U. S. Department of the Interior 

Bureau of Land Management 

Alaska State Office 

222 West 7th Avenue, #13 

Anchorage, Alaska 99513 

SLM-Alaska Open File Report 77 

BLM/AK/ST-00/017 +3091 +933 

March 2000 

Economic Prefeasibility Studies of Mining 

in the Ahtna, Inc. Selections in the 

Wrangell-St. Elias National Park and Preserve, 

Alaska 

James R. Coldwell 
i

Mission Statement

The Bureau of Land Management is responsible for the stewardship of public lands. It is committed to

manage, protect and improve these lands in a manner to serve the needs of the American people for all

times. Management is based on the principles of multiple use and sustained yield of our nation's

resources within a framework of environmental responsibility and scientific technology. These resources

include recreation, range, timber, minerals, watershed, fish and wildlife, wilderness, air, and scenic,

scientific and cultural values.

Author

James R. Coldwell is a mining engineer in the Division of Lands, Minerals and Resources, working for

the Juneau Mineral Resources Team, Bureau of Land Management, Juneau Alaska.

Open File Reports

Open File Reports identify the results of inventories or other investigations that are made available to

the public outside the formal BLM-Alaska technical publication series. These reports can include

preliminary or incomplete data and are not published and distributed in quantity. The reports are

available at BLM offices in Alaska, the USDI Resources Library in Anchorage, various libraries of the

University of Alaska, and other selected locations.

The reports are available while supplies last from BLM External Affairs, 222 West 7th Avenue #13,

Anchorage, Alaska 99513 and from the Juneau Mineral Information Center, 100 Savikko Road,

Mayflower Island, Douglas, AK 99824, (907)- 364-1553.

Copies are also available for inspection at the Alaska Resource Library and Information Center in

Anchorage, the USDI Natural Resource Library in Washington, D.C.,the BLM Service Center Library in

Denver, various libraries of the University of Alaska and other selected locations.

A complete bibliography of all BLM-Alaska scientific reports can be found on the Internet at:

http://www.ak.blm.gov/affairs/sci_rpts.html. Related publications are also listed at

http://juneau.ak.blm.gov
Economic Prefeasibility Studies of Mining

 in the Ahtna, Inc. Selections in the 

Wrangell-St. Elias National Park and Preserve, Alaska

James R. Coldwell

BLM-Alaska Open File Report 77

March 2000

U.S. Department of the Interior

Bureau of Land Management
ii

CONTENTS

Abstract ................................................................... 1

Introduction ................................................................ 2

Location and access ..................................................... 3

Land status ............................................................. 4

Environmental and socioeconomic issues .................................... 4

Economic mine prefeasibility studies ............................................ 6

Basaltic Copper Models .................................................. 6

Polymetallic Vein Models .................................................. 8

Iron Skarn Models ....................................................... 10

Summary and conclusions .................................................... 11

References ................................................................ 12

APPENDICES

A. Capital and operating costs for mine models ................................... 14

B. Economic assumptions .................................................... 17

ILLUSTRATIONS

 

1. RMV vs. resource size, basaltic copper mine models ......................... 8

2. RMV vs. resource size, polymetallic vein mine models ........................ 9

3. RMV vs. resource size, iron skarn mine models ............................. 10

TABLES

1. Summary of cash flow analysis for basaltic copper models .................... 8

2. Summary of cash flow analysis for polymetallic vein models .................... 9

3. Summary of cash flow analysis for iron skarn models ......................... 10

A-1. Mineral deposit and mine model descriptions ................................ 14

A-2. Capital and operating costs - basaltic copper mine models .................... 15

A-3. Capital and operating costs - polymetallic vein mine models .................... 15

A-4. Capital and operating costs - iron skarn mine models ......................... 16

B-1. Ten, twenty, and thirty year average constant dollar commodity prices

(1969-98) ............................................................ 20
iii

UNIT OF MEASURE ABBREVIATIONS USED IN THIS REPORT

cm centimeter

dpy days per year

g gram

g/mt gram per metric ton

kg kilogram

km kilometer

lb pound

m meter

Mmt million metric tons

Mst million short tons

mt metric ton

mtpd metric tons per day

mtpy metric tons per year

ppm parts per million

st short ton

stpd short tons per day

tr oz troy ounce

yrs years

METRIC TO ENGLISH CONVERSIONS

From Multiply by To

g/mt (= ppm) 0.02917 troy ounces/short ton

kg 2.2046 pounds

mt 1.1023 short tons

m 3.2808 feet

km 0.6214 miles

m3 1.3080 cubic yards

ACRONYMS

ACRS Accelerated Cost Recovery System

AMICEF Alaska Mineral Industry Cost Escalation Factors

ANCSA Alaska Native Claims Settlement Act

ANILCA Alaska National Interest Lands Conservation Act

CES Cost Estimating System

DCFROR Discounted Cash Flow Rate of Return

FEIS Final Environmental Impact Statement

GIPV Gross In Place Value

MAS Minerals Availability System

RMV Recoverable Metal Value

USBM U.S. Bureau of Mines

USGS U.S. Geological Survey
 

1 Mining Engineer, Juneau Mineral Resources Team, U.S. Bureau of Land Management, Juneau, AK.

1

ECONOMIC PREFEASIBILITY STUDIES OF MINING IN THE AHTNA, INC.

SELECTIONS IN THE WRANGELL-ST. ELIAS NATIONAL PARK AND PRESERVE,

ALASKA

by James R. Coldwell1

 

ABSTRACT

Mining and processing cost analyses were conducted on basaltic copper, polymetallic vein, and iron

skarn deposit types that are found on Ahtna, Inc. selections in the Wrangell-St. Elias National Park

and Preserve. Resources and recoverable metal values (RMV) needed to make these deposits

economically viable were modeled. Methods for estimating ore grades and required RMV are

presented.

Economic modeling for basaltic copper deposits indicated the RMV necessary for a

15% Discounted-Cash-Flow Rate-Of-Return (DCFROR) for an underground mine ranged from

$152/st for a 10,209 stpd operation to $224/st for a 1,276 stpd operation.

Economic modeling for polymetallic vein deposits indicated the RMV necessary for a 15% DCFROR

for an underground mine ranged from $155/st at 2,189 stpd to $394/st at 273 stpd.

Economic modeling for iron skarn deposits indicated the RMV necessary for a 15% DCFROR for

an underground mine ranged from $163/st at 6,191 stpd to $259/st at 774 stpd.

 

 
2

INTRODUCTION

This report was produced under the terms of a memorandum of understanding between the U.S.

Bureau of Land Management (BLM), the National Park Service, and Ahtna, Inc. Regional Native

Corporation for the mineral assessment of the 1971 Alaska Native Claims Settlement Act (ANCSA)

Regional Native Corporation selections within the Wrangell - St. Elias National Park and Preserve,

Alaska and should not be used for any purpose other than that for which it was originally prepared for.

This report is not an appraisal by the BLM nor an opinion of value of any mineral resources that may

be found within the subject valid Ahtna Inc. ANCSA selections surrounded or substantially surrounded

by the Wrangell - St. Elias National Park. This report does not conform to the general reporting

standards described in BLM Manual 3070, the Uniform Appraisal Standards for Federal Land

Acquisitions 1992, nor The Appraisal of Real Estate 1992. 

This economic study was conducted by the BLM to meet the information requirements of the

memorandum of understanding. As BLM’s mineral assessment did not identify any significant

resources on the subject land selections, economic models based on hypothetical mining

development scenarios of mineral deposits not currently known to exist on Ahtna Inc. ANCSA

selections were developed. This report is intended to be a tool to aid in the possible identification of

exploration targets when used as a supplement to the BLM’s mineral assessment reports. 

Due to the nature of these models and the large number of assumptions they contain, additional

subsequent exploration information will likely have large impacts on the estimated capital and

operating costs and project economics. This additional information when available will likely reveal

that substantial revision would be required as the actual operating parameters of the mine, mill, and

infrastructure become known and replace the assumptions. Numerous iterations should be expected

as the project moves from exploration and prefeasibility into the development and feasibility stage.

Companies often use prefeasibility studies to evaluate their projects to determine if exploration should

continue on a project and if it should advance into the development stage. 

The work described in the above memorandum has been accomplished and is presented in four

reports, with this report being the fourth or last in the series. Results of field work and analytical

results from the investigations of the Ahtna, Inc. selections in the Wrangell-St. Elias National Park and

Preserve were published in two open-file reports (Meyer and Shephard, 1998; Meyer and

VandeWeg, 1999). A third and final open-file report planned for publication in three volumes is

currently in progress, and provides a comprehensive summary of results (Meyer and others, in

progress). 

These reports present the results of the ground assessment of the mines, prospects, occurrences,

and mineralized areas within valid ANCSA selections surrounded or substantially surrounded by the

Wrangell - St. Elias National Park and Preserve to document the known and potential mineral

resources. Field work consists of the collection of mineral data, and mapping and sampling to

determine the location, type, amount, configuration, and physical extent of the mineral resources.

The mineral assessment also consists of analysis of the mineral potential and includes the following

elements: commodity, site history, site bibliography, description of known mineralization and past

production, compilation of existing analytical data and data generated under this project, deposit
3

type(s), and a mineral resource analysis that estimates resource potential and delineates favorable

areas/terranes.

This report provides supplemental economic information required in the memorandum of

understanding including the future economics of metals contained within favorable areas, grade and

tonnages of known producers for comparable ore deposit, estimates of mining, milling, and

environmental costs for extraction, and estimates of all infrastructure costs associated with mine

development. 

Economic prefeasibility studies were conducted on typical mineral deposit types that may be found

in the Ahtna, Inc. selections in the Wrangell-St. Elias National Park and Preserve. Two factors were

addressed in this study: (1) the magnitude of resource that would have to exist, and (2) the

recoverable metal value (RMV) that would be necessary to make a deposit economically feasible

to mine. The RMV is the combined dollar value of all salable products from a given mineral deposit

expressed in $/st, and is equal to the amount of revenues required before all expenses including

royalties, mining and milling capital and operating costs, off-site transportation costs, base smelting

charges, and taxes are deducted. The interrelation between these factors is shown in tabular and

graphical form.

In order to make these economic assessments for the basaltic copper, polymetallic vein, and iron

skarn deposit types, existing mineral deposit information was used whenever possible. Mineral

deposit grades and supporting background information were furnished by the BLM’s Mineral

Assessment personnel. Additional information was retrieved from the Minerals Availability System,

a database formerly maintained by the U.S. Bureau of Mines (USBM). 

Detailed deposit characteristics such as depth, thickness, orientation, and volume have not been

determined for the partially explored deposits used as examples in this study, so assumptions were

made. These assumptions are discussed at the beginning of each deposit characteristics section.

Location and Access

The following descriptions of location and access, and land status were modified from the mineral

assessment reports discussed previously (Meyer and Shephard, 1998, Meyer and VandeWeg,

1999). The Wrangell-St. Elias National Park and Preserve is located in southcentral Alaska. The

park is the largest national park in the United States and encompasses the Wrangell and Nutzotin

Mountains to the north and the Chugach and St. Elias Mountains to the south. The Alaska National

Interest Lands Conservation Act (ANILCA) established 8.33 million acres for the park, and 4.85

million acres for the preserve, for a total of 13.18 million acres. ANILCA also designated 8.7 million

acres within the park and preserve as wilderness.

The area studied for this mineral assessment includes approximately 123,520 acres on the north side

of the Wrangell Mountains and 321,280 acres on the south side for a total of 444,800 acres. Access

to the study areas is along the Glenn Highway (Tok Cut-Off) and the Nabesna Road for the northern

area and the Edgerton Highway for the southern area. All the highways are connected to the

Richardson Highway and the Alaska Highway system.

Helicopters were used to access the selections from either Devils Mountain Lodge for the northern

area or from Kenny Lake for the southern area. To minimize impacts within the park, helicopter
4

landing sites were carefully selected to minimize the number of landings necessary while maximizing

the number of mineralized locations that could be visited from each landing site.

Land Status

Land in the study area is situated within the Wrangell - St. Elias National Park and Preserve. In

1980, ANILCA, Title II, Section 201(9) established and included the park in the National Park System.

Under terms of ANCSA, Section 12 (c), Ahtna, Inc. has selected approximately 650,000 acres within

the park. Other native selections include selections made by local village corporations under ANSCA,

as well as individual native allotments granted under the Native Allotment Act of 1906. There are also

numerous private and State of Alaska inholdings and rights-of-way occurring within the park boundary.

Currently, there are no active unpatented mining claims located within or adjacent to the Ahtna

selections. Patented mining claims are present in the following locations: 1) Clear Creek Mine, 2)

Copper King Mine, 3) Franklin prospect, 4) Hubbard-Elliott Mine, 5) Minneapolis prospect, 6) Mullen

Mine, 7) Nabesna and Royal Development Co. mines, 8) Nugget Creek Mine, 9) War Eagle prospect,

and 10) Warner prospect

Environmental and Socioeconomic Issues

This preliminary study does not address environmental and socioeconomic concerns in a direct

manner. For each model the acquisition cost represents the cost of mine permitting activities,

environmental studies such as baseline data collection, water quality sampling and monitoring,

wildlife studies, preparation of permit applications to the required local, State, and Federal

agencies, and other related activities. 

Environmental issues that may arise during the course of mineral development of ANCSA

selections surrounded or substantially surrounded by the Wrangell - St. Elias National Park and

Preserve may include, but are not limited to, abandoned mine lands, access, acquisition costs of

mining properties, aquatic ecosystem integrity, claim validity, criteria for cumulative impact

analysis, economic impacts, fish habitat, fisheries, heavy metals contamination, hydrologic

changes, impact thresholds, impact to scenic values, impacts from past mining operations,

impacts on subsistence, impacts on visitor use, impacts from access, long-term and short-term

impacts, monitoring and enforcement, non-mining uses of patented claims, reclamation,

significance of impacts, threatened and endangered species, water quality, wetlands impacts,

wilderness, and wildlife habitat. These issues were identified during the public scoping phase of a

National Park Service Final Environmental Impact Statement concerning the cumulative impacts

of mining in Wrangell - St. Elias National Park and Preserve, Alaska (National Park Service,

1990).

Socioeconomic concerns may include, but are not limited to, potential impacts on the population

(e.g. population increase, movement, or relocation in response to the project), public services and

facilities, housing supply, employment, education (e.g. student population increase), local, State

and Federal tax revenues and expenditures, transportation, and quality of life (Berger, 1991).

The population would likely increase in the communities that are in close proximity to the proposed

mineral development and cause potential socioeconomic impacts such as increased demands for

housing, local school district student capacity, health care, social services, impacts on public
5

utilities such as electric power, water and sewer, public safety, traffic, and recreation impacts, and

so forth. 

Potential mitigation requirements developed during the permitting process would likely attempt to

measure these impacts relative to future scenarios of economic growth and development of other

industries or projects in the area, and seek compensation in some form from Athna to offset and

mitigate these impacts. These mitigation measures and the costs involved could have a

significant impact on mineral development on Athna Inc.’s valid ANCSA selections. 

Mitigation measures and associated costs developed during the permitting process are unique for

each mineral development project. It is difficult to estimate these costs without benefit of public

scoping and at least a preliminary environmental and socioeconomic assessment for the

proposed mineral development project. 

Measuring these socioeconomic impacts is beyond the scope of this study, and although it is

assumed they would exist, the extent and magnitude of these impacts was not determined relative

to current population, current unemployment rates, current school enrollments, etc. These issues

and the associated costs of mitigation are not addressed in the economic models.

Environmental considerations of mine development in an area adjacent to a National Park could

far outweigh economic considerations. Recent events surrounding Crown Butte Mining, Inc.’s

(Crown Butte) proposed New World Mine development proposal from November, 1990 - August

1996 illustrates this potential. Crown Butte’s proposed mine location was 2 1⁄2 miles northeast of

Yellowstone National Park, near the town of Cooke City, Montana. Over the course of almost six

years, Crown Butte’s efforts to permit the mine were unsuccessful. Work on the environmental

impact statement (EIS) was delayed due to opposition to the mine and challenges to the

document. Presenting an accurate long term risk assessment to the public for mine operations,

mine abandonment, and reclamation proved to be another difficulty. Intense local, national, and

world wide media attention as well as the emotional issue of locating a large scale mining

operation at a gateway to Yellowstone National Park prompted political involvement. In August,

1996, President Clinton announced that Crown Butte and the Federal government had reached

agreement where in exchange for $65 million of Federal lands elsewhere, Crown Butte would

relinquish their lands, and interests in lands in the New World Mining district to the Federal

government (National Park Service, 1999).

These environmental and socioeconomic issues are normally addressed, and companies usually

initiate related studies when a project reaches the feasibility stage and a decision to proceed with

development has been reached. If an exploration project doesn’t advance to this stage, then

there is no reason to incur the additional costs involved. For the purposes of this economic study,

it is assumed that the mineral development project would be successfully permitted, and these

environmental and socioeconomic issues would be satisfactorily mitigated during the

environmental review and permitting process.
6

ECONOMIC MINE PREFEASIBILITY STUDIES

 

Economic prefeasibility studies for three mineral deposits types were conducted to establish the

recoverable metal value (RMV) per short ton necessary to meet a 15% Discounted-Cash-Flow

Rate-Of-Return (DCFROR). 

The RMV is the combined dollar value of all salable products from a given mineral deposit expressed

in dollars per short ton ($/st) (Baggs and Sherman, 1987: Sherman, 1990). The RMV was used to

reduce the individual effects of commodity grades, recoveries, and metal prices to a common base

so that a single curve relating ore value of the deposit to DCFROR could be created. See Appendix

B for further information and a sample calculation of RMV.

This pre-feasibility report considers a number of factors controlling the feasibility of mineral

development including physical attributes and geographic location of the deposit, metallurgical

attributes of the minerals, metal markets, and infrastructure availability. Results presented here

should be considered preliminary. Additional factors such as perceived risk, political and economic

climate, environmental constraints, and corporate policy may be present but aren’t considered. 

Capital and operating costs for the deposit models were determined using the USBM’s Cost

Estimation System (CES) version 2.3 . Cost estimates were escalated using the USBM's Alaska

Mineral Industry Cost Escalation Factors (AMICEF) of 1.78 for operating labor, 1.71 for capital labor,

1.30 for capital costs, and 1.73 for electricity to reflect higher costs in the Wrangell-St. Elias National

Park and Preserve Area. These factors are a set of calculated values that are used to escalate

itemized capital and operating costs for mining and milling operations from the central front range of

the Rocky Mountains (Denver vicinity) to any point in Alaska. The Denver vicinity is used as the base

for the CES (Balen and Allen, 1993). 

Published cost information from permitting documents, environmental impact statements, and private

reports were also used (Red Dog FEIS, 1983; Greens Creek FEIS, 1984). All cost estimates are

expressed in 1999 dollars.

 

Using the estimated capital and operating costs, economic models were compiled using cash flow

analysis techniques. The RMV and DCFROR were computed. See Appendix A for the economic

models and Appendix B for the inflation adjusted, ten-year, twenty-year, and thirty-year commodity

price averages.

Basaltic Copper Models

The basaltic copper mine models are based on the geology and mineralized rock present at the 

Clear Creek, Copper King, Hubbard-Elliott, Mullen, and Nugget Creek mines and the Ammann, Barrett

Young and Nafsted, Bluebird, Cave, Divide Creek, Fall Creek Upper, Falls Creek, Forget-Me-Not,

Hidden Treasure, Homestake, Larson West, Lime Creek, Newhome, Mountain Sheep, Peacock

Claim, Roaring Creek, Sunrise, Sunset, Surprise/Sunshine, and Warner prospects and mineral

occurrences.

The basaltic copper deposit model is described as a diverse group including disseminated native

copper and copper sulfides in the upper parts of a thick sequence of subaerial basalt and copper

sulfides in overlying sedimentary beds. The mineralogy is described as native copper, native silver

in flows and coarse clastic beds, chalcocite and other Cu2S minerals, and locally bornite and
7

Cox and Singer (1987) present lists of known producers for comparable ore deposits types from

which they derived their mineral deposit models. This information will not be repeated in this report,

but is incorporated by reference. 

The basaltic copper mine models assume that the structural characteristics of the orebody favor the

use of underground mining methods. Exploration expenditures range from $10-44 million, increasing

as the size of the resource increases from 3.6 to 58.2 million short tons (Mst). Five underground

mine models are developed with capacities of 1,276 to 10,209 short tons per day. 

It is assumed that conventional highway trucks would transport concentrates from the proposed mine

via the Glenn Highway (Alaska Route 1) and the Richardson Highway (Alaska Route 4) to Valdez.

It is assumed a new road, approximately 25 miles in length, would be built and maintained from the

proposed mine to it’s intersection with the Glenn Highway and Richardson Highway along the western

perimeter of the park. In total, the assumed haulage distance from the proposed mine to Valdez is

estimated at 225 miles one way.

It is assumed a deep water, export, bulk mineral concentrate marine terminal would be built in Valdez

to serve the needs of the mine. It is assumed that the mine operator would retain the services of a

commercial stevedoring firm to handle receiving, mineral concentrate storage, reclaiming, and

shiploading. A trucking firm would handle both incoming supplies and fuel delivery to the mine and

outgoing mineral concentrate shipments for the majority of the mine's shipping needs. Concentrates

would be shipped year-round to a smelter, assumed to be located in Japan. 

It is assumed that the Gulkana airstrip near Glennallen, a public airport maintained by the Alaska

Department of Transportation and Public Facilities, would serve the mine's needs for expedited cargo

shipping, and no provision for an additional airstrip at the mine site is included in the cost estimate.

 

The population in the immediate area of the mine is relatively small. According to December 1999

population estimates by the Alaska Department of Community and Economic Development, the local

population is about 1,400 people, distributed as follows: Chistochina - 52, Chitina - 94, Copper Center

- 553, Gakona - 22, Glenallen - 494, Gulkana - 90, McCarthy - 37, Slana - 55.

It is assumed that the local population in the immediate area would be sufficient to recruit a work

force. Mining industry wages are among the highest for industrial occupations and it is assumed this

would provide an incentive for job seekers to relocate to the area.

The work force would commute to the mine at their own expense. Based on this assumption, no

additional costs would be incurred by the mine operator, other than the construction and maintenance

of an employee parking lot. 

Based on information from the Rural Electric Cooperative Association, Inc. (ARECA), a trade

association for electric utilities in Alaska, it appears unlikely that the mine would be located in an

electrical utility service area. It is assumed that the project would produce its own electric power using

diesel powered generators. 

 

It was assumed that a suitable tailings pond location could be found within a 1⁄2 mile of the mill. Land

area requirements were estimated as follows: for a 5-year mine life - 17 acres per 1,000 stpd mill

capacity, for a 10-year mine life - 32 acres per 1,000 stpd mill capacity, and for a 20-year mine life -

62 acres per 1,000 stpd capacity (Ritcey 1989).
8

0 10 20 30 40 50 60

140

160

180

200

220

240

Resource Size

Recoverable Metal lValue ($/mt)

15% DCFROR

Figure 1. - RMV vs. resource size basaltic copper mine models

An initial starter dam would be

constructed that would be an

upstream dam design, followed in

subsequent years by three raises,

added as necessary to meet the mill’s

requirements. It is assumed that the

starter dam and each of the three

raises would each hold approximately

25% of the total tailings volume over

the life of the mine. 

Table 1 summarizes the cash flow

analysis of the various models. The

RMV per short ton of minable ore

required to achieve a 15% DCFROR

ranges from $224/st for a 1,276 stpd

(3.64 Mst) mine to a low of $152/st

for a 10,209 stpd (58.20 Mst) mine.

Figure 1 graphically presents the

results for the basaltic copper deposit

mine models. The downward sloping curve illustrates the cost advantages larger deposits achieve

through economies of scale.

Table 1. - Summary of cash flow analysis for basaltic copper models

Deposit type Deposit

size

(Mst)

Mining rate

(stpd)

RMV ($/st)

15% DCFROR

Basaltic copper 3.64 1,276 $224

Basaltic copper 7.28 2,146 206

Basaltic copper 14.55 3,609 194

Basaltic copper 29.10 6,070 164

Basaltic copper 58.20 10,209 $152

1 ; 1 I · 

! +······ J ............... J ...................... j 

I . i I ........................ ! ......................... + ......................... ?................ .. ................... !····· ................... . 

I I 

• 
9

0 2 4 6 8 10

100

150

200

250

300

350

400

450

Resource Size

Recoverable Metal lValue ($/st)

15% DCFROR

Figure 2. - RMV vs. resource size polymetallic mine models

Polymetallic Vein Models

The polymetallic vein mine models

are based on the geology and

mineralized rock present at Silver

Star Mine and O’Hara prospect. The

polymetallic vein deposit model is

described as quartz-carbonate veins

with gold and silver associated with

base-metal sulfides, related to

hypabyssal intrustions in sedimentary

and metamorphic terranes. The

mineralogy is described as native

gold and electrum with pyrite,

sphalerite, chalcopyrite, galena,

arsenopyrite, tetrahedrite-tennanite,

silver sulfosalts, argentite, and

hematite in veins of quartz, chlorite,

calcite, dolomite, ankerite, siderite,

rhodochrsosite, barite, fluorite,

chalcedony, and adularia (Cox and Singer, 1987).

 

The mine models assume ore is mined by shrinkage stoping methods using stopers for drilling and

jacklegs for rock bolting. Stopes, stope raises, laterals, and crosscuts necessary for production are

developed using drilling and blasting methods. The ore is flotation milled. Electric power will be

produced by on-site diesel generators. The same transportation, marine terminal, airport, work force,

and tailings pond assumptions as the basaltic copper mine model in the previous section are used

for the polymetallic vein models. 

Figure 2 graphically presents the relation between RMV per short ton and deposit size for the

polymetallic vein mine models.

Table 2 summarizes the results of the analysis for the various models. The RMV per short ton of

minable ore required to achieve a 15% DCFROR range from $155/st for an 2,189 stpd (7.94 Mst)

mine to $394/st for a 273 stpd (0.50 Mst) mine.

Table 2. - Summary of cash flow analysis for polymetallic vein mine models

Deposit type Deposit size 

(Mst)

Mining rate

(stpd)

RMV ($/st)

15% DCFROR

polymetallic vein 0.50 273 $394

polymetallic vein 0.99 460 296

polymetallic vein 1.98 774 228

polymetallic vein 3.97 1,302 182

polymetallic vein 7.94 2,189 $155

,,,,,, ...... ,,,,,,, ........ !······ ....... ,,,,,,, ........ ,,,?,, I ....... ,,,,,,, ........ ,,,,,,~ I ....... ,,,,,, ........ ,,,,,,, .. + .... ,,,,,, ........ ,,,,,,, ..... 

J....... J ...... J....... J....... ········+···· 

! I : 

··············1 ••i••······· 

i .....•....... i 

• 
10

0 10 20 30 40 50 60

140

160

180

200

220

240

260

280

Resource Size

Recoverable Metal lValue ($/st)

15% DCFROR

Figure 3. - RMV vs. resource size iron skarn models

 Iron Skarn Mine Models

The iron skarn mine models are

based on the geology and

mineralized rock present at the

Nebsena and Rambler Mines. The

iron skarn deposit model is described

as magnetite in calc-silicate contact

metasomatic rocks. The mineralogy

includes magnetite, chalcopyrite,

pyrite, and pyrrhotite. and rarely

cassiterite in iron skarns in tin granite

terranes (Cox and Singer, 1987). 

The models assume ore is mined by

shrinkage stoping methods using

stopers for drilling and jacklegs for

rock bolting. Stopes, stope raises,

laterals, and crosscuts necessary for

production are developed using

drilling and blasting methods. The ore is flotation milled. Electric power will be produced by on-site

diesel generators. The same transportation, marine terminal, airport, work force, tailings pond

assumptions as the basaltic copper and polymetallic vein mine models would be used for the iron

skarn models. 

Figure 3 graphically presents the relation between RMV per short ton and deposit size for the

polymetallic vein mine models.

Table 3 summarizes the results of the analysis for the various models. The RMV per short ton of

minable ore required to achieve a 15% DCFROR range from $162/st for an 6,191 stpd (58.2 Mst)

mine to $259/st for a 774 stpd (3.64 Mst) mine. 

Table 3. - Summary of cash flow analysis for iron skarn mine models

Deposit type Deposit size 

(Mst)

Mining rate

(stpd)

RMV ($/st)

15% DCFROR

iron skarn 3.64 774 $259

iron skarn 7.28 1,302 221

iron skarn 14.55 2,189 195

iron skarn 29.10 3,681 176

iron skarn 58.20 6,191 $162

• 
11

SUMMARY AND CONCLUSIONS

Mining prefeasibility investigations were conducted for basaltic copper, polymetallic vein, and iron

skarn deposit models under the terms of a memorandum of understanding between the BLM, the

National Park Service, and Ahtna, Inc. Regional Native Corporation for the mineral assessment of

ANCSA Regional Native Corporation selections within the Wrangell - St. Elias National Park and

Preserve, Alaska.

This report is not an appraisal by the BLM nor an opinion of value of any mineral resources that may

be found within the subject valid Ahtna Inc. ANCSA selections surrounded or substantially surrounded

by the Wrangell - St. Elias National Park and Preserve. This report does not conform to the general

reporting standards described in BLM Manual 3070, the Uniform Appraisal Standards for Federal

Land Acquisitions 1992, nor The Appraisal of Real Estate 1992.

Mine models were developed for application to the mineral deposit models. Capital and operating

costs for the models were determined using the USBM's Cost Estimation System (CES) version 2.3.

As BLM’s mineral assessment did not identify any significant resources on the subject land

selections, these economic models are based on hypothetical mining development scenarios of

mineral deposits not currently known to exist on Ahtna Inc. ANCSA selections. These models were

developed as a tool to aid in the possible identification of exploration targets on the subject land

selections when used as a supplement to the BLM’s mineral assessment reports. 

Published cost information was drawn from industry publications, permitting documents, and

environmental impact statements. All costs were escalated by factors that reflect the higher cost of

labor, transportation, and electricity in Alaska.

The cost data for each mine model were used to perform a cash flow analysis. The goal of the

prefeasibility study was to determine the RMV per short ton of minable ore that would provide a 15%

DCFROR for each of the mine models.

Economic modeling for basaltic copper deposit types indicates the RMV necessary for a

15% Discounted Cash-Flow Rate-Of-Return (DCFROR) for an underground mine ranges from

$152/st for a 10,209 stpd operation to $224/st for a 1,276 stpd operation.

Economic modeling for polymetallic vein deposit types indicates the RMV necessary for a 15%

DCFROR for an underground mine ranges from $155/st at 2,189 stpd to $394/st at 273 stpd.

Economic modeling for iron skarn deposit types indicates the RMV necessary for a 15% DCFROR

for an underground mine ranges from $163/st at 6,191 stpd to $259/st at 774 stpd.

This preliminary study does not provide an in-depth analysis of environmental and socioeconomic

concerns. Environmental considerations of mineral development in an area adjacent to a National

Park may far outweigh economic considerations. 
12

REFERENCES

Baggs, D.W. and G.E. Sherman, 1987, Feasibility of Economic Zinc, Copper, Silver, and Gold Mining

in the Porcupine Mining Area of the Juneau Mining District, Alaska, USBM OFR 15-87, 28 pp.

Balen, M.D., and A.M. Allen, 1993, Alaska Mineral Industry Cost Escalation Factors, USBM OFR 76-

93, 19 pp.

Berger/ABAM Engineers Inc., Reed Hansen & Associates, 1991, Draft Socioeconomic Impact

Assessment, Alaska-Juneau Mine Project, 142 pp.

Cox, D.P., and D.A. Singer, 1987, Mineral Deposit Models. U.S. Geol. Surv. Bull. 1693, 379 pp.

Meyer, M.P. and A.D. Shepherd, 1998, Mineral Assessment of Ahtna, Inc. Selections in the

Wrangell-St. Elias National Park and Preserve, Alaska, 1997 Preliminary Report, BLM OFR 71, 164

pp.

Meyer M.P. and D.A. VandeWeg, 1999, Mineral Assessment of Ahtna, Inc. Selections in the

Wrangell-St. Elias National Park and Preserve, Alaska, 1998 Preliminary Report, BLM OFR 73, 155

pp.

Meyer M.P. D.A. VandeWeg, and A.D. Shepard, Mineral Assessment of Ahtna, Inc. Selections in the

Wrangell-St. Elias National Park and Preserve, Alaska, Final Report - Volume I Executive Summary,

BLM OFR in progress, 37 pp.

Meyer M.P. D.A. VandeWeg, and A.D. Shepard, Mineral Assessment of Ahtna, Inc. Selections in the

Wrangell-St. Elias National Park and Preserve, Alaska, Final Report - Volume II Report, BLM OFR

in progress, 70 pp.

Meyer M.P. D.A. VandeWeg, and A.D. Shepard, Mineral Assessment of Ahtna, Inc. Selections in the

Wrangell-St. Elias National Park and Preserve, Alaska, Final Report - Volume III Property

Summaries, BLM OFR in progress, 228 pp.

National Park Service, 1990, Final Environmental Impact Statement. Cumulative impacts of mining

in Wrangell-St. Elias National Park and Preserve, Alaska, Volume 1, 521 pp., Volume 2, 314 pp.

Ritcey, G.M., 1989, Tailings Management, Problems and Solutions in the Mining Industry, Elsevier

Publ., Amsterdam, Netherlands, pp. 884-894.

Sherman, G.E., 1990, Permitting and Environmental Constraints: Their Impact on Mining in Alaska.

USBM OFR 35-90, 1990, 28 pp.

Sherman, G.E. and D.W. Baggs, 1988, Feasibility of Economic Gold Mining in the Juneau Gold Belt

Area of the Juneau Mining District, Alaska. OFR 38-88, 1988, 14 pp.

Smith, R. C., 1992, PREVAL: Prefeasibility Software Program For Evaluating Mineral Properties.

USBM IC 9307, 35 pp. 
13

U.S. Bureau of Mines, 1986, USBM Mineral Commodity Summaries, 196 pp.

-----, 1993, USBM Mineral Commodity Summaries, 202 pp.

-----, 1995, Economic Analysis Tools for the Mineral Industry CD-ROM, SP 17-95.

-----, 1993, Metals Prices in the United States Through 1991, 201 pp.

-----, 1975, Mineral Facts and Problems. USBM B 667, 1,259 pp.

-----, 1980, Mineral Facts and Problems. USBM B 671, 1,060 pp.

-----, 1985, Mineral Facts and Problems. USBM B 675, 956 pp.

-----, 1983, Greens Creek Final Environmental Impact Statement, 366 pp.

U.S. Environmental Protection Agency and U.S. Department of the Interior, 1984, Red Dog Mine

Project Northwest Alaska. Final Environmental Impact Statement, 1984, 430 pp. 

-----, 1984, Red Dog Mine Project Northwest Alaska. Final Environmental Impact Statement, Volume

II-Appendices, 1984, 315 pp.
 

2

 Mine life estimate is based on 350 days of operation per year.

14

APPENDIX A. - CAPITAL AND OPERATING COSTS FOR MINE MODELS

The tables in this appendix give the mineral deposit type and mine model descriptions; and capital and

operating costs for the basaltic copper, polymetallic vein, and iron skarn mine models. Capital costs

are categorized into six groups which include acquisition, exploration, infrastructure, mine, mill,

working capital, and reclamation costs for each model. Operating costs are categorized into five

groups, which include infrastructure, mine, mill, smelting, and transportation.

An eight-year pre-production period is assumed for each model. The models assume exploration and

acquisition would run concurrently and would take six years from 2002-2007. Two years from 2008-

2009 would be needed for construction. Production would begin in 2010. 

Table A-1. - Mineral deposit and mine model descriptions

Deposit type Deposit

size (Mst)

Mine model Mining

rate

(stpd)

Mine

life

(yrs)2

Mill type

Basaltic copper 3.64 Shrinkage stoping 1,276 8 Flotation

Basaltic copper 7.28 Shrinkage stoping 2,146 10 Flotation

Basaltic copper 14.55 Shrinkage stoping 3,609 12 Flotation

Basaltic copper 29.10 Shrinkage stoping 6,070 14 Flotation

Basaltic copper 58.20 Shrinkage stoping 10,209 16 Flotation

Polymetallic vein 0.50 Shrinkage stoping 273 5 Flotation

Polymetallic vein 0.99 Shrinkage stoping 460 6 Flotation

Polymetallic vein 1.98 Shrinkage stoping 774 7 Flotation

Polymetallic vein 3.97 Shrinkage stoping 1,302 9 Flotation

Polymetallic vein 7.94 Shrinkage stoping 2,189 10 Flotation

Iron skarn 1.98 Shrinkage stoping 774 15 Flotation

Iron skarn 3.97 Shrinkage stoping 1,302 16 Flotation

Iron skarn 7.94 Shrinkage stoping 2,189 18 Flotation

Iron skarn 15.87 Shrinkage stoping 3,681 20 Flotation

Iron skarn 31.75 Shrinkage stoping 6,191 22 Flotation
15

TABLE A-2. - Capital and operating costs - basaltic copper mine models

Model Description

Resource size (Mst) 3.64 7.28 14.55 29.10 58.20

Mining rate (stpd) 1,276 2,146 3,609 6,070 10,209

Capital Costs ($ millions)

Acquisition $9.07 $12.18 $16.85 $23.66 $33.88

Exploration 10.55 14.56 20.67 29.88 44.02

Infrastructure 18.64 22.57 28.67 38.17 52.96

Mine 28.44 39.20 54.22 75.10 104.25

Mill 29.92 41.66 60.14 87.65 130.42

Working Capital 3.65 4.90 6.78 9.53 13.64

Reclamation 15.82 25.05 40.08 64.68 105.05

TOTAL $116.10 $160.12 $227.41 $328.65 $484.20

Operating Costs ($/st)

Infrastructure $1.25 $0.74 $0.44 $0.26 $0.16

Mine 39.88 36.60 33.61 30.89 28.39

Mill 23.65 18.50 14.85 12.23 10.36

Smelting 42.35 42.38 42.36 42.37 42.36

Transportation 44.72 44.75 44.73 44.74 44.74

TOTAL $151.85 $142.97 $135.99 $130.49 $126.01

TABLE A-3. - Capital and operating costs - polymetallic vein mine models

Model Description

Resource size (Mst) 0.50 0.99 1.98 3.97 7.94

Mining rate (stpd) 273 460 774 1,302 2,189

Capital Costs ($ millions)

Acquisition $3.13 $3.46 $4.16 $5.06 $6.50

Exploration 4.16 4.73 5.75 7.09 9.17

Infrastructure 20.19 21.72 24.42 28.29 34.33

Mine 3.82 4.70 8.13 11.88 18.33

Mill 15.09 16.53 18.89 22.07 26.59

Working Capital 3.45 5.21 6.94 9.62 13.85

Reclamation 2.67 3.01 3.65 4.49 5.82

TOTAL $52.51 $59.36 $71.94 $88.49 $114.60

Operating Costs ($/st)

Infrastructure $14.33 $27.19 $17.67 $11.63 $7.78

Mine 50.25 43.67 39.39 36.52 34.52

Mill 75.58 53.57 38.43 28.02 20.83

Smelting 42.55 42.55 42.55 42.55 42.55

Transportation 14.35 14.35 14.35 14.35 14.35

TOTAL $197.06 $181.34 $153.39 $133.07 $120.04
16

TABLE A-4. - Capital and operating costs - iron skarn mine models

Model description

Resource size (Mst) 1.98 3.97 7.94 15.88 31.75

Mining rate (stpd) 774 1,302 2,189 3,681 6,191

Capital Costs ($ millions)

Acquisition $7.00 $9.18 $12.41 $17.10 $24.07

Exploration 7.96 10.70 14.83 21.01 30.42

Infrastructure 16.21 18.80 22.80 29.02 38.70

Mine 20.94 28.79 39.72 54.89 76.05

Mill 22.29 30.36 42.85 61.29 89.58

Working Capital 2.82 3.70 5.00 6.89 9.69

Reclamation 10.33 16.14 25.56 40.92 66.07

TOTAL $87.55 $117.67 $163.17 $231.12 $334.56

Operating costs ($/mt)

Infrastructure $2.06 $1.22 $0.73 $0.43 $0.26

Mine 43.33 39.73 36.47 33.53 30.78

Mill 30.60 23.41 18.34 14.73 12.15

Smelting 42.53 42.55 42.55 42.56 42.56

Transportation 44.92 44.94 44.93 44.95 44.95

TOTAL $163.44 $151.85 $143.02 $136.20 $130.70
17

APPENDIX B. - ECONOMIC ASSUMPTIONS

This appendix includes information regarding the development of the economic prefeasibility mine

models. It notes all major assumptions for income tax rates, depletion, depreciation, commodity

prices, exploration and permitting costs, working capital, salvage value, and reclamation expense. 

Economic Factors

It is important to emphasize that the mine models described in this report are based on hypothetical

mining and milling scenarios. The models are not meant to represent a feasibility analysis of specific

deposits. This would be inappropriate since such an analysis requires more precise data than that

available for this report. 

The models do not include proprietary company data which, if available, would probably change the

outcome of the evaluation. When applicable, cost information from developing or producing mines

in Alaska was used in constructing the models. Alaska Mineral Industry Cost Escalation Factors

(AMICEF) of 1.78 for operating labor, 1.71 for capital labor, 1.30 for capital costs, and 1.73 for

electricity were used to reflect higher costs in the Wrangell - St. Elias area. These factors are a set

of calculated values that are used to escalate itemized capital and operating costs for mining and

milling operations from the central front range of the Rocky Mountains (Denver vicinity) to any point

in Alaska (Balen and Allen, 1993). 

A number of factors control the feasibility of mineral development, including physical attributes of the

deposit, metallurgical attributes of the minerals, metal markets, infrastructure availability, political

climate, environmental constraints, and corporate policy. Any forecast of the development potential

should weigh all of these factors. Results presented here are preliminary.

Cash Flow Assumptions

All RMV ($/st) are equal to the amount of revenues required before deducting all expenses, including

royalties, mining and milling capital and operating costs, off-site transportation costs, smelting

charges, and taxes. 

Federal income tax, Alaska corporate income tax, and Alaska mining license tax rates are simulated

with a 41% tax rate during the first 3 years of production, 43% in the 4th year, and 45% thereafter.

All projects were assumed to be equity financed by a single corporate producer that expensed tax

due against other income. Modified Accelerated Cost Recovery System (ACRS) depreciation and

percentage depletion were utilized.

Exploration costs were considered for all models. Acquisition capital cost represents the direct cost

of permitting, and was estimated at 12% of the total project cost. Reclamation costs were included

in all mine models. Mine and mill reinvestment were not considered for the models. It was assumed

that the project would have no salvage value recovered at final reclamation. Working capital for all

models is the cash required to sustain a mining operation between mining the ore and receiving

revenues from its sale. Working capital was estimated at 90 days of operating costs and was

invested in the first year of production and recovered in the last year of production for cash flow

purposes. 

Ahtna, Inc. is subject to ANCSA 7(i) revenue sharing which means Ahtna, Inc. would share 70 percent

of its income from developing its natural resources with each of the 12 Regional Native Corporations
18

in Alaska. These revenues are pooled together and then apportioned back to the regional

corporations on a per capita basis. This profit sharing arrangement does not present an impediment

to mineral development, as all would stand to benefit, so it was not considered in the economic

models. The economic models were evaluated from the standpoint of a single corporate entity. 

 

The Exploration Incentive Credit bill signed into law by Governor Knowles in 1995 may also provide

Ahtna, Inc. with credits toward future tax and royalty obligations due the State of Alaska. The

Exploration Incentive Credits are for exploration work on new mining operations. The law provides

100 percent credit for all eligible exploration costs against future mining license tax, corporate taxes,

and royalties on production. Credits are limited to no more than 50 percent of the taxes or royalities

due the state in any given year and must be taken within 15 years of beginning production. A cap of

$20 million is placed on the total exploration credits for any new mining operation.

These Exploration Incentive Credits were not considered in the economic models as it is not possible

to account for them without knowledge of Ahtna Inc. proprietary financial information. Ahtna, Inc. stock

is not publicly traded and is subject to restrictions under ANSCA, as to who the authorized

shareholders may be and their rights to sell the stock. This is similar for all Native Regional

Corporations and Ahtna, Inc.’s financial information is not a matter of public record.

Although, the effect of the incentive would be positive, it would likely represent only a small reduction

in the RMV required to attain a 15% DCFROR. Evaluated on a stand-alone basis, with the $20 million

cap for total exploration credits used against future mining license tax and corporate taxes, it is

estimated that on average, the incentive would likely reduce RMV no more than 2.8%. At a prefeasibility level evaluation, the effect of the Exploration Incentive Credits is almost insignificant. 
19

Calculation of RMV

Assume mill feed with grades of 11% zinc, 11.6 tr oz/st silver, 3% lead, and 0.10 tr oz/st gold is mined from

a deposit. Mill recoveries were estimated at 90% for zinc, 85% for silver, 81% for lead, and 71% for gold.

Smelter recoveries were estimated at 75% for zinc, 87% for silver, 80% for lead, and 55% for gold. 

Assume ten-year (1989-98) average prices from Table B-1 (1998 dollars) are used. The RMV ($/st)

equals $180. 

 The equation used in calculating RMV for a deposit is:

 n 

S GiRiSiVi,

 I=1

where 

Gi = mill feed grade of commodity I,

Ri = mill recovery of commodity I,

Si = smelter recovery of commodity I,

Vi = $/unit of commodity I,

and n = total number of commodities.

The calculations are shown in the worksheet below.

CALCULATION OF RECOVERABLE METAL VALUE

Commodity Grade

(decimal)

Mill

recovery

(decimal)

Smelter

recovery

(decimal)

Unit Price RMV

Gi Ri Si Vi (GiRiSiVi)

Zinc 0.11 0.90 0.75 st $1,340 $99

Silver 11.6 0.85 0.87 tr oz $5.62 48

Lead 0.03 0.81 0.80 st $900 17

Gold 0.10 0.71 0.55 tr oz $417.79 16

TOTAL $180

How To Use Worksheet

1. Estimate minable resource size, and resource commodity grades to be evaluated.

2. Refer to Figure 1, 2, or 3, select appropriate x-axis value representing nearest estimated minable

resource size. Read RMV ($/st) from y-axis. This is the minimum value per short ton of minable resource

adjusted for mining recovery, dilution, mill, and smelter recovery required to yield a 15% DCFROR using

the hypothetical mining and milling scenarios described in this report.

3. To translate this value into a gross in place value (GIPV), back calculate value using assumed mill

recoveries or pilot testing results if available, and appropriate smelter recoveries. Suggested commodity

prices shown in Table B-1 may be used or other prices as desired.
20

Commodity Prices

Commodity prices provided for individual metals were determined by using an inflation adjusted thirty-year

average for the years 1969-98. Prices for 1967-96 from various USBM publications were escalated to

1996 dollars using U.S. Department of Commerce Gross National Product implicit price deflators and then

averaged. Prices after 1996 came from the U.S. Geological Survey (USGS) Commodity Statistics and

Information web site. 

Ten-(1989-98), twenty-(1979-98), and thirty year-(1969-98) average prices are shown for the commodities

of interest. All prices shown in Table B-1 are given in 1998 dollars. Price fluctuations over the short term

may have substantial impacts on project economics, with the obvious impacts of low prices resulting in low

profitability or even financial losses. Higher profits will be realized during periods of higher prices.

Obviously, higher prices do not represent a problem for the mine operator. Low prices may force the mine

operator into re-evaluating project economics and determining if the mine and mill should be idled, or if

production should be reduced for some temporary period of time, or if the mine should be closed

permanently. As there are significant expenses involved in idling and/or closing a mine, mine operators

often elect to continue operating the mine at a loss, as it may often be less costly than idling or closing the

mine. 

When considered with ongoing maintenance expenses for meeting permit requirements, keeping a small

work force to maintain the mine and mill in standby condition, cash flow requirements, the loss of

production, incurring reclamation expenses and so forth, the decision will always rest on a case by case

assessment of metal prices, the mine’s unique situation, financial circumstances, closure expenses, and

the operator’s view of what the future may hold.

For the purposes of this report, it is assumed that over the long term life of the mine that the average price

trends listed in Table B-1 would continue in the future. The mine would be continuously operated regardless

of temporary short-term price fluctuations. As price is only one of four components that comprise

recoverable metal value (RMV) in the models, it should be considered with the other components in arriving

at different price assumptions. 

Table B-1. - Ten, twenty, and thirty year average commodity prices (1969-1998)

Commodity 30 year average

(1969 - 1998)

20 year average

(1979 - 1998)

10 year average

(1989 - 1998)

Copper $1.47 $1.28 $1.26 lb

Gold 441.36 523.07 417.79 tr oz

Lead .52 .50 .45 lb

Silver 10.06 10.58 5.62 tr oz

Zinc $0.69 $0.50 $0.67 lb