State of Alaska

Alaska Mining Seminar

1

Metal Mining Successes in Alaska:A Review of Active and Developing Metal Mines in Alaska

November 7, 2006

JOGMEC • Tokyo, Japan

By Albert H. Clough, MSc, PGeolDeputy Commissioner

Alaska Department of Commerce, Community, and Economic Development

State of Alaska

Alaska Mining Seminar

2

Summary

History of Modern Mining Development in Alaska

Alaska Native Claims Settlement Act, 1971

Alaska National Interest Lands Conservation Act, 1980

Period on intensive statewide reconnaissance mineral exploration, 1970-1990

Mine development and refined exploration - Ongoing

State of Alaska support for mine development

State of Alaska

Alaska Mining Seminar

3

Alaska Producing Metal Mines

The foundation of a multi-billion U.S. dollar mineral industry!

• Red Dog• Fort Knox• Pogo• Greens CreekFort Knox (Fairbanks)

State of Alaska

Alaska Mining Seminar

4

Location ofProducingMetal Mines

Red Dog

Fort Knox

Greens Creek

Pogo

State of Alaska

Alaska Mining Seminar

5

Active Mines

Greens CreekJoint venture between Kennecott Minerals (70%) (owner-operator) and Hecla Mining (30%)

• Began production in 1989.

• Volcanogenic massive sulfide deposit containing economic amounts of silver, lead, zinc and gold.

• Underground mine.

• 12% zinc, 4% lead, 12 opt silver, 0.2 opt gold.

• Production rate approximately 2000T/day.

State of Alaska

Alaska Mining Seminar

6

Active Mines

Red DogA joint venture between NANARegional Corp. and Teck-Cominco

• The world’s largest zinc reserve(121 million tons of ore).

• World’s largest producer of zinc concentrate.

• 3 million tons of ore mined annually at an average grade of 22% zinc, 6% lead and 3 ounces per ton silver (93 grams silver).

State of Alaska

Alaska Mining Seminar

7

Active Mines

Red Dog, continued

• Mine employs 450 people (including contractors) 50+% of which are NANA shareholders.

• Production started in 1989.

• Conventional truck and shovel open pit mine.

• Considerable undeveloped reserves near mine and mineralization in region.

State of Alaska

Alaska Mining Seminar

8

Active Mines

Red Dog

In a classby itself!

State of Alaska

Alaska Mining Seminar

9

Active Mines

Fort Knox – True North

Kinross Gold Corp. Owner/Operator

• Operating open-pit gold mineproducing 330,000 - 410,000ounces annually from the TrueNorth and Fort Knox deposits at anestimated cash cost of $258 per ounce.

• Average combined grade is 0.025 ounces per ton(0.8 grams).

State of Alaska

Alaska Mining Seminar

10

Active Mines

Fort Knox – True North, continued

• The mine employs over 400 people and has an annual economic impact of $196 million on the community of Fairbanks.

• Mining complete at True North deposit, currently under reclamation.

• Engineering and regulatory work currently underway to convert low grade stockpiles to heap leach.

State of Alaska

Alaska Mining Seminar

11

Active Mines

Pogo

A Sumitomo & Teck-Comincojoint venture

• Intrusive related, shear-hosted,gold-quartz vein system.

• Discovered through systematic exploration in 1994.

• Contains 3.6 million ounces of gold at 0.47 ounce/ton (14.6 grams).

• Construction started in 2004, commissioned 1st quarter of 2006.Construction cost est. - $347 M.

• Employment 238 people. Production rate: 2,500 tpd. Mine life: 10 years. Annual production ~450,000 oz.

State of Alaska

Alaska Mining Seminar

12

Location ofDevelopingMinesand LargeExplorationProjects

Donlin Creek

Kensington

Rock Creek/Big Hurrah

Pebble Copper

State of Alaska

Alaska Mining Seminar

13

Developing Mines

KensingtonCoeur Alaska

• Mesothermal gold deposit.

• Reserves: 4.2 million tons @0.25 ounces/ton (7.8 grams).

• Operating mine would provide 250 full time workers and spend $13m annually on local purchases.

• Commission schedule – 2007, currently under construction.

• Construction cost - $190 M.

• Mining/milling rate - 1,150 tons/day.

State of Alaska

Alaska Mining Seminar

14

Developing Mines

Rock Creek/Big Hurrah

• Production: 100,000 oz/year• Commission schedule: 2007, currently under construction• Big Hurrah (30 mi. east) probably will mined concurrently with Rock Creek

• Ownership: NovaGold Resources• Capital Requirements: $50M• Employment: 130 - 150

State of Alaska

Alaska Mining Seminar

15

Large Exploration Projects

Donlin CreekOperated by Placer Dome in a Joint venture agreement with NovaGold Resources and Calista Corporation

• Orogenic gold-quartz-sulfidesheeted vein deposit.

• 25.4 million ounces of gold at an averagegrade of 0.089 opt (2.8 grams).

• 2nd largest gold resource in Alaska.

• Placer Dome spent $14 million in 2005exploration program.

• Similar expenditure for 2006.

• Ongoing exploration and feasibility investigations.

State of Alaska

Alaska Mining Seminar

16

Large Exploration Projects

Pebble• Ownership: Northern Dynasty.• Resources: Measured and Indicated:

- 31.3 M oz gold + 18.8 B lbs copper• Inferred:

- 34.3 M oz gold + 31.8 B lbs Cu • Employment forecast: >1,000.• Mining rate: 100 - 200K tpd.• Annual production: >1,200,000 ounces of gold (equivalent).• Capital requirements: >$2,000M.• Commission schedule: 2012(?).• Access: Road to Cook Inlet.• Ongoing exploration, environmental studies, and feasibility investigations.• Kennecott Canada Exploration (subsidiary of Rio Tinto) has recently taken a 9.9% interest in Northern Dynasty.

State of Alaska

Alaska Mining Seminar

17

State of Alaska Programs and Actions to Advance Mine Development

• Airborne Geophysics

• Alaska Industrial Development & Export Authority (AIDEA)

• Stable regulatory and taxation structure

State of Alaska

Alaska Mining Seminar

18

State of Alaska Programs and Actions to Advance Mine Development

Airborne Geophysical/Geological Mineral Inventory (DGGS)

A multi-year project to expand the knowledge base of Alaska’s mineral resources as a catalyst to private sector investment.

Products include:•1:63,360-scale aeromagnetic and airborne-electromagnetic maps•1:63,360-scale bedrock and surficial geologic maps•1:63,360-Scale Land status map•and various geological, geochemical and geophysical data compilations

State of Alaska

Alaska Mining Seminar

19

Inventory of DGGS Alaska Airborne Geophysical/Geological Surveys

State of Alaska

Alaska Mining Seminar

20

DGGS offers both:DGGS offers both:

1970s or older data)1970s or older data)andand

--? And ? And BLMBLM--DGGS 1997DGGS 1997--?)?)

Regional airborne magnetic and Regional airborne magnetic and resistivity data (USGS & DGGS, resistivity data (USGS & DGGS,

Detailed airborne magnetic and Detailed airborne magnetic and resistivity data (DGGS 1994resistivity data (DGGS 1994

State of Alaska

Alaska Mining Seminar

21

State of Alaska Programs and Actions to Advance Mine Development

Alaska Industrial Development & Export Authority (AIDEA)

The mission of the Alaska Industrial Development and Export Authority (AIDEA) is to provide various means of financing to promote economic growth and diversification in Alaska.

State of Alaska

Alaska Mining Seminar

22

State of Alaska Programs and Actions to Advance Mine Development

Alaska Industrial Development & Export Authority (AIDEA)

Support for Alaska mining projects:

• Road & Port for Red Dog Mine

• Skagway Ore Terminal

• Seward Coal Terminal

• Revenue Bonds for Fort Knox Tailing Facility

• Revenue Bonds for Kensington Dock and Tailing Facility

State of Alaska

Alaska Mining Seminar

23

State of Alaska Programs and Actions to Advance Mine Development

•Regulatory Structure - Large Mine Permit Process

•Land Available for Mining

Federal mineral lands

State of Alaska lands

Private lands, Aboriginal land claims settled –available for mining

• Stable Taxation Structure with Development Incentives

State of Alaska

Alaska Mining Seminar

24

State of Alaska Programs and Actions to Advance Mine Development

Taxation and Incentives

MINING TAXATIONState corporate income tax. Net income based on graduated scale to

maximum of 9.4% on income over $90,000 USD.

Mining license tax. Based on net income from mineral product sales. Graduated tax, maximum of 7% on products sales over $100,00 USD.

Production royalty. 3% on net income fromsales on state lands only.

Modest state claim rents and lease fees.

• Claim rental up to $520 USD/year for 65 Hectare claim.• Production lease, up to $1.35 USD/hectare.• Annual labor of $100 USD/16 hectare claim.

State of Alaska

Alaska Mining Seminar

25

State of Alaska Programs and Actions to Advance Mine Development

Taxation and Incentives

INCENTIVES

No state reserves tax.

New mines receive a 3½ year grace period from paying mining license tax.

Credit is given for rents and lease payments against productionroyalty.

Exploration incentives program. Exploration expenditure credits up to $20 million USD per mining property may be booked. These creditsmust be used during the first 15 years of production and appliedagainst corporate income tax, mining license tax, and products royalty.

State of Alaska

Alaska Mining Seminar

26

Future Trends and Developments

1. Satellite deposits developed adjacent to existing mines – especially:

•Red Dog•Fort Knox•Pogo

2. New mines developed such as Donlin Creek3. Establishment of in-state mineral beneficiation based on mineral wealth, low cost and available energy, and pacific rim location

State of Alaska

Alaska Mining Seminar

27

Thank You.