Pogo
UPDATED 11/2006: Pogo is an operating underground gold mine with a current estimated gold resource of 5.6 million ounces averaging 0.41 ounces/ton, a projected mine life of 10 years, and an annual production rate of between 350,000 and 500,000 ounces of gold. Newly constructed, gold production began at the mine in early 2006. As of the end of the second quarter 2006, the mine was still in the commissioning phase, and was not yet operating at commercial production levels1.
The mine is owned by Sumitomo Metal Mining, Inc. - a member of the Japanese Sumitomo Group. Through a joint venture agreement with Sumitomo, Teck Cominco, Teck Cominco, a Canadian mining company, has a 40 % interest in the property; its wholly-owned subsidiary, Teck Pogo, Inc. (TPI) is the mine operator. Teck Cominco also operates the Red Dog zinc-lead mine in northwest Alaska.
Location
Fuel storage at Pogo camp |
Comprising about 16,700 hectares of claims, Pogo is located on state land in the upper Goodpaster River valley 85 miles east -southeast of Fairbanks and 38 miles northeast of Delta Junction. The mine complex is situated on the Goodpaster River, a pristine clear water drainage with optimal riparian and aquatic habitat. It hosts 11 fish species, among them Arctic grayling, king and chum salmon. The Goodpaster region is also within the range of the Forty-Mile Caribou herd, and has good moose, bear and wolf habitat. Very little historical placer mining occurred in the Goodpaster region, and prior to the Pogo discovery, there had been little hardrock mineral exploration. Aside from the private gravel road that services the mine, current public access to the region is by the Goodpaster Winter Trail in winter, and by boat in summer. Human habitation is limited to recreational and remote homesteads located on the lower Goodpaster.
Operating Agreements
In 1997, Teck Cominco (then Teck) entered into an agreement with Sumitomo Metal Mining to explore and potentially develop the Pogo prospect. Teck Cominco earned a 40% interest in the Pogo mine by constructing and subsequently operating an underground mine capable of producing up to 500,000 ounces of gold per year. Teck Pogo, Inc. as mine operator receives a management fee from Sumitomo.
Sumitomo receives a 1.5% net smelter royalty on the first 2 million ounces of gold produced. Thereafter, it receives no net smelter royalty, but Teck Cominco is required to pay a production royalty on each ounce of gold it keeps that is the greater of 5% of the price of gold per ounce and $US 25.
Type of Ore and Projected Production
The Pogo is a gold sulfide ore body hosted in a large quartz vein system, with low-grade gold present in quartz stockworks. According to their 2004 annual report, Pogo contains a probable reserve of 770,000 tons grading at 0.56 ounces/ton, an indicated resource of 849,000 tons grading at 0.31 ounces/ton and an inferred resource of 1.3 million tons grading at 0.59 ounces/ton. All reserves and resources were calculated using a $300/ounce gold price, which was the price of gold at the time of the mine feasibility study. With increases in gold price in recent years, these figures are undoubtedly low at this time.
The Pogo mill is designed to process between 2,500 and 3,000 tons of ore per day, with an annual production range of between 300,000 and 500,000 ounces of gold. Mine life is estimated at 10 years. At present gold prices of about $500 per ounce, Teck Pogo Inc. estimates production costs to run about $150/ounce. Pogo primarily produces gold oré ranging in size from several hundred to 1,000 ounces; this ore, which contains impurities, is refined outside of Alaska.
Operation
The Pogo deposit is mined using the conventional underground mining techniques of cut and fill and drift and fill. The main workings are located underneath Liese Creek; there is an underground water treatment facility to handle the high flows of water that must be pumped from the underground structures in order for mining to occur.
The mine complex includes a mill, camp, dry stack tailings pile, waste rock dumps, recycle water tailings pond, an airstrip, gravel pits, laydown and fuel storage areas, and a local network of roads. Gold is recovered using gravity (60%) and floatation and cyanide vat leaching (40%). During life of mine, an estimated 11 million tons of tailings will be produced, with approximately half returned underground as paste backfill. The remaining tailings are stored above ground in the dry stack tailings impoundment located in Liese Creek. At end of mine life, Teck Cominco will close and seal the underground workings and reclaim the mine site.
Teck Cominco has a local (Alaska) hire policy, with presently 85% of its 240 workers from Alaska. Employees work two weeks on, one week off, with personnel transported via company buses from Fairbanks and Delta. Company policy strictly forbids on-site employees from hunting or fishing on Pogo property, and, as is typical in remote work sites, there is a zero tolerance drug and alcohol policy.
Access
Teck Cominco constructed a 49-mile road across state lands from the Richardson Highway to the Pogo mine; the road also includes a bridge spanning the Goodpaster River. The road is maintained and operated on a year-around basis, and during life-of-mine, is closed to the public. However, after the mine closes, the first 23 miles, which wind out in and out of the Tanana Valley State Forest, will be open for public use. The remaining 26 miles of road, which is leased to the company, will be closed and removed by the company unless the lease is otherwise negotiated - a process which would be subject to public notification and comment.
Pogo Stakeholders Groups
During the permitting phase of the mine, the Northern Alaska Environmental Center filed an administrative appeal of the final National Pollution Discharge Elimination System (NPDES) permit wherein the US Environmental Protection Agency declined to consider mine tailings as waste, thus approving discharge of mine tailings into Liese Creek. In an effort to avoid lengthy delays in construction resulting from an appeal process, and with the intervention of the State of Alaska, the Northern Alaska Environmental Center and Teck Cominco reached a negotiated settlement agreement.
As part of the settlement agreement, Teck Cominco agreed to install two additional groundwater monitoring wells near the Goodpaster River, fund annual fish studies on the Goodpaster for at least ten years, and establish a stakeholder group that would regularly review mine operations and environmental compliance. The seven -member group is composed of representatives from fishing, mining, environment/conservation, subsistence, hunting, and local resident. The initial members were selected by the Commissioner of the Department of Natural Resources, following a public recruitment and nomination process. There are no term lengths or limits; vacancies following a resignation are filled by the Commissioner selecting from a list of three candidates submitted by the stakeholders group. The group meets no less than twice a year with at least one meeting at the mine site.
Current Status of the Project
Final construction costs for the mine were $357 million - 17% higher than the original projected estimates of $300 million. Sumitomo attributes the cost over-runs to higher costs in fuel and construction materials such as steel, increased labor costs, and unexpected geotechnical conditions.
As of the end of the third quarter, 2006 Teck Pogo, Inc. had yet to run the mine as full commercial production levels. Although the mine was achieving its design goals of just under 3,000 tons/day ore throughput for short periods of time, maintaining full production rates consistently was limited by tailings filtration capacity, as well as other pinch points in the paste tailings system. Thus the mine is generally operating at 60% projected capacity, with an 85% gold recovery rate. Filter plant modifications are underway and are expected to be completed by the end of the fourth quarter, 2006; the mine is expected to be running at full operating levels sometime in the first quarter of 2007.
On October 19, 2006, the mine's electricity and power were knocked out as a result of a fire in a power substation adjacent to the mill. Mine fire crews contained the fire before any damage occurred to the mill. During approximately two weeks that it took to restore full power, portable generators provided sufficient power to continue construction and maintenance operations, but the mill remained inactive, and only minor underground mining occurred. Full power was restored to the mine in early December 2006.
Exploration continues throughout the rest of the Pogo property, in fulfillment of work commitments on the claims. In 2005, a new mineralized quartz vein was discovered on the Chorizo Prospect, 12 kilometers east of the existing mine infrastructure.
12Q Results for the Three Months Ending June 30, 2006, Teck Cominco Limited.
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