity. After an exploration program has indicated that
a deposit shows promise of being economic, the development
of a large open pit mine may take from five to eight years
from the time a feasibility study is initiated to the
beginning of production. An underground mine may take one
to two years longer, depending on the extent of underground
excavation required to expose the productive ore body.
Secondly, the decision to invest is based
on the projected price of the product and production costs
over the estimated duration of the mining operation.
However, fu tnre mineral prices are contingent not only on
supply and demand, but also on the world economy and the
degree to which free market competition is 1i mi ted (for
example, by long term contracts between miners and
consumers) and on national policy (Louis Berger & Assoc.,
1982).
a. Mine models
Given these realities, base metal
mining potential was not assessed in the form of formal
forecasts. Instead, a scenario was developed in an effort
to provide some possible order-of-magnitude esti rna tes of
the economic con tri but ions of base metal mining to the
Tanana Basin. The scenario was based on the assumption
that four mines will be in production. The mines were
based on models presented in the Interior Transportation
Study, Transportation Demand Forecasts (Louis Berger &
Assoc. , 1982) and on mine development ac ti vi ty currently
taking place in the Basin.
The mines were assumed to be shipping
concentrate out of the region for smelting and refining.
The reader should bear in mind that revenue figures would
more than triple if in-state smeltirig and refining were to
5-19
occur. For example, a ton of 3% copper ore is worth
$42.60; a ton of pure copper concentrate is worth $482.80;
a ton of smelted copper is worth $1,349 and a ton of
refined copper is worth $1,430 per ton. 1
The four mines were the Dry Creek prospect,
the Delta Belt prospect, the Gilmore Dome prospect and a
prospect on Cleary Hill (See Figure 5-l). The mine models
for the De 1 ta Belt and Dry Creek operations were adopted
directly from the Interior Transportation Study (ITS), the
model used for the other two operations was a tungsten mine
model, also presented in the ITS. A detailed description
of these modes is presented in Appendix 5-C, but a brief
synopsis appears in Table 5-l.
1 Calculated from mineral prices presented in Engineering
and Mining Journal, Vol. 183 No. l 0, 1982.
5-20
Table 5-1
SuiDDlary of Mine Model Assum.ptions
Concentrate
Produced
Mine Name Tons Per Day Annually
Dry Creek 1,200 tpd. 68,000 tons
Delta Belt 5 '000 tpd. 448,000 tons
Cleary Hill 600 tpd. 36,000 tons
Gilmore Dome 600 tpd. 6,540 tons
tpd = tons per day
Source: Louis Berger and Associates, Interior
Transportation Study, 1982
5-21
Minerals
Found
Lead, zinc,
silver, gold
Copper, zinc,
lead, silver
Lead, zinc,
gold, silver
Tungsten
The reader should be aware that the
probability of these mines producing within the near future
is not known. Therefore, the following estimates should be
viewed as order-of-magnitude figures only and not as
absolute measures.
To estimate potential
assumert that the model mines used
produced a single likely mineral.
product would be complemented by an
1. Producers benefits
economic effects, it was
in this assessment each
In actuality, the main
array of by~products.
If it is assumed that a 5% return on
gross revenues is realized from these operations (see Table
5-2), then the potential producers net benefits would be
$12 million. The net present value over a 20 year period
with a 10% discount rate is $102 million.
Table 5-2
Estim.ated Annual Revenue of Potential Base Metal Mines
World Price Possible
Concentrate Price Concentrate Annual
Model tons perton1 Adjuster2 Revenues
(millions)
Dry Creek 68,000 Lead X 500 X .34 = $ 11.6
Delta Belt 448,000 Copper x 1420 X .34 = 216.0
Cleary Hill 36,000 Lead/ X 500 X .34 = 6.1
zinc/gold/
silver
Gilmore Dome 36,000 Tungs X 200 X 1 = 7.2
240.9
All prices were September 1982 quotes from the Engineering
and Mining Journal.
The price ~oncentrate adjuster for both copper and lead is
based on the ratio of copper concentrate to world prices
which is 0.34. Tungsten concentrate was assumed to be
twice the current price of 65% minimum, tungsten ore.
5-22
~-
r
[
[
[
[
[ ___ _
~_;
2. Consumer benefits
Loca 1 consumers are unl i k:el y to benefit
directly in terms of measureably lower prices for lead,
zinc, copper, e'tc. However, they are 1 i kel y to benefit
somewhat if the world price is affected by the supply from
the Tanana Basin.
3. Income effects
Given possible annual revenues of $240
million, and using the mining income multiplier of 2.93
(Logsdon, et. al. 1977), the potential income effect of
base metal mining in the Basin would be over $700 million
per year.
4. Employment effects
From the models (Appendix 5C), direct
employment from this level of activity would be 714
people. Using an employment multiplier of 1. 25 for the
mining industry (Logsdon et. al. 1977) the total employment
effects would be in the range of 900 people).
5. Fiscal effects
No information is available on potential
fiscal effects.
6. External benefits and costs
Some of the potential negative effects
include a decrease in environmental quality and depletion
of a non-renewable resource.
5-23
(
Table 5-3
Estbnated Current and Potential Economic Effects
Of Base Metal Mining
Current
Activity
Potential
Activity
Producers
Benefits
(Millions
$/year)
Income
(Millions
$/year)
Employment
(Person·
Years)
Current activity is a by-product
of Placer Operations. Economic
effects not calculated.
12.0 700.0 900
Dry Creek, Delta Belt, Cleary Hill and Gilmore Dome
assumed to be in production.
5-24
III. INDUSTRIAL AND STRUCTURAL MATERIALS
A. Current Industrial and Structural Materials
Activity
Currently, there are seven sand and gravel
operators in the Tanana Basin, working from private and
state gravel pits. In 1981 one mill ion tons of sand and
gravel were mined for landfill, construction and road
building projects in the Bas in ( Bundtzen, et. al. 198 2).
In addition, the Browns Hill basalt quarry supplied the
local area with about 340,000 cubic yards of high quality
rip rap, D-1 road metal (i.e., gravel), ballast material
and crushed fill. There were also 25 personal use permits
issued for 100 cubic yards of gravel each. Tailings are
also an important by-product of gold placer mining.
I. Current Net Producers Benefits
From interviews with local producers, gross
revenue for the industry was estimated to be $18.5
million. If it is assumed that industry profits amount to
about 5 percent of gross revenue, then current net
producer's benefits are about $925,000 per year. The net
present value ( NPV) of $9 25,000 over a 20 year period,
given a discount rate of 10%, is $7.9 million dollars.
2. Current Net Consumer Benefits
If no sand or gravel were available within the
Basin, gravel would probably be imputed by rail. The
difference in cost was not available, but it probably
represents substantial savings for Basin residents to have
a local supply of this important commodity.
Personal use gravel permits resulted in
$12,500 worth of consumer benefits, assuming that each of
the 25 people who received permits acquired 100 cubic yards
of gravel worth $10 per cubic yard. (DNR, 1982.) This
amount does not take into account the opportunity cost of
the labor involved.
3. Current Income Effects
Gross revenues for the industry were estimated
at $18.5 million dollars. If it is assumed that the
construction income multiplier of 2.34 applies to this
industry (Logsdon, et. al. 1977), then the indirect income
effects would amount to about $25 million dollars for a
-~ -----------total-income--e-ffect-O-f-$4-3-mil-l-ion--dol-lar-s-.-----------------------------------
5-25
4. Current Employment Effects
From information collected from industry
representatives, the employment in the industry was
estimated at 198 people for an average of seven mo~ths per
year, or a total of 116 person-years. Using the employment
multiplier for the construction industry of 3.53 (Logsdon,
et. al., 1977), the total direct and indirect employment
effects are roughly 410 people for the Basin's sand and
gravel industry.
5. Current Local Fiscal Effects
Miners located within organized boroughs
and/or towns will be liable for real property taxes on
buildings and patented claims as well as personal
property. They may also have an effect on service costs,
such as road maintenance. However, information was not
available on the exact fiscal effects.
6. Current External Costs and Benefits
Gravel pits take a long time to
revegetate. Consequently, erosion and other problems are
commonly associated with the area, as well as a decrease in
the scenic quality of the vicinity.
Many abandoned gravel pits have been
transformed into mini-recreation areas for swimming,
fishing and sport shooting. ADF&G has stocked fish in many
of the lakes that form in the gravel pits. These are
positive benefits.
B. Potential Industrial and Structural Materials
Activity
Predicting potential activity in the sand, gravel
and stone sector is an uncertain exercise at best. The
major factors which would greatly affect production
activity beyond current levels include:
a. The total length and standard of roads to be
built in the Basin.
b. The possible extension of the Alaska Railroad
to Delta, the Canadian border, or to the Red
Dog or Bornite area in the Northwest.
·"". ----------------~----e-.-The--pes-s-i-b-le-eens-t-r-uet-i-en-ef--t-he-prepesed--g-a-s-----------
~ pipeline.
5-26
Because of the uncertainty of these endeavors
happening in the near future, a conservative scenario is
presented which is the continuation of the current
production levels. If one or more of the above projects
are undertaken, the economic impact from the sand, gravel
and stone industry would easily double and would probably
triple or quadruple.
5-27
l
IV.COALANDPEAT
Coal from the major fields in the Tanana Basin (i.e.
the Nenana field and the Jarvis Creek field) is of a subbi-
tuminous rank which places its heat content in BTU's per
pound between 8,300 BTU's and 13,000 BTU's. Proven
reserves and indicated resources from the Nenana coal field
are estimated to be 861.6 million and 6 billion tons
respectively. Jarvis Creek's proven reserves and indicated
resources are estimated to be 300,000 and 76 million tons
respectively (Bundtzen, et al., 1982).
A. Current Coal Activity
The Usibelli Coal Mine near Healy is currently the
only active coal mine in the state. The mine annually pro-
duces 800,000 tons of subbi tumi nous coal from the Nenana
coal field. Most of the coal is consumed by power plants.
However, a small quantity (roughly 20,000 tons) is annually
consumed for direct space heating needs. All of the
current production is consumed in the Tanana Basin.
Upon completion of an export facility at Seward, the
Usibelli operation will begin to export coal under a 10-
year, 8-million-ton contract with Sun Eel, a Korean based
firm. Completion is estimated to be sometime within the
next two years, at which time the production at Healy is
expected to double to 1. 6 mi 11 ion tons to meet an export
schedule of 800,000 tons annually. (MIRL, 1982)
1. Producers Net Benefits
Coal is currently selling for about $22 per ton
to power plants with longterm contracts. This puts Usi-
belli 's gross revenues in the range of $17.5 million. Usi-
belli Coal Mine profits were estimated at 5% of gross reve-
nues, based on the profits of mines of simi 1 ar size as
1 i sted in Standard and Poor's Index. This puts pro-
ducer's net benefits from coal production in the Basin at
about $875,000 annually. If it is assumed that Usibelli's
contract for the export of coal is for roughly the same
price per ton as domestic coal contracts, then when ship-
ment commences, earnings can be expected to double to $1.75
million.
2. Consumers Net Benefit
Consumers save in two ways from the use of coal:
a) in power generation and b) in space heating costs.
a) Power generation
Currently, roughly 75% of the Basin's electric
.............. __ pow.e_r. _i_s __ ge.n_e.r_a.t_e_g _ _hy-_~_p_a_L_ ___ _For._Jl.OWBJ:._ge_n_ex.Ji_ti_Qll_. _i_n __ t.h.e ___ ---·-_
5-28
-,
Basin, oil would be the most likely alternative to eoal.
Power utilities, which are the largest consumers of coal,
use roughly 125 gallons of oil to generate one MWH compared
to roughly 0.8 tons of coal to generate one MWH. Average
price contracts are roughly 80~ per gallon for fuel oil and
$22 per ton for coal. These figures work out to 12.5~ per
KWH for fuel oi 1 and 2. 2~ per KWH for coal (Community
Research Center, FNSB, 1981). For civilian power genera-
tion faci 1 i ties, switching to oi 1 would require the con-
sumption of 46.9 million gallons of fuel oil at an added
cost of $30.9 million dollars (Appendix 5-D). This amount
is 11 saved 11 by burning coal.
Adding military power plants at Ft. Wain-
wright, Eielson A.F.B. and Clear Early Warning Missile
Station, and the University of Alaska's physical plant
(which are co a 1-fi red fac i 1i ties) , the consumers benefit
from burning coal as opposed to oil for power generation
more than triples to $80.3 million (Appendix 5-D). The net
present value of this figure over a twenty year period at a
10% discount rate is $684 million.
b) Space heating
Approximately 20,000 tons of coal (3% of total
production) are used for space heating in the Basin (Louis
Berger and Associates, 1982). If delivered fuelwood were
substituted for coal in space heating applications, consum-
ers would pay an additional $2.1 million annually for an
equivalent amount of heat (see Appendix 5-E). The net
present value of this over twenty years at a 10% discount
rate is equal to $17.9 million.
3. Current Income Effects
The Usibelli Mine's gross revenues for 1981
amounted to about $17.5 million dollars. Using an income
multiplier for the mining industry in Alaska of 2.93 (Logs-
don, et. al., 1977), the total income effects are roughly
$51.3 million dollars.
4. Current Job effects
At present, the Usibelli Coal Mine employs 100
people. The employment multiplier for the mining industry
in Alaska is estimated to be 1.25 (Logsdon, et. al.,
1977). Total employment effects in the Usibelli operation
then are approximately 125 people.
~ ~ _ ~ __ ~ _ ~ _ ~ ~ ~ ~ ~ ~ _ ~ _s_._Eis~c_al Eff,....e""c.._..t~s ________________ _
No information was available concerning fiscal
effects.
5-29
6. External Benefits and Costs
The Usibelli Mine is a strip mine. This type of
activity contributes to soil erosion and scenic
degradation. However, Usibelli is attempting to revegetate
the site and it is of ten mentioned that Dall sheep are
common in the area despite the level of activity.
Depletion of a non-renewable resource is also a cost.
Import substitution is a major positive external
effect.
B. Potential Coal Activity
Future coa 1 production scenarios are pri mari 1 y
dependent on the supply and demand for coal and the
financial feasibility of the expansion of coal mining
activity. As di cussed earlier, there are two coal fields
in the Tanana Basin: the Nenana field and the Jarvis Creek
field.
The growth of the domestic market is
contingent on a number of factors including: 1) per capita
power consumption trends; 2) grid expansion of electric
utilities using coal-fired power generation facilities; 3)
population growth and 4) the cost of coal relative to
suitable alternatives.
Fairbanks North Star Borough, the per
capita residential power consumption from 1979 to 1981
decreased at an annual rate of 4.6% (FNSB Community
Research Center, 1982).
In the
It is not known whether any of the uti 1 i ties
operating coal-fired generators are planning an expansion
of service area at this time. With lands becoming
available through disposal programs in rural areas, it is
likely that the grids of the electric utilities will
eventually expand to cover a larger market area as these
regions become economically feasible to serve.
The population of the · area served by the coal
fired utilities is expected to grow in the Basin at 2.7%
annually through the year 2000, when the population is
forecasted to be 95,000 (DNR, DRD, 1982). Assuming that
the current per capita coal consumption of 14.5 tons
remains constant and also that the ~ajority of the
increases in gross power demand in the coal-fired uti 1 i ty
service area are met by increases in coal consumption, the
forecasted consumption will be roughly 1.4 million tons by
: << << ~ ~ <. ~ ~ ~ ~ ~ ~ure~year~!3eee.~ · ~~.~~·~~·~~~~~~
The costs of coal relative to other energy
sources plays an important role in the local consumption of
5-30
_,
coal. Currently, power generated by coal fired utilities
cost $. 02 per KWH to produce as compared to oi 1-fi red
plants which produce power at a cost of 12. 5i1 per KWH
(Community Research Center, 1982). Therefore, coal remains
very attractive.
Factors which could have a significant impact on
ttle attractiveness of coal for both power generation and
space heating include: 1) the cost of Susi tna Hydropower;
and 2) the possi bi 1 i ty of inexpensive gas from the North
Slope for space heating and power generation in the Fair-
banks region.
If these two developments either do not occur or
are significantly cheaper than current coal-generated elec-
tric power, then it can be concluded that a modest growth
in domestic coal consumption can be expected.
For space heating, the demand for inexpensive
co a 1 could increase due to both high prices for oi 1 and
electric heat and the growing demand for a limited supply
of fuel wood close to Fairbanks. The opera tor of the Coal
Bunker contends that this market is growing 5% annually.
However, if a 11 fuel wood users switched to coal, current
production would be increased by an almost insignificant 2%
(since so much of ttle demand is for power generation) (See
Appendix 5F). Therefore space heating is not expected to
be a major factor in future production.
Commercial use of coal for space heating is not
expected to grow much within the near future for several
reasons. First, the cost advantage of coal over al terna-
tives is still not great enough to compensate for the high
i ni ti al costs and maintenance costs of coal heating sys-
tems. Secondly, it is necessary to have a large space to
heat and there are not many large structures being built in
the Basin and the large structures being built now and in
the future will be increasingly energy efficient. Thirdly,
ttle widely varying qua 1i ty of coal presents problems for
equipment.
In summary, the largest consumers of coal within
the state is expected to be power plants. Space heating is
not expected to require more than about 6% of total coal
production (currently, space heating uses 4%). Unless
Susitna Power or North Slope gas are more attractive
sources of power, then coal consumption is expected to in-
crease. The range for the increase is likely to be some-
where between the current level of demand of 800,000 tons
and the per capita forecasted demand of 1.4 million tons.
~~-----~-~~~~~~ Foreign demand has the greatest potential for ex-
panding the coal production in the Basin. The Usibelli
Coal Mine currently has an 8-million-ton, ten-year contract
5-31
with Sun Eel, a Korean-based firm, and is also in the pro-
cess of negotiating a contract with another foreign firm
for an unspecified quantity. Export of the Sun Eel coal is
not expected to begin until the coal export facility that
is currently under construction in Seward is completed.
With the current world's oil reserves expected to
diminish early in the 21st century some believe that the
world wi 11 experience another world energy crisis between
the years 1985 to 1995. Diamond Alaska and Placer-Amex
(Beluga Coal Company) are currently proceeding with plans
to develop the Beluga Coal field. Diamond Alaska believes
that an export market as large as 13 million tons per year
could be developed. Placer-Amex is projecting an annual
production of 10 million tons for export as early as 1990.
Although these developments are outside the Tanana Basin,
the fact that these companies are actually investing for
the purposes of exporting millions of tons of co a 1 (as
early as 1990) means that they seriously believe that such
foreign markets will be found. With such development it is
likely that the Usibelli Mine will capture part of the
expanded foreign markets.
In addition to supply and demand, financial
feasibility will play a major role in determining future
production. The Usi belli Mine is currently expanding its
production. This expansion of production is a concerted
effort to use up idle capacity. Estimates from a Usibelli
mining engineer and from the Mineral Industry Research Lab
( MIRL) p 1 ace the current annual capacity of the Usi be 11 i
operation at 2.0 to 2.2 million tons per year. Current
production of 800,000 tons per year utilizes 36% of this
capacity. The Sun Ee 1 contract wi 11 increase utili za ti on
to almost 75% of capacity.
If and when production reaches capacity, many
decisi6ns will have to be made by Usibelli as to the path
the company is to follow. The decision to expand or not,
and if so, then by how much, will have the greatest impact
on coal production in the Basin. Some of the factors which
will probably enter into the decision process include
interest rates, cash reserves, longterm contract possibili-
ties, etc.
Jarvis Creek's potential will also rest on such
factors as hom~ space heating needs and possible c6nstruc-
tion of a coal-fired power plant in the area. The minimum
size of coal-fired plants is about 1000 KW (Frank Abegg,
MUS, Fairbanks) and this is probably larger than what is
currently needed. However, as agriculture, settlement and
mining develop the upper Tanana, the ciemand for power will
c;----------rrrcr_e_a~s-i-rrg-1-y~m-a-ke~a-c-o-a-l--=-f-J--r-e-d----puWBT----p-l-a-n-t-more~a-t-t-ra-ct-J-ve-,--.--------
~ provided that the expense of tra nsmi ssi on lines is not
pro hi bi ti ve.
5-32
'-'
THE SCENARIOS
LowProduction -Current production level including the Sun
Eel contrllct (1.6 million tons/year total). No production
at ,Jarvis Creek.
MediumProduction -Usibelli production at capacity of 2.2
million tons/year. Jarvis Creek producing 30,000
tonsjyear.
High Production -Doubling current capacity to 4. 5 mi 11 ion.
tons/year. Jarvis Creek producing 50,000 tonsjyear.
a. Potential net benefit to local producers
Low Scenario -Operating at 75% of capacity is
not as profitable as operating at 100% capacity. The
profit margin was assumed to be equal to the average value
of the profit margins of coal mining companies of similar
size which are listed in Standard and Poors Industrial
Index (average net profit 5% as a percentage of gross
revenue). This figure when applied to the low scenario,
yielded a producers benefit of roughly $1.75 million
dollars.
Medium Scenario -Operating at 100% capacity
was assumed to improve the profit margin by 1% to 6%.
Under this scenario $2.8 million dollars is an approximate
value for producers surplus.
High Scenario -Operating at 200% of current
capacity would, at 6% profit margin (as a percentage of
gross revenue) yield a profit $5.7 million dollars.
b. Potential net benefits to consum.ers
Because the total quantity of coal on the
domestic market is not expected to change si gni fi cantl y,
regardless of the scenario, the price of coa 1 wi 11 most
likely increase at a real rate of about 2% per year (the
average price i nceases over the last several years). The
consumer savings resulting from burning coal compared to
alternative energy sources is expected to increase in the
coming years, making coal increasingly attractive.
However, if the Susitna Dam is constructed or
if gas is piped down from the North Slope to Fa i rhanks,
the consumers net benefit from the use of coal could
decrease.
5-33
c. lncom.e effects
Low Scenario -Gross revenues of $35.2 mi 11 ion
would result in an income effect of roughly $103 million.
Medium Scenario Gross revenues of $48
million would result in an income effect of roughly $142
mi Ilion.
High Scenario -Gross revenues of $95 mi 11 ion
would result in an income effect of roughly $278 million.
d. Ednploym.ent effects
Low Scenario
25 people indirectly.
100 people employed directly,
Medium Scenario 125 people employed
directly, about 30 people employed indirectly.
HighScenario -200 people employed directly,
50 people employed indirectly.
e. Externalities
Large amounts of land would be strip mined,
causing possible erosion and disruption of scenic beauty.
Import substitution is a positive externality.
Table 5-4
Current and Potential Econom.ic Effects
from. Coal Mining
Producers Consumers Income 1 Employment
Benefits Benefits Effects Effects
(Millions (Millions (Millions (Person
$/year) $/year) $/year) Years)
Current
Activity 0.9 83.2 51. 125
Potential
Activity
Low Scenario 1.8 N.A. 103. 125
High Scenario 5.9 N.A. 278. 250
N.A. = Not Available
~:-----------1Rounaea--to nearest $~-mrrn on
5-34
r-.
I
[
[
C. Current Peat Activity
at roughly
frozen and
arrived at
Peat resources in the Basin are estimated
24 billion cubic yards, however, much of this is
none is considered fuel grade. This figure was
from estimates of non-fuel grade peat acreages
Peat Resource Map of Alaska, (Rawlinson and Hardy,
from tlle
1982).
Peat is currently being mined commercially by five
firms in the Tanana Basin. The largest of these producers
mines an estimated 5,000 cubic yards annually. From inter-
views with 1 ocal producers, the entire industry's output
was estimated at 10,000 cubic yards. Most of this peat is
used for landscaping purposes, but a small quantity is used
for agricultural and horticultural purposes. None of the
peat is used for fuel.
I. Producers Benefits
Peat is currently selling
yard. Thus revenues are in the range
peat industry has a 5% profit margin,
peat producers would be about $6,000.
2. Consumers Net Benefits
for $12 per cubic
of $120,000. If the
then net benefits to
Peat produced locally sells for $12 per cubic
yard. Since there is no similar substitute it must be com-
pared with imported peat. About 10,000 cubic yards of peat
are consumed annually. Assuming that consumers would buy
an equal amount of imported peat if a local supply did not
exist, they would have to pay $400,000 (imported peat,
sells for about $40 per cubic yard). Thus, consumers are
saving about $280,000 through t h use of loca 11 y produced
peat.
3. Income Effects
For the peat industry, gross revenues for 1981
amounted to about $120, 000. If the mining income multi-
plier is applied, the peat industry's total income effect
is about $351,600.
4. Employment Effects
The peat industry currently employs six people
seasonally. If the mining employment multiplier is applied
to the peat industry, it is expected that 8 seasonal jobs
result from the existence of the peat industry, or about 3
person-years.
5-35
V. OIL AND GAS EXTRACTION
Oil and gas extraction covers three phases;
exvlo r-ation, development and pruducti on. All three are
treated in this chapter. Exploration was not separated out
as in the preceding chapters, because it is readily
identifiable and solely related to oil and gas activities.
A. Current OU and Gas Activity
As of August lB82, an oil and gas lease has been
in effect for part of a B41, OUO acre tract of ::;tate land
west of Nenana. Prior to this lease, the only other
related activity in the basin was a well drilled in 1961
{in the vicinity of the present lease area) which was dry.
1. Current Net Producers Benefits
Currently, the annual rent for all tracts
leased in Oil and Gas Lease Sale No. ~7, is $105,000.
There are no positive cashflows to offset this liability,
but tax incentives do offset this amount.
2. Current Net Consumer Benefits
Since there is currently no production there
are no current benefits to consumers.
3. Current State Net Benefits
The net benefit to the state can be calculated
as the monies from the lease bonuses and rental fees minus
the cost associated in the leasing of the land.
The range of cash bonuses for Sale No. ~7 was
between $5 and $:30 per acre. Yearly rental rates are $1
per acre the first year rising to a maximum of $3.00 in the
fifth year. Roughly 165,000 acres in 36 tracts were
leased ( DMEM, 1982). Si nee bonuses only accrue if
production ensues, income to the state from rental fees is
estimated at $165,000 for this year.
Tile cost of state administration is not known.
5-36
-,
-~
B. Potential OU and Gas Activity
l!rojectin& the potential impacts of oil u.nd gas
developtnent in the basin is an uncertain <:'Xercise si.nct~ tlll~
location, type and magnitude of potential devel,)prnent
activity cannot be determined precisely. Therefore, it is
necessary to .::;peculate about the most likely course of
events, based on available information concernin5 the
geology of the area and other factors tl1a t may i nf 1 ue nee
future development.
The potential oil and gas related economic
activity in tne Tanana Basin is indicated by the following:
1) four firms entered into leases with the State in Lease
Sale ~71; and 2) petroleum and economic geologists are of
the opinion that there is a low probability of commercial
quantities of oil or gas in the Tanana Hasin.
It seems likely that at least three shallow
exploratory wells will be drilled in the Basin over the
course of several years. The targeted petroleum bearing
structures are of medium depth and an average well could be
completed within ~0 days
I. Potential Benefits
Due to the many unknowns, it is not possible
to estimate benefits and costs of oil and gas at this
time. It should be noted that there is potential, but more
exploration is required before reasonable forecasts can be
made.
2. Potential Income Effects
Roughly $6 million dollars can be expected to
be expended for these three drilling operations. If the
i ncor1e multiplier for the oi 1 and gas i ndu:stry of 2. 87 is
used (Logsdon, et. al., l!::J77) then the expected income
effects are estimated to be $17.2 million dollars (DMJ:<.:M,
1982.)
3. Potential Employment Effects
Three exploration wells are each expected to
employ 50 people for a four month period. Total direct
employment would be 600 person-month:-:; or roughly 5U
man-years.
lBrock, Burglin, Shell & Arco leased ~6 tracts in the fall
of 1982.
5-37
Logsdon, et. al., ( lW/7) set the oil and gas
industries employment multiplier at 1.1~. If this is
applied to the direct e1nployment figures, then the expected
total employment effects should be in the range of HO man
years. These employment ef fee ts have an ex pee ted 1 i fe of
from one to three years.
include:
4. Potential Local Fiscal Effects
Unknown
5. Potential External Costs and Benefits
Some of the likely external costs and benefits
non-locals hired for field crews (-)
some local hiring for field crews (+)
trails, access (+, -)
abandoned camps (-)
information on geology and heat flows
of the region from drilling activity (+)
destruction of habitat (-)
creation of habitat (+)
5-38
VI. EXPLORATION
r~xplora ti on activity has been placed in a separate
section because these types of activities are nut involved
in production, and so are unique in that there are no net
benef 1 ts to producers or consumers. Also exvlora ti on may
be for several kinds of minerals at once.
Most o£ the data used in this section came from the
section on exploration in tlle eastern interior developed in
Alaska Mineral Resources 1~~1-1~~~, by the UGGS staff.
Only those ac ti viti es within the Basin were included. A
detailed description of current exploration and development
activity is found in Chapter 4.
A. Current Exploration Activity
The dollar value spent on exploration in the Tanana
Basin (Eastern Interior) represents the highest for any
region in the s.ta te (excluding oi 1 and gas). Most of tile
current activity is concentrated in the Yukon/Tanana
Uplands and the Alaska Range. The relative share of
expenditures by commodity type is as follow for the Tanana
Hasin: Precious metals --placer 43%, lode 16%; base metals
39%; coal and peat ~%. The total amount spent in l9Hl was
estimated at 13.5 million.
1. Current Producers Net Benefits
As there is no current production from these
exploration activities, the net benefits to producers can
be described as negative (the cost of exploration).
However, the i hforma tion gathered as a result of these
activities is assumed to be of at least an equivalent
future value to potential producers, on the average.
Consequently the net benefit is considered positive but not
quanti tiable.
2. Current Consumers Net Benefits
Since there is no production, there are no
direct benefits to consumers.
5-39
u J .. _j L .1 JJ
' i
TANANA
BASIN
AREA
a
SCALE IN MILES
ll \2 2·1
.J
F;IGURE 5.1 Areas of Active Exploration in the Tanana Basin
I .
I
I
I
' .J .J
~,
l
l.
··:..
3. Current Net Benefits to the State
The state
exploration permits.
monitorin~ exploration
assumed to be small.
4. Income Effects
receives
The state
activity.
fees
also
The
from miners
incurs costs
net effects
for
for
are
If expenditures are treated as revenues then
the total income effects are estimated to be $lj.5 million
direct effects and $~~.4 million indirect, using the mining
income multiplier of ~-~~.
5. Employment Effects
Bundtzen, et. al. (l~M~) estimated employment
for the 11 B;astern Interior" to be above 552 on exploration.
A rough estimate of employment within the Basin is 500. An
estimated 75% of this is assumed to be seasonal (6
months). Thus there are about ~lU person-years of direct
employment and MO indirect jobs, for a total of ~~U
person-years of employment due to exploration in the Basin.
6. External Costs and Benefits
The same as for oi 1 and gas exploration (l:>ee
l:>ection V).
B. Potential Exploration Activity
MaJor new mineral finds (e.g. massive sulfides in
the Fairbanks area) could spur large exploration
expenditures, but for the purposes of this analysis, a
similar level to the current activity was assumed for the
p6tential scenario.
l:>ee current exploration activity for potential
economic effects.
!Adjusted from Bundtzen, et. al., (1~82) which indicated
tlla t employment for tt1e 11 Eastern Interior 11 was about 5b2 in
exp,ilora tion. A rough estimate of employment within the
Tanana Hasin is bUU.
5-41
~·
"" I
VII. NONMETALLIC MINERAL ACTIVITY
A. Current Non10etalllc Minerals Activity
There currently
acti~ity in the Basin.
is no nonmetallic
B. Potential NoniDetallic Minerals Activity
production
Currently agricultural 6rade limestone is being
examined in the Canwell Glacier area for use at Big Uelta.
llowever, the potential benefits of this activity are
unknown at the current time.
VIII. SUMMARY
Currently, precious metals, industrial and
structural materials, coal and exploration activities have
the largest economic i rnpact. These acti viti es generate an
estimated $ti million in benefits to producers, $1b5 million
in income and over 800 jobs (out of an estimated 22,000
person-years of employment available in the Basin (UNH.,
UH.D, l!j~2) J. Gold generates most of the producers
bene£ its and the larc?;est income ef feet, while exploration
may generate the most employment. (See Table 5-4).
The present value of these activities is shown in
Table 5-5. This table is in tended to be used to compare
the economic effects of the different resources.
Unfortunately, much of the information necessary to
complete Table 5-5 was not available. This table includes
some general statements on possible external (or
nonquant if iable) benefits and costs which should also be
kept in mind when makin~ comparisons.
Table 5-o presents a summary of the estimated
potential effects of mining. These estimates are not
intended to be used as absolute measures. They are
estimates intended to show the potential of the mining
industry in the next 20 years.
These estimates do indicate that the principal
expected change is the addition of major base metal mining
to the gold, sand and gravel and coal activities which nave
been the basis of the indu~try for the last several
decades. Base metals could become the most important
commodity in terms of econorni c impact, \considerably
increasing producers benefits, income and employment.
Gold, sand and 6ravel and coal also nave considerable
potential for expansion.
---~,----------------
5-42
...,
-~
\
~
..,
~
Table 5-5
SuDllllary of Current Econoulic Effects
of Mining in the Tanana Basin
Producers
Mining Benefits Income Employment
Activity by (Millions (Millions (Person-
Commodity $/year) $/year) Years)
Precious Metals 4.4 64.0 140
Industrial and
Structural
Commodities o.~ 43.0 410
Coal 0.9 51.3 145
Exploration and
Development
Activities 39.4 390
------Total o.2 1~7.7 1,065.0
5-43
.1 L J t . ~ .J ;_,•J 1
TABLE 5-6
ESTIMATED CURRENT ECONOMIC. EFFECTS OF MINING IN THE TAN ANA BASIN
NET BENEFITS NET
VALUE DIRECT & DIRECT& FISCAL EXTERNAL
NET RETURN PER INDIRECT INDIRECT EFFECTS COSTS
TO PRODUCERS TO CONSUMERS TO THE STATE TOTAL ACRE INCOME EMPLOYMENT ON LOCAL AND
I EFFECTS EFFECTS GOVERNMENTS BENEFITS
I (S MILLIONS) (±)
I PRESENT PRESENT PRESENT PRESENT
MILLIOj'IS VALUE(a) MILLIONS VALUE (+) VALUE VALUE MILLIONS PERSON (+)
$/YEAR OVER20 YRS $/YEAR OVER20YRS $/YEAR OVER 20 YRS $/YEAR OVER20YRS $/ACRE $/YEAR YEARS $/YEAR
Precious Metals 4.4 37.5 N.S. N.S. N.A. N.A. N.A. N.A. 64.0 140 N.S. See text
Industrial and
Structural Materials 0.9 8.0 N.A. N.A. N.A. N.A. N.A. N.A. 43.0 410 N.A. See text
Coal 0.9 7.6 83.2 676 N.A. N.A. N.A. N.A. 51.3 125 N.A. See text
Exploration and
Development NOT APPLICABLE
I I NOT ArLICABLE N.A. N.A. N.A. N.A. 39.4 390 N.A. See text
TOTAL 6.2
i
53.1 N.A. N.A. N.A. N.A. N.A. N.A. 197.7 1065 N.A.
N.S. = Not significant.
N.A. = Not available.
(a) Discounted at 10%. value assumes current production remains constant. But as explained in the text. current production is expected to increase lor all commodities. Therefore. this is only a minimum eslirnale (see Potential Benefits).
~
\
Table 5-7
Sum.JD.ary of Potential EconoJD.ic Effects
of Mining in the Tanana Basin
Mining
Activity by
Commodity
Producers
Benefits
(Millions
$/year)
Income
(Millions
$/year)
Emplo~ent
(Person-a
Years)
Precious Metals
Placer
l:fardrock
Total
Base Metals
Industrial and
Structural
Materialsb
Coal
Ivledium Scenario
Total
6.4
1.6
~.0
1~.0
0.9
4.9
aRounded to nearest 10 person-years.
94.
19.
11~.
700
4J
142
bcurrent effects are shown as a minimum estimate.
CRounded to nearest $1 million.
dRounded to nearest lOU person-years.
5-45
450
900
145
1!55
' ' j
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J
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1
j
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j
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i
..1
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J
j
.i
1
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Chapter&
Management Recommendations
--------------
J
'·"!'-
I. STATEWIDEGOALSANDTHEIRIMPLICATIONSFORMINE~LS
MANAGEMENT IN THE TANANA BASIN
A. Introduction
'Ihe preceding chapters describe existing arrl expectErl production of
minerals and the likely economic benefits of mineral production. 'lhese
analyses, together with the goals for minerals laid out in the FY83
Statewide Natural Resources Plan, form the foundation for the minerals
management recommendations that follow.
B. Relationship of Statewide Mineral Goals to the Tanana
Basin
'Ihe Statewide Natural Resurces Plan is the broadest of the plans
developed by the Department of Natural Resources. It provides the
context for the area plans, such as the Tanana Area Plan, by setting
forth goals and objectives for each resource. 'Ihe Statewide Plan is
used in formulating ADNR' s budget and setting inventory arrl planning
priorities.
1. Statewide Goal: Economic Development
Develop mineral and energy industries which will provide
stable and diverse job opportunities, increase per capita
income, increase local tax revenues and stimulate growth
-qf the industry.
Historically, the Tanana Basin has been a very productive ITUnHlg
area in the state. Today, mining remains a very important industry,
employing approximately 1065 people and generating an estimated $200
million in income.
Because of the imp:>rtance of m1n1ng in the Tanana Basin in both the
regional and the statewide economy, areas should remain open to mineral
entry unless there is overwhelming evidence to irrlicate that an area
should be closed. Areas which are currently producing large quantities
of minerals should have minerals designated primary use.
6-1
2~ Statewide Goal: Mineral and Energy Supplies
Develop coal and geothermal resources to contribute
to the energy suwly of the u.s. and Alaska. Develop
metallic and industrial mineral resources to contri-
bute to the industrial needs of the u.s., particularly
critical and strategic minerals.
Much of the state larrl in the study area is known to have high or
moderate potential for minerals. The Tanana Basin is currently pcoducing
an estimated 55,000 ounces of gold, 1.6 million tons of coal arrl over one
mill ion tons of sand and gravel each year. This represents a large
percentage of total state production of each of these oonm:xHties.
Because of the importance of the Tanana Basin in supplyin:J minerals
and energy, designation of land for mineral use and leaving land open to
mineral entry must be a high priority.
3. Statewide Goal: Revenue Base
Establish a stable source of revenues to assist the state
in meeting the public needs of people of Alaska in the decades
following the decline of Prudhoe Bay :production.
Through continued production arrl developnent of minerals, the Tanana
Basin can make a significant contribution to the local and state revenue
base. Every effort should be made to encourage am protect mineral entry
and development in this region.
4. Statewide Goal: Environmental Quality and Cultural Values
Maintain existing environmental quality and cultural values.
Mineral development is not incompatible with protecting
environmental arrl cultural values. Mineral exploration arrl development,
when conducted in accordance with existing regulations and plan
guidelines, will not cause undue harm to these important values. In
almost all cases, compromises can be v.orked out which allow development
to take place while protecting the environmental quality arrl cultural
values of the.Tanana Basin.
6-2
II. MANAGEMENT RECOMMENDATIONS
A. ReeoJDJDendations for Designations
I. Designate Active Mining Areas and Areas of Very High
Potential Primary Use Minerals.
On these high value areas, minerals should be at least a ooprimary
use. All of the areas designated on Alternative 4 as 501, 601, 602,
603, and 607 have roth very high mineral rntential and high levels of
historic and current production. The following guidelines are proposed
for the management of these lands:
a. Land disposals should be few and small in nature.
b. Land sales should rot proceed without careful design to
avoid mining claims and mineral concentrations.
c. These areas should remain open to rocrl developnent.
d. Timber harvesting, material sales, agricultural leases,
trapper cabins, rem::>te cabins, ronmercial leases, grazing and habitat
enhanoenent would be allowed after consultation with DMEM.
2. Retain Areas of High Mineral Potential in Public
Ownership and Open to Mineral Entry.
Areas are designated as 502 or 605 on Alternative 4 have known
potential for minerals but generally few active claims. On these areas,
minerals should be a secondary use and the area should be left open to
mineral entry. The following guidelines are proposed for the management
of these lands:
a. These areas should be left open to mineral entry. Land
sales may be permitted with consultation of DMEM, but they should be
small and their design should take mining claims and mineral values
into account.
b. Large project agricultural sales would not be acceptable
in these areas.
c. Trapper cabins and reroc>te cabin permits would be
acceptable, as would timber harvesting, material sales, grazin:J and road
development. Scattered small tracts may be acceptable with DMEM
consultation.
6-3
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-,
--,.:
/
3. Whenever Possible Leave Areas Open to Mineral Entry.
Other areas should not be closed to mineral entry unless
irreversible damage \\Ould be done to a scarce or very valuable surface
resource. Areas designated for disposal will be closed to mineral entry
during the LADS disposal process. 'Ihe following management guidelines
would apply to these undesignated lands:
a. These areas should be left open to mineral entry because
their mineral potential is as yet largely unknown.
b. If there is an overriding concern regarding another
resource or if the area is of very high value for disposals, a mineral
closure may be acceptable. Ibwever, prior to closing an area, all
possibilities for leaving it open to leasehold location should be
pursued.
c. 'Ihese areas should be left open to coal prospectill3 and
leasing and to oil and gas leasing unless there is an O'lerriding ooncern
for the protection of another resource.
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6-4
l
Appendices
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APPENDIX4A
GEOGRAPHY AND GEOLOGY OF THE TANANA BASIN
Geography
The Tanana River or 'River of the Mountain Men' as it
was known to Indians and early explorers, flows 44U miles
from the confluence of the Nabesna and Chisana Rivers
northwest to the Yukon River. The :3b, 000 mi 2 drainage
basin is bounded on the south by the Alaska Range, on the
north by a hydrolog;ic divide with the Yukon River, and on
the west by a low hydrologic divide with the Kuskokwim
Mountains. The study area lies in four physiographic
provinces: the Alaska Range, Tanana H.i ver lowlands, Yukon
Tanana Upland, and the Kuskokwim Mountains (Wahrhaftlg,
1865). The legal boundary of the study area omits a
si~nificant portion of the Tanana drainage basin: hence we
have included the Kantishna Hills in this summary.
Bedrock Geology
Yukon Crystalline Terrane
About three-fourths of the bedrock underlying the
Tanana Basin can be assigned to the Yukon Crystalline
Terrane, a pol ymetamorphi c-igneous-complex ranging in age
f ro1n Precambrian to upper Paleozoic (Foster and others,
l!.f7 :3). This large unit underlies portions of all four
physio~raphic provinces, including the Tanana River
lowlands where it is deeply buried by Quaternary fill. The
southern boundary of the crystalline rocks lies just north
of the Denail Fault, a fundamental geologic feature that
separates the metamorphic sequence from younger largely
unmetamurphosed rock units on the south. Originally known
as the 'Birch Creek Schist,' the Yukon Crystalline Terrane
L1 as bee n sub d i vi de d i n to at 1 east f i v e d i s t i n c t i v e
lithologic packages that differ in metamorphic history,
genesis, and age. Recent work in the Kantishna Hills,
nortl1-ceutral Alaska Range, and Fairbanks areas by both
indu8try and DGGS have shown that certain metamorphic
sequences are mineralized and host numerous metal
deposits. Some of these will be described in the mineral
resources section.
4A-l
I'
Precambrian-Mesozoic Sedimentary and Minor Volcanic Rocks
In the western portion of the Yukon Tanana Uplands
near Livengood, relatively unmetamorphosed sedimentary and
minor volcanic rocks are tectonically JUXtaposed to the
Yukon Crystalline Terrane. These rocks range in age from
late t>recambri an to Cretaceous and consist of sandstone,
limestone, shale, chert, greenstone, and minor ultramafic
intrusions.
Similar rocks (but not related) occur south of the
Denali Fault in the Alaska Range from Cantwell eastward to
the Clearwater Mountains. Altered basalt, andesite, and
some sedimentary rocks of Permian, Triassic, and Jurassic
age underlie much of the Clearwater Mountai ns-.Paxon
Mountain area. Some metamorphic rocks also occur south of
tne Denali Fault but are believed by must geologists to be
unrelated to those in the Yukon-Crysta 11 i ne Terrane
previously described.
Igneous Rocks
Granitic plutons are scattered throughout the Alaska
Range (but mainly concentrated east of the Richardson
Highway), and in the Yukon-Tanana Upland. These composite
bodies range in composition from quartz diorite to 6ranite
and appear to average quartz monzonite in composition.
Several large bodies in the Alaska Range are signatured by
prominent rnagneti c highs. The plutons range in age from
Devonian to Early Tertiary (050-60 m.y.); 90 percent
crystallized during Cretaceous-Barly Tertiary time (140-60
m.y.). Rare to uncommon alkalic and ultramafic dikes
intrude a crystalline schists of the eastern Alaska Range
(Foley, 1981). These dikes bear some interest in terms of
potential for platimum and gemstones. Small felsic
porphyry plugs of Late Cretaceous age in the Richardson and
Livengood areas are lode sources for placer ~old.
Ultramic rocks occupy a thin discontinuous belt
trending from the head u£ the Salcha River southwest toward
Wood River Butte in the Tanana Lowland. An important
asbestos find on Slate Creek near Eagle (outside the study
area) is hosted within this rock package.
4A-2
Tertiary Sediments
Tertiary coal bearin~ rock::> underlie :several 11UtHireJ
Si.J.uare mi le:s of the central Alaska Ran~e near Healy and
about lb square miles in the eastern Alaska H.an~e near
Jarvis Creek. These rocks have been :subdivided into
several formations near Healy, but not at ,Jarvi::; Creek.
However, the strati~raphic sections in both fields is
similar and can be subdivided _into three major members: a
basal portion of micaceous sandstone and con~lomerate,
middle units of arko::>ic sand, coal, and lacustrine silt.,
and upper units of claystone, sandstone, and thin coal
seams (Wahrt1aftig, l!::loH). All coal bearing rucks range in
age from Miocene to ~liocene. They are believed tu
underlie at lea::;t _portions of tt1e Tanana Lowlands.
Capping the coal bearing group in both areas is
aerially extensive Nenana Gravel of the late ~liocene age.
Carter ( l!::!Hl) has suggested tlHt t portions of the Nenana
~ravel are outwash or till depos.i ted by a late Tertiary
glaciat_ion.
Pleistocene-Holocene Geology
Pleistocene glaciation took place in ~uch of the
Alaska H.ange but is absent in most of the Kuskokwim
Mountains, Tanana Upland, and Tanana Lowlands. Several
advances of Wisconsinan and pre-Wisconsinan ice left
deposits in major north flowing ::;treams leaving the Alaska
Range (l>ewe, 1!::175). In general, glacial deposits are
progressively modified through time and landforms such as
moraines, kettles, eskers, and outwash fans are absent in
the old-est depo::;i ts. Glaciation is an important
consideration in a regional appraisal of placer gold
deposits because glacial ice tends to scour out,
disseminate, or bury heavy mineral placers (Hundtzen,
1!::1~0). There are significant exceptions to this
generalization.
Today the Tanana Basin is actively undergoin~
modification through various periglacial erosional
_processes. Loess; i.e., homogeneous deposits of silt, have
been transported by ::;trong winds from the Alaska H.ange and
cover the uplands near Fairbanks with accumulations uf many
feet thick. Stream deposited reworked si 1 t fans and slope
deposits fill valley bottoms. Thick accumulations of
Sphagnum peat cover poorly drained lowlands. Hugh alluvial
-------------------
4A-3
.,
fans extending north from the Alaska Range have buried the
Tanana Lowland, a deep structurally controlled trough.
Many of the stream valley::> in the Fairbank::>, Livengood,
Manley, and Hi chardson areas contain gold bearing gravel
deposits in ancient stream depo::>its. The gravels v~ny in
thickness and are often overlain by younger sediments such
as reworked silt, peat, and sand termed 'muck overburden.'
The Fairbanks district is well known for extensive dredging
operations of these gravels---described in the mineral
resource section.
Altiplanation terraces, stone polygons, stone stripes,
and solifluction lobes are common geomorphic features in
higher altitudes (_1,500 ft) on all upland areas within the
basin. Thaw lakes, pingos, abandoned oxbow lake::>, and
thermokarst topogravhy are common in valley fills,
particulary in the Yukon-Tanana Upland. The entire region
is in the zone of discontinuous permafrost.. Modern day
geologic "hazards" associated with these geoniorphologic
feature include permafrost, ground water distribution,
landslide potential, hillside erosion, and flooding. Of
these, permafrost is a constant engineering problem in much
of the basin; failing to recognize tllis condition during
construction projects can have dire consequences. The City
of Fairbanks is built entirely on the flood plains of the
Tanana and Chena Rivers. Such hazards should be important
considerations for disposal of settlement, agricultural, or
industrial development lands. The reader is encouraged to
review an excellent summary by Pewe (1~82) of these
processes as they affect the general Fairbanks area.
Structural Geology
Several major folding episodes have folded
pre-Quaternary bedrock units in the Tanana Basin. Much of
the folding is associated with a complex history of
mountain building deformation and plate boundary
interactions. Young parallel high angle faults have formed
'grabens' in the Alaska Range and are responsible for the
distribution of Tertiary coal bearing units. Major faults
in the study area include the Tintina Fault, a major
structure that forms the boundary between the Yukon-Tanana
Upland and Yukon H.i ver Basin on the north, and the Denali
Fault in the Alaska Range. 'Tear' faults oblique to these
two parallel structures include the Shaw Creek, Minook, and
Minto Faults, all of which appear to be active.
4A-4
Alaska is part of the circum-~acific seismic belt
where more than 7 percent of world seismic energy is
released. Even though many do not consider the Tanana
Hasin seismically active, nine earthquakes with Kichter
magnitudes e~ceeding o.U have shook the region in the last
~u years (fig. J). A ten-year period has been well
established for these large quakes. One such earthquake,
the October 15, 1947 Nenana 'Shake' reached a magnitude of
7.0 and was partially responsible for cancellation of plans
to bui 1 d an air force base at the present site of Clear,
Alaska.
EXPLANATION
Earthquake Magnitude
• 6.0. 6.9
.7.0·7.9
May 10,1958-MacniLude 6.4 ----~::..:::..~
May 10, 1958-Macnitude 6.4 -------"
Dee. 21,1958-Macnitude 6.0------~
May 24..195()-Macnitude 6.0-----------'
1900 ,----------AUL 27."1904--Ma&nltud~ 7.1
,__,_ ____ July 6, 1912-Maanltude 7.4
---Sept. 3, 1935-Macnitude 6.3
----July 22, 1937-Macnitude 7~3
Figure 3. Earthquake periodicity in Tanana Basin, fro:m Pewe (1982).
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4A-5
APPENDIX SA
1. PLACER MINING MODEL (BOTH PRECIOUS AND BASE
METALS)
The model is based on four state mining claims
(160 acres) with 15 percent of the land containing placer
values (24 acres). It was assumed that 15 feet of
overburden ("muck") cover 10 feet of pay-gravels,
containing values at $10 per cubic yard. It is further
assumed that 100 yards3 per hour of material are moved with
40% of being run through the sluice box. An average work
day of nine hours, and 110 work days were considered the
working season. The operation employs 4 people.
Capital Costs
The equipment complement consisted of the
following:
1982
Price
1 D8 Cl-\T dozer $349,820
1 966 Loader 182,180
Large capacity sluice box 5,000
Pump 3 ., 000
Transportation & set up 50,000
$600,000
Revenues
The operation is assumed to use water pumped from
a creek to run through the box. The D-8 dozer str-ips the
overburden and loads the sluice box while the 966 Loader
removes tailings. Clean up is once-a-week.
Given these assumptions
$400,000 in gross revenues are
($400/ounce).
---------------------------~--~----
SA-I
it was figured
generated each
that
year
1UO
9
900
110
100,000
.40
40,000
10
$400,000
Operating Costs
yardJ moved/hr
hr. workday
yardJ/day of material moved
workdays per season
yardJjseason of material moved
percent of material run through the box
yardJ processed gravels
average valuesfyardJ
Gross Revenues per season
Typical annual operatin~ expenses are roughly $180,000
fur such an operation, assuming that it employs 4~5 people
at 4)40 per 11uur. (see following table).
Typical Operating Expenses per Year
Payroll :$80,000
Workmans Comp & Other Ins. 16,100
Fuel, Lube, etc. 46,000
Maintenance 60,000
TOTAL $181,100/year
Profitability
If these figures represent reasonable operating costs,
then a net cash flow of roughly $150,000 per year could be
expected from tnis Operation. Using a capital expenditure
figure of ::PoOO, 000 pres en ted on the previous page, this
operation would have an IR.H. .of 41% over the life of this
operation given :stable 60ld prices which held the gravel
values at an average of roughly $10/cubic yard
($400/ounce). This indicates that this is a good
investment, and that the operation would be profitable.
If the value::; were $7.50 per yardJ (assuming a drop in
prices from ~400 oz to $J00 oz) this operation would
generate $j00,000 in revenue each year, which after
deducting operating costs, and taxes would yield a cash
flow uf roughly $100,000 per year. Th1s yields an lRH. of
+10 .o% over the life of the mine. Under these conditions
the model operation becomes only marginally feasible.
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5A-2
APPENDIX SB. ALASKA TAX STRUCTURE
Taxe:::; i mvo:::;ed by the State of Alaska that directly affect
mining are as folluws:
1. Alaska Corporate Income Tax
Ala:ska' s corporate income tax is based on the :tederal
tax code. Generally, income, deductions and tax credits
genera ted within the state are treated the same as under
federal tax laws. Inve:::>tment tax credits are lim.i ted to
1~% of the federal credit.
The tax rates are:
Taxable Income
$ 10,000 -40,000
40,000 JO,UOO
::so,ooo -40,000
40,000 -bU,OOO
50,000 -60,000
60,000 -70,000
70,000 80,000
~o.ooo -~o.ooo
~o.ooo -1,ooo,ooo
1,000,000 -4,000,000
4,000,000 or more
Base Amount
of Tax
:p 100 plus
::sou plu:::>
600 plus
1,000 vlus
1,500 plus
~,lOU plu:::>
2,700 plus
::S,oUU vlus
4,500 plus
~0,040 _plu::;
::S!::l0,040 plus
Excess
Percent of Over
~ <" o/ 10,000
J :w,uou
4 ::so,ooo
5 40,000
6 50,000
7 oU,OOU
~ 70,000
!:::1 ~o.ooo
!:::1.4 !:::10,000
lll 1,000,000
11 4,000,000
It :::>hould be
income taxes.
therefore do
ventures.
noted that Ala:::>ka has eliminated indi.vidual
~artnerships and sole proprietorships
not pay state taxes on profits from mini n5
2. Mining Ucense Tax
Three and one-half years after production begin::>, mining
operations are liable for a license tax based on net income
as follows:
Net Income
~40,000-
$50,001 -
$ 50,000
$100,000
Over $100,000
Tax Rate
::S%
$1,500 plus 5% uf the excess
over ~50,000.
$4,000 plus 7~ of the excess
over $100,000.
5B·l
,
Net income is determined by standard federal tax accounting
methods. The depletion allowance is limited to 15% for
metal mines.
3. Local GovernJDent Taxes
Mines located within
will be liable for real
patented claims as well
equipment.
organized boroughs and/or towns
property taxes on buildings and
as personal property taxes on
4. ElnployJDent Security Taxes
Employers pay a minimum of 4.~% tax on the first $14,400
of employee wages annually to the State's Unemployment
fund.
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c.>
58-2
APPENDIX SC MINE MODELS
DELTA BELT MINE
ASSUMPTIONS:
Open Pit mine, 5,0UU tons per day ore
Waste-to-Ore ratio ~:1
~30 operatin6 days per year
Production 44M,OOO tons per year of Copper-Lead-Zinc
~ilver concentrates
Logistics model based on "Arctic Mine" (WAATS; Janson
and Hottge), and scaled from porphyry Cu-Mo mine
model (Table 3.1 -2.~)
448 employees
SUPPLIES:
Explosives Y~0.75 lb/ton Ore and Waste
0.75lb. x :JO,UOO T/Day x ~~0 Days/Yr.
2,000
Tires Y 20% of Cu -Mo mine
0.2 x 411 tons
Lube and Grease Y 20~ of Cu Mo mine
0.2 x 561 tons
Repair Parts, Mine and Mill @ 20% Cu -
Mo mine 0.2 x 2~1 tons
Overhaul/Heplace~ent Y 20~ Cu -Mo Mine
Mill Steel and liner consumption
at ~1.1~ lb/Ton Ore
1.9 lb x 5,000 TPD X ~30 days/Yr.
2,000
Heagents 0.0 lb/Ton Ore
0.9 lb. x 5,UOO TPD x 33U Days/Yr.
2,000
Support U10 lb/empluyees/Day
10 lb. x 228 Employee x 365 Days/Yr.
2,UOO
Total Dry Supplies
FUEL REQUIREMENTS
Diesel Fuel: 65% workin~ factor for
open pit equipment
4,200 HP @ 0.037 Gal/HP/hr.
=
=
=
=
=
=
=
2,475 Tuns
M2 Tons
112 Tons
46 Tons
1~4 Tons
1,561; Tons
743 Tons
416 Tons
= 5,636 Tons
0.037 X 4,200 iiP X 24 drs/Day x 3:.JO Days= 1,321,000 Gal.
Coal: mill Y25 ~wh/Tun Ore
25 x 5,000 TPD x 330 Days/Yr.
Support U 7.5 KwnjEmployeejDay
7.5 X 228 X ~65
Total Power Hequirement
'!Y 1,220 Kwh/Ton of coal (based
_, · · -------------------e>n-&V-b'-A-ee>a-1-pe>wer-ge-ne-ra-t-h::>n-)-:
41,874,150 Kwh/Yr. ·
1, 220 Kwhj'r
Source: Interior Transportation Study
SC-I
= 41,250,000
= 624,150
= 34,300 Tons
,,
~ !
DENAU AND DRY CREEK
ASSUMPTIONS:
Denali -Underground Mine, 600 Tons per day 0re.
Logistical model based on Tungsten Mine
Model (Table J.l -~.5) and "Green Creek"
Mine Model (WAATS)
JJO operatin~ days per year
Production: 64,000 Tons ~inc-Lead-Copper-Silver
Gold concentrates per year
Dry Creek Equivalent to 2 Denali-Type Mines
SUPPLIES:
Dry supplies
FUEL:
Liquid Fuel
Coal (heating and
substituted for
drying), if
Propane:
Propane =
Coal =
!:H,SOO BTU/Gal.
1~.4 x 10° BTU/Ton
~40,000 Gal. Propane x ~1,800
17.4 X 106
Source: Interior Transportation Study.
5C-2
8~1 Tons
1,110,000 Gal.
= 1,~66 Tons
TUNGSTEN MINE
ASSUMPTIONS:
Underground Mine, 600 Tuns per day Ore mined
Mine -300 operating days per year
Mill -500 tuns per day, 7 days per week
~roduction: 6,540 tons of Tungesten concentrates per year
143 gmployees
SUPPLIES:
Explosives ~ U.o5 lb/Ton Ore
U.o5 x oOU TPU x 300 Days/Yr.
2,000
= 59
Tires, Lube, repair parts, drill
Reagents @ 316/Ton Ore
steel (est.) = ~u
3 X (:)00 X 300
2,000
Mill steel and liner consumption
Overhaul Y 20% bf Equipment wt.
0.2 x 11~ Tons
~upport Y 10 lb/Employee/Day
y 1. 02
143 Employees x 10 lb./Day x 365 Days
2,000
FUEL:
Total Supplies
Mine equipment, Diesel-powered
Power plant (diesel) ~ 80,000 galjmo
Propane: (cleating and Drying)
Average -20,000 galjmo x 1~
Total Fuel
Source: Interior Transportation ~tudy.
5C-3
= :no
lb/Ton = 119
= 22
= 2o1
= 821
150,000
9oO,OUO
= 240,000
= 1,350,000
Tons
Tons
Tons
Tons
Tons
Tons
Tons
Gal.
Gal.
Gal.
Gal.
APPENDIX SO
CONSUMER BENEFITS FROM COAL
USED FOR POWER GENERATION
The cost of an equivalent amount of oil was used as an
estimate of the value of coal for power generation.
Cost of a coal contract
Cost of an oil contract
= $24.00/ton(a)
= $ .80/gallon
145 gallons of oil =
0.8 tons of coal =
1MWH (megawatt hour)(a)
1MWH (me~awatt hour)(a)
A.Civilian Power Generation Facilities require 000, ooo (a)
tons of coal to produce 375,000 MWH
Oil used to generate :575,000 MWH = 46.9 million gallons
46.9 million gallons at $0.80/~al = $:57.5 million
Less current cost of :300,000 tons
of coal at $22/ton = 6. 6. million
Savings due to burning coal
instead of oil = $:50.9 million
B. Military and University Facilities require 480, ooo (b)
tons of coal to produce an estimated 600,000 MWH
This would require 75.4 million gallons of oil.
75.4 mill1on gallons at $0.80/gal = ~oo.o million
Less current cost of 480,000 tons
of coal = 10.6 million
Savin~s due to burning coal
instead of oi 1
Total savings due to burning coal
Civilian Facilities
Military and University Facilities
TOTAL
$49.4 million
$J0.9 million
49.4 million
$80.3 million
(a)Fairbanks North ::>tar Borough H.esearch Center Energy
Report , 1982
(b)Estimate based on 800,000 tons total production,
000,000 used by MU::> and 20,000 used for space
heating.
50-I
APPENDIXSE
VALUE OF COAL FOR SPACE HEATING
If coal were not available, people may switch to tt1e next
cheapest alternative, which is currently fuelwood.
An estimated 40,UUU tons of coal are used for space heating
in the Basin,(a) co:.:;ting $'/!J per delivered ton,(b) and
t1aving an average value of ~.suo BTU's per pound. (1~
million BTU's per ton)(c)
The cost of one million BTU's of fuelwood is about $10.~1
(see Appendix SF).
40,000 tons of coal at 1~ MMBTU'sjton = 3~0,000 MMBTU's
An equivalent amount of fuelwood would cost $4.1 million.
($10.81/MMBTU x JMO,UUO MMBTU's = $4.1 million).
This amo~nt of coal costs $2.0 million
Savings due to burning coal is then $4.1 million.
(a)Louis Berger & Assoc., Mineral Potential Working Paper,
Interior transportation Study, 1~82.
(b) Interviews with the manager of
Fairbanks.
the Coal Bunker,
(c)Fa:irbanks North Star 1:3orough, H.esearct1 Center, Energy
Report
5E·l
_j
APPENDIX SF
ENERGY COST PER MILLION BTU'S (1982 DOLLARS)
SOURCE $/MMBTU
Electricity
Propane
Heating oil
Wood (delivered)
Lump coal (delivered)
Wood (personally gathered)
4S.54
40.SS
HJ. o4
10.81
!:>.1!11
4.8J
!Assuming 15 mile delivery radius from coal bunkers.
Source: Fores~ry ~lemen~ Paper, Economic Analysis, Tanana
Basin Area Plan, 1YS4, with coal prices modified 'to
reflect current prices.
36,500
cords
fuel wood
X 0.514
tons coal
equivalent
im BTU's
5F-l
= 18,800 tons
J
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1
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