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HomeMy WebLinkAboutDonlin Creek Project Conceptual Study and Cost Estimate 20027-1 VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project SOUTHWESTERN ALASKA POWER PROJECT CONCEPTUAL STUDY AND COST ESTIMATE Natural Gas Pipeline and Power Plant Servicing: Donlin Creek Project Kuskokwim/Yukon Interior Communities Future Tintina Belt Mine Development VECO ALASKA,INC. 6411 'A'Street Anchorage,Alaska 99518 Confidential Page 1 04/10/03 C:\DOCUME I\mmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project Introduction: The current political environment in Alaska favors State involvement in helping "jump start"new resource development projects such as Donlin Creek.In the case of the Donlin Creek Mine (NovaGold -70%,Placer Dome -30%),the huge (20+million ounce)gold resource in a refractory ore will require large amounts of energy to liberate the gold.Placer Dome has recently decided to exercise an option to buy back in as 70%owner and proceed to development,by spending $30MM over the next four years and producing a bankable feasibility study. The lack of access infrastructure (roads and docks)is one hurdle in transporting the mill and setting up operations at this remote site,and the State will need to build a road to the mine from the Kuskokwim River at Crooked Creek,the Yukon River at Holy Cross,or both. The lack of power (40 to 80 MW)is an even bigger problem.Initial feasibility studies used fuel oil generators on site,but transporting and storage for 9 months of liquid fuel is a problem, particularly when using the shallow Kuskokwim River.Calista Corporation has received some State funds for a regional power study,and has come up with a plan using a coal-fired plant at Bethel,with a primary intertie to the mine and single phase interties to the villages of their region. We have developed the attached conceptual proposal to build a small diameter natural gas pipeline from the west side of Cook Inlet to the minesite and to build a natural gas fired power plant at the mine. For any project to be realized,key stakeholders need to be aligned.VECO is currently gathering responses to our conceptual proposal from potential stakeholders,and we are prepared to support and facilitate communications among the interested parties to gain the needed private sector and public sector commitments for a Southwest Alaska Power Project to proceed.In our view,some fundamental commitments are required for any project to move forward: 1.Mine developers Placer Dome and NovaGold must commit to develop Donlin Creek based on key economic assumptions regarding gold price and power costs.The mine owners must also commit to build install power generation or enter a long-term power purchase agreement with a third party. 2.Calista Corp.and the Kuskokwim Corp.must review and buy into any power scheme for the mine so that it helps them with their regional power goals.Doyon may also have an interest if railbelt energy in the form of a pipeline or intertie crosses part of their region. 3.If Cook Inlet gas is to be the fuel,then a supplier or suppliers must commit to long-term supply of gas with some form of pricing certainty and/or indexing formula acceptable to the mine economics. 4.The State of Alaska must commit to build the needed access infrastructure (road and dock).Some assistance with financing the power solution through use of PCE funds, AVEC funds,AIDEA bonds,or other mechanisms could also be helpful. 5.The State of Alaska DNR/JPO and the BLM must work with developers to grant right-of- ways and permits for the project. 6.The Federal Government can assist with Denali Commission funds,DOT funds,low interest USDA or REA loads,or other mechanisms. 7.Utility operator/owners must be found based on the funding mechanisms and power sales agreements.Calista's subsidiary,Nuvista is interested in operating the power generation utility.Placer Dome may prefer a captive,single-use power generation plant for the mine. Confidential Page 2 04/10/03 C:\DOCUME 1\rmiller\,LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project PROJECT SCOPE,GAS VOLUMES,AND POWER NEEDS: Phase 1:DONLIN CREEK DEVELOPMENT 2006 Development of Donlin Creek Mine is the catalyst to provide lower cost, environmentally clean,rural energy plus economic development and local jobs. Power:65 MW,natural gas fired,combined cycle power plant Natural Gas:5.1 BCF/year or 14.0 MMcf/day Pipeline:From west side of Cook Inlet to Donlin Creek 6.625”to 12.75”diameter,316-mile pipeline Communities:Optional gas hookup and convert from diesel to natural gas Stony River,Red Devil,Sleetmute Phase 2:DONLIN CREEK EXPANSIONS AND 2010 SOUTHWEST ALASKA RURAL ENERGY DEVELOPMENT Power:20 MW power plant expansion at mine 20 MW power plant at Bethel Natural Gas:Additional 3.1 BCF/year or 8.6 MMcf/day Total requirements of 8.2 BCF/year or 22.6 MMcf/day Pipeline:Extend from Donlin Creek to Bethel 3”to 4”diameter,180-mile pipeline Communities:Gas hookup and convert from diesel to natural gas Chuathbaluk,Aniak,Upper &Lower Kalskag,Tuluksak, Akiak,Akiachack,Kwethluk,Napaskiak,Napakiak Phase 1 &2 Ultimate Needs: Natural Gas:8.2 BCF/year or 22.6 MMcf/day Power:105 MW power plant capacity PROJECT POWER COSTS: Target:Less than $.10/kwh,based on 6%interest and $4.00/mcf Mine feasibility currently based on $.07/kwh and $300/oz Confidential Page 3 04/10/03 C:\DOCUME 1\rmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project Project Budget (rough order of magnitude): Phase 1:DONLIN CREEK DEVELOPMENT Donlin 65 MW power plant @ $1,000,000/MW 65,000,000 Beluga-Donlin Pipeline (8”-12”nominal diameter)$170 -210,000,000 3 Community Hookups and conversions @ $5MM each:15,000,000 PHASE 1 SUBTOTAL $250 -290,000,000 Phase 2:DONLIN CREEK EXPANSIONS AND SOUTHWEST ALASKA RURAL ENERGY DEVELOPMENT Donlin 20 MW Expansion @ $800,000/MW 16,000,000 (add modular expansion and/or waste heat recovery) Donlin-Bethel Pipeline (3”to 4.5”nominal diameter)$50 -75,000,000 Bethel 20 MW power plant @ $1,000,000/MW 20,000,000 9 Community Hookups and conversions @ $3 MM each:27,000,000 PHASE 2 SUBTOTAL $113 -138,000,000 TOTAL SOUTHWEST ALASKA RURAL ENERGY DEVELOPMENT $363 -428,000,000 Confidential Page 4 04/10/03 C:\DOCUME 1\rmmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project PROJECT BENEFITS: New Rural Infrastructure: e Possible New Access Road connecting Yukon River to Donlin Creek e New Access Road from Crooked Creek on Kuskokwim to Donlin Creek e New Dock facilities on Yukon and Kuskokwim to serve mining district Construction Jobs:5 MM Man-Hours,$250,000,000 payroll e Infrastructure construction:200 jobs for 12 months e Pipeline construction:500 jobs for 6 months e Power Plant module assembly:250 jobs for 12 months e Power Plant installation:100 jobs for 6 months e Mine construction:500 jobs for 24 months New Mine Operation Jobs:250 jobs,$12,500,000 annual payroll e Donlin Creek operation employing up to 300 for 20+years e More exploration and mine development in Yukon-Kuskokwim District New Rural Utility Jobs:30 jobs,$1,500,000 annual payroll e Power Plant operation and maintenance employing 20 for 20+years e Natural gas pipeline operation and maintenance employing 10 for 10+years Rural Energy: e Lower cost energy =Higher quality of life and standard of living e Rural energy development bootstrapped by largest power customer,the Donlin Creek Mine e Opportunities for Federal Funding:Denali Commission,BIA,USDA,REA e Opportunities for State Assistance:AIDEA bonds and PCE funding Whya Pipeline is better than an Intertie: Pipeline costs equal to or less than an intertie Pipeline is more efficient:Intertie loses 3-10%through line losses Pipeline is lower cost to maintain Pipeline does not create hazard for small aircraft Pipeline delivers gas for domestic/industrial heating to Rural Alaska Power plant is located in Rural Alaska and is owned and operated by rural utility e Pipeline is not susceptible to weather damage/disruption and is more reliable operationally e Iditarod Trail View-shed is protected:Buried Pipeline vs.Elevated Confidential Page 5 04/10/03 C:\/DOCUME 1\miller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project Potential Players: e Potential Gas Suppliers: -Marathon -Unocal -ConocoPhillips -Forest Oil -Aurora Gas -Evergreen -Others e Mine Developers -Placer Dome -NovaGold -Possibly other investors e Native Corporations -Calista -The Kuskokwim Corporation -Doyon has mineral prospects just north of Donlin Creek and is interested in having power available for those plus their villages McGrath,Nikolai,Tokotna e Possilble Utility Investors -Nuvista (Calista) -Local rural utilities and/or AVEC -Chugach Electric -ML&P -Potential pipeline owners/operators are unknown at this time Confidential Page 6 04/10/03 C:\DOCUME 1\rmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc "hy x fountDall-"AkaadNationaiParkanderssee an ' Heart Mountain 7 -Tokositna a .«Glacier "Lacuna :Hound Glacier a a snares*Russell z FYentnaGlaciermae, Kahiltna foDallGlacie;f F "Lewis Peak tie ea Poy ,Glacieréate5he tn Haurtvpigeens . Ss »South Buttress 5,Po Le i Mount 4) - ,Srobnap Mourdain © &+ efaquanateamei2ke -Mount %a betdine aN SHATANUSKA.sushi=Saag MountsSpurn" a)ole43 eeeee A4,eoaS Baligaeeeheos BELUGA RIVER ,AeMe\DuaTyonek at Beluga River to Donlin Creek \£;NX *+ae N 4 - Med 4:DN ef'#}:wieueeardinyspe ae AONFigHylg ae*: * #ehS&&ahy;=A-i,ASdey---ieat:fsvedzNee%'.<o'Ge £ ie Ssrai"Ey ies on £aa 's ey POO SSatPdFs"Aa .ed iat Saat is €ee mage ReoMe :ee Z a a ne 4 eof¢:Af nadeLeetanere K 0]NoHo".Looe Le a "rt DONLIN CREEK ' iymhtryareytat.;a 5 ae b é ae Crooked Creek Pop,137*.1D 200KW +|Chuathbaluk Pop.|fsi|Kw [=P ge 8 Oe agepoenr [|Aniak Pop.572 D 1,160KWtgtan,oacn Lakepaked raKkisheaile'Upauk Late fA oh,a - ;aad 2 i i : ptei }Noe oeémeetge"suet E 'ss, £ae fsor# ns iQ?éBomvee NE S ®eos ;ed ot3&s=:ad {}rBeevRedDevilPop.48 "7 D 140KW *%é .ecliansiF he ce f MpGeenfoe Lime Village Pop.44 Solar /Diesel? 1 Current Installed Power VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project SOUTHWESTERN ALASKA POWER PROJECT CONCEPTUAL STUDY AND COST ESTIMATE Natural Gas Pipeline and Power Plant Servicing: Donlin Creek Project Kuskokwim/Yukon Interior Communities Future Tintina Belt Mine Development VECO ALASKA,INC. 6411 'A'Street Anchorage,Alaska 99518 Confidential Page 1 04/10/03 C:\DOCUME 1\mmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project Introduction: The current political environment in Alaska favors State involvement in helping "jump start"new resource development projects such as Donlin Creek.In the case of the Donlin Creek Mine (NovaGold -70%,Placer Dome -30%),the huge (20+million ounce)gold resource in a refractory ore will require large amounts of energy to liberate the gold.Placer Dome has recently decided to exercise an option to buy back in as 70%owner and proceed to development,by spending $30MM over the next four years and producing a bankable feasibility study. The lack of access infrastructure (roads and docks)is one hurdle in transporting the mill and setting up operations at this remote site,and the State will need to build a road to the mine from the Kuskokwim River at Crooked Creek,the Yukon River at Holy Cross,or both. The lack of power (40 to 80 MW)is an even bigger problem.Initial feasibility studies used fuel oil generators on site,but transporting and storage for 9 months of liquid fuel is a problem, particularly when using the shallow Kuskokwim River.Calista Corporation has received some State funds for a regional power study,and has come up with a plan using a coal-fired plant at Bethel,with a primary intertie to the mine and single phase interties to the villages of their region. We have developed the attached conceptual proposal to build a small diameter natural gas pipeline from the west side of Cook Inlet to the minesite and to build a natural gas fired power plant at the mine. For any project to be realized,key stakeholders need to be aligned.VECO is currently gathering responses to our conceptual proposal from potential stakeholders,and we are prepared to support and facilitate communications among the interested parties to gain the needed private sector and public sector commitments for a Southwest Alaska Power Project to proceed.In our view,some fundamental commitments are required for any project to move forward: 1.Mine developers Placer Dome and NovaGold must commit to develop Donlin Creek based on key economic assumptions regarding gold price and power costs.The mine owners must also commit to build install power generation or enter a long-term power purchase agreement with a third party. 2.Calista Corp.and the Kuskokwim Corp.must review and buy into any power scheme for the mine so that it helps them with their regional power goals.Doyon may also have an interest if railbelt energy in the form of a pipeline or intertie crosses part of their region. 3.If Cook Inlet gas is to be the fuel,then a supplier or suppliers must commit to long-term supply of gas with some form of pricing certainty and/or indexing formula acceptable to the mine economics. 4.The State of Alaska must commit to build the needed access infrastructure (road and dock).Some assistance with financing the power solution through use of PCE funds, AVEC funds,AIDEA bonds,or other mechanisms could also be helpful. 5.The State of Alaska DNR/JPO and the BLM must work with developers to grant right-of- ways and permits for the project. 6.The Federal Government can assist with Denali Commission funds,DOT funds,low interest USDA or REA loads,or other mechanisms. 7.Utility operator/owners must be found based on the funding mechanisms and power sales agreements.Calista's subsidiary,Nuvista is interested in operating the power generation utility.Placer Dome may prefer a captive,single-use power generation plant for the mine. Confidential Page 2 04/10/03 C:\DOCUME 1\rmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project PROJECT SCOPE,GAS VOLUMES,AND POWER NEEDS: Phase 1:DONLIN CREEK DEVELOPMENT 2006 Development of Donlin Creek Mine is the catalyst to provide lower cost, environmentally clean,rural energy plus economic development and local jobs. Power:65 MW,natural gas fired,combined cycle power plant Natural Gas:5.1 BCF/year or 14.0 MMcf/day Pipeline:From west side of Cook Inlet to Donlin Creek 6.625”to 12.75”diameter,316-mile pipeline Communities:Optional gas hookup and convert from diesel to natural gas Stony River,Red Devil,Sleetmute Phase 2:DONLIN CREEK EXPANSIONS AND 2010 SOUTHWEST ALASKA RURAL ENERGY DEVELOPMENT Power:20 MW power plant expansion at mine 20 MW power plant at Bethel Natural Gas:Additional 3.1 BCF/year or 8.6 MMcf/day Total requirements of 8.2 BCF/year or 22.6 MMcf/day Pipeline:Extend from Donlin Creek to Bethel 3”to 4”diameter,180-mile pipeline Communities:Gas hookup and convert from diesel to natural gas Chuathbaluk,Aniak,Upper &Lower Kalskag,Tuluksak, Akiak,Akiachack,Kwethluk,Napaskiak,Napakiak Phase 1 &2 Ultimate Needs: Natural Gas:8.2 BCF/year or 22.6 MMcf/day Power:105 MW power plant capacity PROJECT POWER COSTS: Target:Less than $.10/kwh,based on 6%interest and $4.00/mcf Mine feasibility currently based on $.07/kwh and $300/oz Confidential Page 3 04/10/03 C:\DOCUME 1\rmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project Project Budget (rough order of magnitude): Phase 1:DONLIN CREEK DEVELOPMENT Donlin 65 MW power plant @ $1,000,000/MW 65,000,000 Beluga-Donlin Pipeline (8”-12”nominal diameter)$170 -210,000,000 3 Community Hookups and conversions @ $5MM each:15,000,000 PHASE 1 SUBTOTAL $250 -290,000,000 Phase 2:DONLIN CREEK EXPANSIONS AND SOUTHWEST ALASKA RURAL ENERGY DEVELOPMENT Donlin 20 MW Expansion @ $800,000/MW 16,000,000 (add modular expansion and/or waste heat recovery) Donlin-Bethel Pipeline (3”to 4.5”nominal diameter)$50 -75,000,000 Bethel 20 MW power plant @ $1,000,000/MW 20,000,000 9 Community Hookups and conversions @ $3 MM each:27,000,000 PHASE 2 SUBTOTAL $113 -138,000,000 TOTAL SOUTHWEST ALASKA RURAL ENERGY DEVELOPMENT $363 -428,000,000 Confidential Page 4 04/10/03 C:\DOCUME 1\rmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project PROJECT BENEFITS: New Rural Infrastructure: e Possible New Access Road connecting Yukon River to Donlin Creek e New Access Road from Crooked Creek on Kuskokwim to Donlin Creek e New Dock facilities on Yukon and Kuskokwim to serve mining district Construction Jobs:5 MM Man-Hours,$250,000,000 payroll e Infrastructure construction:200 jobs for 12 months e Pipeline construction:500 jobs for 6 months e Power Plant module assembly:250 jobs for 12 months e Power Plant installation:100 jobs for 6 months e Mine construction:500 jobs for 24 months New Mine Operation Jobs:250 jobs,$12,500,000 annual payroll e Donlin Creek operation employing up to 300 for 20+years e More exploration and mine development in Yukon-Kuskokwim District New Rural Utility Jobs:30 jobs,$1,500,000 annual payroll e Power Plant operation and maintenance employing 20 for 20+years e Natural gas pipeline operation and maintenance employing 10 for 10+years Rural Energy: e Lower cost energy =Higher quality of life and standard of living e Rural energy development bootstrapped by largest power customer,the Donlin Creek Mine , e Opportunities for Federal Funding:Denali Commission,BIA,USDA,REA e Opportunities for State Assistance:AIDEA bonds and PCE funding Why a Pipeline is better than an Intertie: Pipeline costs equal to or less than an intertie Pipeline is more efficient:Intertie loses 3-10%through line losses Pipeline is lower cost to maintain Pipeline does not create hazard for small aircraft Pipeline delivers gas for domestic/industrial heating to Rural Alaska Power plant is located in Rural Alaska and is owned and operated by rural utility e Pipeline is not susceptible to weather damage/disruption and is more reliable operationally e Iditarod Trail View-shed is protected:Buried Pipeline vs.Elevated Confidential Page 5 04/10/03 C:\DOCUME 1\rmiller\LOCALS 1\Temp\SOUTHWESTERN ALASKA POWER PROJECT Rev 11.doc VECO Alaska,Inc.Conceptual Study Southwestern Alaska Power Project Potential Players: ¢Potential Gas Suppliers: -Marathon -Unocal -ConocoPhillips -Forest Oil -Aurora Gas -Evergreen -Others e Mine Developers -Placer Dome -NovaGold -Possibly other investors *®Native Corporations -Calista -The Kuskokwim Corporation -Doyon has mineral prospects just north of Donlin Creek and is interested in having power available for those plus their villages McGrath,Nikolai,Tokotna e Possilble Utility Investors -Nuvista (Calista) -Local rural utilities and/or AVEC -Chugach Electric -ML&P -Potential pipeline owners/operators are unknown at this time Confidential Page 6 04/10/03 C:\DOCUME 1\rmiller,LOCALS 1\Temp\SOUTH WESTERN ALASKA POWER PROJECT Rev 11.doc ae\2iNi tom DallelFFSGtat nal ¢r Park anitApreserve "Lewis Pe Yer na ©Fad earthountain -Tokositna :ion'Glacier,eo oge Lacuna -_ "tMount «Glacier °-.ne RussellYentnaGlacier a 2 Kahiltna sDallGlacier"i Glacier /z\,* =Att ork eosMountain,”Ek t Ls So aos,we ae5SNhy:ae5awe.NN Pas a agt7weeoy:as anos Soe Ce ee J re MountToe a raa7 :aout Buttress.*,AB MountFP"ae fs | >Snotpaps 6 -4Mountain% "i\2h,*aieaepoeee'eyecotaa oeoo e Mound eet Lake aipeooyssohirina aisny2 YeniIneliitou Mountain ' aed Fates 4ake Clarkational'Park and Preserve a 'at Beluga River to Donlin Creek 7 Se aeDOMLINCREEK::ee Ms AueceletsSs Red Devil ©aa :ee eeeAs so Donlin to Bethel 178 miles PY :. ee ee ePeak 6i.f|o a i. :'Se)ce agi Neo oOo :beets é oe %| fe \t a a ae fa :/'ateNAPEaryaTe Jonlin Creek to Bethel .Ss :a :'ary\"4YuUKOJN_oea'rf r aeCrookedcreckPop.137 D 200KW BERRgle a -a Aniak Pop,S72 D1,160k'W -Be Lake Alb 140KWSleetmute Pop,100 Lime Village Pop.44 Solar/Diesel?eesES¥xg.eyFCurrent Tastalled'Power