page Alaska gas line negotiations 9 have made ‘enormous progress’

Vol. 10, No. 13 • www.PetroleumNews.com North America’s source for oil and gas news Week of March 27, 2005 • $1.50

● CANADA March Mining News inside Mac frozen in time? Gas line project hit by blizzard of problems in NWT; hearings off-schedule By GARY PARK On March 22, Canada’s energy regu- Petroleum News Calgary Correspondent lator put out a revised timetable of dates covering the remaining phases of its t’s easy to reach a conclusion that the technical review. Those new targets Mackenzie Gas Project has been ranged from a few days to seven weeks I frozen in time as squabbling and court behind the preliminary dates set early actions continue between the Deh this year. Cho First Nations and the Canadian gov- Other discontent is surfacing in the ernment. Northwest Territories as regulators lay But other issues are starting to bedev- Former Northwest groundwork for the public hearings and il the regulatory process, as residents of Territories premier the project proponents start formal nego- the Northwest Territories add to the list Stephen Kakfwi tiations with aboriginals on land access of concerns. and benefits agreements. An official with the National Energy Board confirmed earlier in March in Yellowknife that Northwest Territories public hearings will not start before the end of representatives air concerns summer, well behind the possible spring start that The Northern Gas Project Secretariat, the Joint the project backers had hoped for at one time. see FROZEN page 16

● CANADA Subdued response to ANWR Ottawa to continue lobbying Washington to look at ways to protect caribou By GARY PARK Petroleum News Calgary Correspondent The March edition of North of 60 Mining News, a special monthly sup- plement of Petroleum News, carries stories on Southeast Alaska’s eading into a March 23 summit with the U.S. Greens Creek mine, the latest from Southwest Alaska’s Pebble mine, diamonds in Greenland and (maybe) Minnesota, reactions to the and Mexican presidents, the Canadian gov- Fraser Institute’s annual survey and news about John Felderhof, a for- H ernment did nothing more than reiterate its mer Bre-X geologist, and more. opposition to exploration of the Arctic National Wildlife Refuge. Talisman CEO Buckee says Libyan In the aftermath of the U.S. Senate vote to allow drilling of the refuge, Canada issued a more mod- exploration rights ‘uneconomic’ erate response than at any time in the past decade. Canada Prime Minister Paul Martin WHILE OCCIDENTAL Prime Minister Paul Martin had nothing to say Mexico’s President Vicente Fox. PETROLEUM is leading the return of about the latest source of cross-border tensions What Martin hoped to accomplish at Waco was U.S. oil companies to Libya and a host before leaving for the one-day summit in Waco, an agreement to negotiate changes to the North of other majors are jostling for strategic Texas, with U.S. President George Bush and see RESPONSE page 16 investments in the former pariah state, one Canadian independent thinks its ● GULF OF MEXICO peers are overpaying for exploration rights in the North African country. Talisman Energy Chief Executive More Exxon ‘ultra-deep’ Officer Jim Buckee, while sorry that his company was unable to secure licenses, doubts the winning bidders wells likely, says Rowan will ever make money on their investments. He told a conference call he was “shocked by the level of By RAY TYSON see INSIDER page 14 Petroleum News Houston Correspondent

ffshore rig contractor Rowan, which has

drilled most of the wells over 18,000 feet on ROWAN COURTESY BREAKING NEWS O the Gulf of Mexico’s continental shelf, says one of its clients, ExxonMobil, is planning to Appraisal drilling extends Mad Dog: Well, sidetracks find 7 sink three more “ultra-deep” exploration wells on 300 feet of net oil pay on Gulf field’s untested southwestern flank the shelf, in addition to the closely watched Blackbeard West well. 11 Provinces beef up incentives: Saskatchewan looks at tax Blackbeard West, which is headed to 32,000 feet and possibly 38,000 feet, was spud in early and royalty changes; B.C. targets long-term investments February and could take up to a year to complete. Rowan’s high-powered Scooter Yeargain jack-up Alaska OKs Beluga PA at Nicolai: Aurora shuts in Cook Rowan’s high-powered Scooter Yeargain jack-up rig is 12 rig was selected for the job. drilling Blackbeard West, which is headed to 32,000 Inlet field; unit changes include new Beluga formation participating area feet and possibly 38,000 feet, was spud in early see WELLS page 15 February and could take up to a year to complete. 2 ACTIVITY REPORT PETROLEUM NEWS • WEEK OF MARCH 27, 2005 Gulf of Mexico Activity Report

Current Deepwater Activity The Gulf of Mexico Activity Report as of March 21, 2005. Active drilling companies only listed.

TD = rigs equipped with top drive units WO = workover operations Area/ OCS Prospect Water CT = coiled tubing operation SCR = electric rig Operator Block Lease Rig Name Name Depth (ft) This platform report was prepared by Tom Kearney BP E&P WR 508 G17001 T.O. DEEPWATER HORIZON Stones 9,556 BHP Billiton Petroleum (GOM) WR 206 G16965 GSF C.R. LUIGS Casade 8,160 BP E&P AC 739 G19390 DIAMOND OCEAN CONFIDENCE Diamondback 6,850 BP E&P MC 822 G14658 T.O. DISCOVERER ENTERPRISE Thunder Horse South 6,262 Murphy E&P MC 734 G21778 T.O. MARIANAS Thunderhawk 5,710 Dominion E&P MC 773 G19996 NABORS POOL 140 Devil's Tower 5,610 COURTESY BP COURTESY Dominion E&P MC 252 G21164 T.O. CAJUN EXPRESS Rigel 5,229 Kerr-McGee Oil & Gas GC 680 G22987 DIAMOND OCEAN STAR Constitution 4,970 ConocoPhillips GB 783 G11573 NABORS MODS 201 Magnolia 4,675 Exxon Mobil EB 945 G08214 GSF EXPLORER Diana 4,641 BP E&P GC 782 G15610 PRIDE MAD DOG SPAR RIG Mad Dog 4,428 BP E&P GC 645 G11081 HOLSTEIN SPAR RIG Holstein 4,344 Anadarko Petroleum GC 652 G21810 T.O. DEEPWATER MILLENNIUM 4,320 Chevron U.S.A. MC 937 G16659 T.O. DISCOVERER DEEP SEAS Makalu 4,181 Eni Petroleum GC 562 G11075 GSF CELTIC SEA K2 4,006 Shell Offshore MC 934 G07975 NOBLE JIM THOMPSON Europa 3,875 Kerr-McGee Oil & Gas EB 602 G20725 NABORS MODS RIG 150 Nansen 3,680 Union Oil Company of CA GC 512 G26315 T.O. DISCOVERER SPIRIT Knotty Head 3,570 Dominion E&P GC 385 G25142 ENSCO 7500 Pegasus 3,493 Shell Offshore AT 267 G18537 T.O. DEEPWATER NAUTILUS Vrede 3,341 Murphy E&P GC 338 G22950 NABORS MODS 200 Front Runner 3,328 Shell Offshore VK 956 G06896 H&P 205 Ram-Powell 3,214 Shell Offshore GC 158 G07995 H&P 202 Brutus 2,985 Shell Offshore MC 807 G07962 H&P 201 Mars 2,945 Shell Offshore GB 426 G08241 AUGER Auger 2,862 Mariner Energy MC 718 G13687 DIAMOND OCEAN AMERICA Juno 2,799 LLOG Exploration Offshore GC 157 G24154 DIAMOND OCEAN SARATOGA Citrine 2,614 Kerr-McGee Oil & Gas GC 320 G25139 NOBLE AMOS RUNNER Chilkoot 2,450 Noble Energy GC 199 G24160 DIAMOND OCEAN QUEST Lorien 2,200 Shell Offshore GC 155 G16698 DIAMOND OCEAN VICTORY Manatee 1,890 BP E&P MC 28 G09771 NOBLE MAX SMITH Pompano 1,853 Chevron U.S.A. VK 786 G10944 ENSCO 25 Petronius 1,754 Eni Petroleum EW 965 G12145 T.O. AMIRANTE Morpeth 1,694 BP E&P VK 989 G07923 NABORS POOL 143 Pompano I 1,290 LLOG Exploration Offshore GC 141 G21785 THE 100 Shaft 1,035

Total Deepwater Prospects with Drilling/WO Activity: 35

BP’s Holstein Spar rig New Deepwater Activity

Area/ OCS Prospect Water Operator Block Lease Rig Name Name Depth (ft)

BHP Billiton Petroleum (GOM) WR 206 G16965 Casade 8,160 Dominion E&P MC 252 G21164 Rigel 5,229 Anadarko Petroleum GC 652 G21810 4,320 BP E&P MC 28 G09771 Pompano 1,853 COURTESY TRANSOCEAN COURTESY INC.

Baker Hughes North America rotary rig counts*

March 18 March 11 Year Ago US 1,320 1,282 1,128 Canada 329 441 451 Gulf 93 89 92

Highest/Lowest US/Highest 4530 December 1981 US/Lowest 488 April 1999 Canada/Highest 558 January 2000 Canada/Lowest 29 April 1992 *Issued by Baker Hughes since 1944

The Gulf of Mexico Activity Report is sponsored by:

Transocean’s Deepwater Millennium PETROLEUM NEWS • WEEK OF MARCH 27, 2005 ON DEADLINE 3

NORTH AMERICA ALASKA Canada climbs aboard British Alaskan wants ELF repeal on state ballot Ray Metcalfe of the Republican Moderate Party is leading a drive to put repeal of Columbia-Alaska rail link study; the economic limit factor for oil on the Alaska ballot. The ELF reduces the state’s pro- funding, project scope to come later duction or severance tax on some Alaska oil fields based on such factors as how pro- ductive wells are in a field and the size of a field. The ELF is designed to prevent the The Canadian government is ready to participate in a feasibility study of the state’s tax on production from being the factor that causes wells British Columbia-Alaska rail link, Transport Minister Jean Lapierre said March to be shut in as their productivity falls late in life, and also to 21. encourage development of marginal oil fields. The announcement came 10 months after Tony Valeri, Lapierre’s predecessor, In addition to Metcalfe, an Anchorage resident, sponsors of recommended that his department lead a design-development exercise, and less the measure include Robert L. Buch of Anchorage and James PATRICK JUDY than a month after Alaska Gov. Frank Murkowski spent a day in Ottawa lobbying Price of Kenai. cabinet ministers on various issues. Alaska Lt. Gov. Loren Leman certified the initiative applica- The British Columbia and Yukon governments support the concept of com- tion to repeal the ELF for oil March 18. Sponsors will need to pleting the final 1,100-mile stake of what has been billed as the last transconti- collect at least 31,451 signatures from registered Alaska voters, nental railroad. Leman said in a letter to Metcalfe. Initiative supporters will have However, BC Rail, formerly owned by the British Columbia government and a year from the time the state notifies them that petition booklets Alaska Lt. Gov. now operating under Canadian National Railway, said last year that it had never have been printed. Loren Leman certi- found evidence of sufficient freight volumes to support building the link — a fied the initiative The petition summary reads: application to project currently projected to cost C$4 billion. “This initiative would repeal the economic limit factor (ELF) repeal the ELF for oil March 18. Financing not part of deal now used to calculate each oil producer’s production tax. That calculation starts with a tax rate of 15 percent of the value of the The provincial government has also made it clear that its backing of the con- oil, except during the first five years of a field’s production, when it is 12.25 percent. cept does not extend to financing either a feasibility study or construction. Application of the ELF reduces the tax rate. The rate is reduced more for fields with B.C. Energy and Mines Minister Richard Neufeld told Petroleum News earlier lower production or that need more wells to produce a given amount of oil. Repealing in March that his government is “not putting any money into a rail link and I ELF would change these calculations and would tax oil from all fields at flat rates of would be surprised if the Yukon is either because the Yukon doesn’t have a lot of 12.25 or 15 percent. money.” “Should this initiative become law?” While some people make the case that a railroad is needed to support con- struction of an Alaska gas pipeline, North Slope gas owner ConocoPhillips ques- see STUDY page 4

Issue Index EXPLORATION & PRODUCTION ...... 7 GOVERNMENT ...... 9 NATURAL GAS ...... 12 ON DEADLINE ...... 3

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Petroleum News (ISSN 1544-3612) Week of March 27, 2005 Vol. 10, No. 13 Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to: P.O. Box 231651, Anchorage, AK 99523-1651) Subscription prices in U.S. — $78.00 for 1 year, $144.00 for 2 years, $209.00 for 3 years. Canada / Mexico — $165.95 for 1 year, $323.95 for 2 years, $465.95 for 3 years. Overseas (sent air mail) — $200.00 for 1 year, $380.00 for 2 years, $545.95 for 3 years. “Periodicals postage paid at Anchorage, AK 99502-9986.” POSTMASTER: Send address changes to Petroleum News, P.O. Box 231651 • Anchorage, AK 99523-1651. 4 ON DEADLINE PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● NORTHWEST TERRITORIES Power transfer in jeopardy Deh Cho ready to go to court to block resource control shift to NWT, proclaim success with Mackenzie case

By GARY PARK political evolution. Petroleum News Calgary Correspondent Court action threatened hard-line negotiating stance by the But the Deh Cho and Akaitcho are Deh Cho First Nations is starting to threatening to launch court action to block A spill over from the Mackenzie Valley such a deal until they have resolved their gas pipeline project to the Northwest land claims. Territories’ cherished dream of gaining con- Akaitcho Chief Darrel Beaulieu said the trol over its natural resources. devolution involves land that rightfully Along with the Akaitcho community in Northwest Territories Deh Cho Grand belongs to his community and the Deh Cho the Northwest Territories, the Deh Cho are Premier Joe Handley Chief Herb and an interim agreement would undermine now threatening to block progress towards a said earlier in March Norwegian was in that his government an upbeat mood treaty talks. landmark agreement that would give the and Ottawa need after the Federal However, he left the door open to a nego- territory power to run its resources and a only one more meet- Court of Canada tiated settlement, saying that would be growing chunk of the revenues. ing to settle on a ordered the release framework agree- of a mountain of preferable to the legal option. This setback comes on top of Deh Cho ment on the transfer briefing notes, min- James Washee, president of the NWT threats to move ahead with lawsuits that of federal powers utes, draft plans, Aboriginal Summit, added to the concerns could stall regulatory progress on the that would see the correspondence and territorial govern- other documents on March 18 when he asked federal Indian and Mackenzie pipeline, with unknown conse- ment collect rev- which Ottawa Northern Affairs Minister Andy Scott for quences, until they reach a deal with the enues from its based the creation assurances that existing and future land federal government on land claims and self- resources and gain of a Joint Review sweeping control Panel for the claims treaties would not be affected by government. over programs, staff Mackenzie gas devolution. The Deh Cho represent 4,500 Dene from and money. pipeline. He wants to know what powers over land 10 communities covering a sprawling area the past two decades. the Canadian government would hold after of the lower Northwest Territories. the transfer of powers. Northwest Territories Premier Joe The urgency for the Northwest Territories government to gain resource Handley said it would be unfair of the Handley said earlier in March that his gov- Akaitcho people to deny economic benefits ernment and Ottawa need only one more control has never been greater, with two dia- mond mines in full production and a third to the rest of the Northwest Territories when meeting to settle on a framework agreement not a single clause has been agreed to in the on the transfer of federal powers that would on the way, with all three projected to yield C$1 billion in royalties over their operating Akaitcho treaty talks. see the territorial government collect rev- Meanwhile, Deh Cho Grand Chief Herb enues from its resources and gain sweeping life. If the C$7 billion Mackenzie pipeline Norwegian was in an upbeat mood after the control over programs, staff and money. Federal Court of Canada ordered the release David Peterson, a former Ontario pre- goes ahead it is seen as the springboard to accelerated onshore and offshore energy of a mountain of briefing notes, minutes, mier who heads the federal negotiating draft plans, correspondence and other docu- team, said the deal would give the development. Currently, Ottawa collects about 92 per- ments on which Ottawa based the creation Northwest Territories “province-like pow- of a Joint Review Panel for the Mackenzie ers.” cent of resource-related royalties and taxes and, by 2011, would receive more than gas pipeline. C$500 million, leaving the Northwest The Deh Cho have been pressing for a Provincial governments greater direct role in the panel because 40 own natural resources Territories with less than C$100 million in net taxes. percent of the pipeline’s route crosses their Under the Canadian Constitution, the 10 Handley said the devolution deal would lands. provincial governments own and control the see the federal government progressively Norwegian said his community will now development of their natural resources. transfer regulatory control now in the hands be able to learn more about the federal gov- The first break to put the three territorial of the Department of Indian Affairs ands ernment’s intentions in designing the panel. governments — Northwest Territories, Northern Development. For now, the Deh Cho have filed lawsuits Yukon and Nunavut — on a similar footing Still to be resolved is exactly how much seeking to have any conclusions reached by occurred in 1998 when Ottawa transferred federal money would come with the transfer the panel declared invalid — a move that resource control to the Yukon government. of power, but Handley and Peterson are has slowed the start of public hearings from ● Parallel negotiations with the Northwest agreed that a deal in principle will be a vital this spring to late summer, at the earliest. Territories have been inching forward over step forward in the Northwest Territories’

continued from page 3 STUDY

tions the validity of that argument, he said. Neufeld said British Columbia would support the project because it would help keep the province’s ports busy, but it would require Canadian National Railway, Canadian Pacific Rail or some other company to decide the project made economic sense. Proponents have contended for years that a railroad would stimulate resource development in northern British Columbia, the Yukon and Alaska, although the cost has been the final obstacle. That has changed with the odds of an Alaska pipeline improving and the U.S. Department of Defense planning to locate much of the infrastructure for its Strategic Defense Initiative in Alaska. Lapierre’s department said funding and details of the feasibility study will soon be worked out “with all the part- ners.” —GARY PARK PETROLEUM NEWS • WEEK OF MARCH 27, 2005 ON DEADLINE 5

● COOK INLET HOUSTON Agrium ups ante on Cook Inlet gas Worldwide rig Higher fertilizer prices prompt Agrium to offer $3 per mcf, wants to keep Nikiski plant open economics jump

By STEVE SUTHERLIN lower prices, and it would be difficult to 4.6 percent The company offered $3 per Petroleum News Associate Editor attract and retain the skilled workforce.” GlobalSantaFe’s worldwide thousand cubic feet of gas to Cook The company said it has purchased Summary of Current Offshore Rig grium Inc. has offered to pay more Inlet producers, a significant jump some spot gas, but all of the spot gas pur- Economics, or SCORE, increased money for Cook Inlet natural gas in over the historic $2 per mcf chases have been made available only on 4.6 percent in February compared to A its latest attempt to avoid a sched- average gas price paid for a fully interruptible basis. Recent January. uled Oct. 31 shutdown of its nitro- delivered supply to its Kenai plant. attempts to purchase a significant quanti- The SCORE compares the prof- gen fertilizer plant on Alaska’s Kenai ty of gas from current Cook Inlet produc- High recent prices for nitrogen itability of current mobile offshore Peninsula. ers for firm delivery, at competitive rates, fertilizer on the world market drilling rig day rates to the prof- The company offered $3 per thousand have failed, it said. itability of day rates at the 1980-81 cubic feet of gas to Cook Inlet producers, made the higher offer possible. In the next few weeks the company peak of the offshore drilling cycle. In a significant jump over the historic $2 will institute its first reduction in work- the 1980- capacity on a year-round basis. per mcf average gas price paid for deliv- force, resulting in the termination of 81 period, “Agrium has explored summer opera- ered supply to its Kenai plant. about 12 employees, the company said. when the The North Sea had tions and at this time, the analysis has High recent prices for nitrogen fertil- With current vacant positions that have SCORE the largest increase determined it is not feasible,” the compa- izer on the world market made the higher not been filled and upcoming termina- averaged in the SCORE ny said. “This is due to high fixed costs of offer possible. tions the company will have about 190 100 per- a limited operation, product would be during February vs. “Current international fertilizer price employees at the plant for the next seven cent, new levels, although dynamic, appear to be sold on the spot market, which commands months, it said. ● January, rising 8.4 day rates percent to 64.7 able to support an average price of $3 per equaled mcf delivered at the plant,” the company the sum of points on a scale of said in a March 18 letter to the governor’s daily cash 100 points. Agrium task force. “Agrium is prepared WESTERN COLORADO operating to pay this price for the next two years if costs plus sufficient gas can be secured to operate about $700 per day per million dol- without the risk of frequent outages due Williams contracts for 10 new drilling lars invested. to lack of gas supply.” The North Sea had the largest The company has issued a request for rigs to speed Piceance basin development increase in the SCORE during proposals to Cook Inlet gas producers, to Natural gas pipeline operator Williams Cos. said March 23 that it signed a contract February vs. January, rising 8.4 per- be submitted by April 15. with Helmerich & Payne Inc. for the operation of 10 new FlexRig4 drilling rigs, in cent to 64.7 points on a scale of 100 order to speed the development of its natural gas reserves in the Piceance Basin of west- Agrium prepared to share risk points. ern Colorado. Williams said it continues to expect it will drill about 300 wells in the In the Gulf of Mexico, the Agrium said it is prepared to share in Piceance Basin this year. Starting in 2006, the company plans to drill up to 450 wells SCORE rose 5.7 percent to 62.4 the risk of fertilizer and gas market fluc- there, up from a prior forecast for about 325 wells. points in February, compared to 59 tuations with its suppliers. In 2007, Williams now plans to drill up to 500 wells in the Piceance, up from prior points in January. If a supplier was willing to enter into estimates of 350 wells. The company also said it will boost planned capital spending in The rig index for West Africa a shared-risk supply contract, it is possi- exploration and production by about $430 million from 2005 through 2007, with $400 increased 1.1 percent to 57.7 points ble the price Agrium pays for gas could million of the increase divided equally between 2006 and 2007. in February, up from 57.1 percent in rise above $3 per mcf, the company said. Williams said it plans to fund the accelerated drilling program with currently available January. Under a shared-risk arrangement, the excess cash balances and future free cash flows. The company also hiked guidance for Southeast Asia was unchanged price paid for gas delivered to the Kenai projected segment profit from its exploration and production business by $30 million with 57.2 points. plant would fluctuate based on ammonia in 2006 and $50 million in 2007. Meanwhile, the worldwide use of market price indicators and natural gas At year-end 2004, Williams’ ownership in the Piceance Basin accounted for 61 per- semi-submersible drilling rigs dur- market indicators, as specified in the cent of the company’s 3 trillion cubic feet equivalent of total proved domestic reserves ing February increased 8.8 percent to contract, according to Agrium spokes- and more than half of its estimated 7 tcfe of proved, probable and possible reserves. 60 points vs. January, while the use woman Lisa Parker. The result would be Separately, contract drilling firm Helmerich & Payne said total revenue from the of jack-up rigs between the two a higher average price, if ammonia prices new Williams rig contract is expected to exceed $200 million. Construction of the first months decreased 0.1 percent to 61.6 escalate and stay high. Parker said the rig is scheduled to be completed in November 2005, and the remaining nine rigs are points. scheduled to be completed at the rate of one every 30 days thereafter. contract would set a floor price for gas as —RAY TYSON well, likely at a price below $3. Helmerich & Payne said this is the largest new construction and rig services project Agrium has a shared-risk agreement for a single customer in its 85 year history. in place at its Bahia Blanca, Argentina —THE ASSOCIATED PRESS plant, according to Richard Downey of Agrium investor and media relations. Although the Bahia Blanca deal has an initial price of far less than $3 per mcf, the mechanics would be similar for a Kenai deal, he said. Natural gas is the highest cost compo- nent in the process of making anhydrous ammonia, the Kenai plant’s primary product. Gas accounts for 80 percent to 90 percent of the cost of ammonia manu- facture. A one-dollar increase in the cost of gas adds $35 per ton to the cost of manu- facturing ammonia at the Kenai plant, according to Christine Gillespie, Agrium investor relations manager. Agrium has to be careful not to pay too much for gas, to avoid being pinched when ammonia prices fall, Gillespie told Petroleum News. The per-ton price of ammonia went to $53 in 1999, $85 in 2001, and to $70 in 2002, she said. Without the use of vari- able cost analysis, a plant might appear to be making a profit, while it actually is losing money on a long-term basis. Gas needed on year-round basis Agrium said it needs enough gas to operate its Kenai plant at half the current 6 EXPLORATION & PRODUCTION PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● NORTH SLOPE Goal: more North Slope wells per season Pioneer Natural Resources drops out of Tuvaaq unit; says new drilling rig will be specially designed for North Slope exploration By KRISTEN NELSON later this year, the preneurial approach Pioneer brings to the 2005 winter season work at Tuvaaq, oper- Petroleum News Editor-in-Chief company said. The North Slope and underscores Pioneer’s ated by Kerr-McGee, a 14,000 acre block rig will be “light- strategy of providing strong returns and northeast of Pioneer’s Oooguruk unit

he new rig Pioneer Natural weight and highly PATRICK JUDY production growth through high-impact “with a primary objective in the Ivishak Resources is having built for North mobile” and exploration in Alaska.” sands and a secondary objective in the T Slope drilling will maximize the designed to maxi- Schrader Bluff sands encountered in the number of wells the company can mize the number of Tuvaaq: Ivishak sands wet adjacent Nikaitchuq unit.” drill in a winter season. wells that can be Pioneer said in January that it planned Pioneer said March 21 that it has Pioneer said March 21 that its Alaska drilled over the a $50 million exploration program in assigned its 40 percent working interest in subsidiary has executed a multi-year con- Alaska winter Ken Sheffield, Alaska in 2005, with activities in the the Tuvaaq exploration well to Kerr- tract with Doyon Drilling to build and drilling season. Pioneer Natural National Petroleum Reserve-Alaska on McGee. Resources operate a new drilling rig designed for “This fit-for-pur- “1.4 million acres in an under-explored The Tuvaaq well, Pioneer said, exploration drilling on the North Slope. pose rig will significantly reduce drilling area with various leads and prospects” “encountered wet sands in the primary Pioneer said Akita Drilling will join costs and increase productivity by reduc- where the company has a 20 percent to 30 Ivishak objection and hydrocarbon-bear- Doyon in the construction of the rig. (See ing ice road and mobilization costs,” percent working interest. The company ing sands in the Schrader Bluff interval.” story in March 20 edition of Petroleum Pioneer said. said work would also be done in the The company said it decided to “assign its News.) “We are very pleased to be working Storms Lead area, a 130,000 acre position interest to Kerr-McGee rather than partic- Pioneer also said it has assigned its 40 with two of the most experienced and south of the Prudhoe Bay and Kuparuk ipate with a small working interest in the percent working interest in the Tuvaaq efficient drilling contractors in the Arctic, River units where the company has a 50 eventual development of the Schrader exploration unit on the North Slope to Doyon and Akita,” said Ken Sheffield, percent working interest and is the opera- Bluff resource, most of which is found in Kerr-McGee. president of Pioneer’s Alaska subsidiary. tor. the adjacent Nikaitchuq unit operated by The new drilling rig will be built in “The new rig is an example of the entre- The third area where Pioneer planned Kerr-McGee.” As a result of this decision, Canada this summer and begin operations Pioneer said, it will not have any capital expenses for the Tuvaaq exploration well. Tuvaaq is the middle exploration unit in the Oooguruk-Tuvaaq-Nikaitchuq group, which forms an arc offshore the Kuparuk River and Milne Point units in the shallow waters of Harrison Bay. 1.6 million gross Alaska acres Pioneer drilled the discovery wells at Oooguruk in 2003, where it is operator and has a 70 percent working interest in 53,000 acres. Armstrong Alaska, which assembled the Oooguruk-Tuvaaq-Nikaitchuq acreage, holds the remaining 30 percent. Pioneer is spending $5 million in 2005 for front-end engineering and permitting at Oooguruk, and said that if a decision is made to devel- op Oooguruk, it would target first oil pro- duction in 2008. Pioneer also holds some 6,000 acres at Gwydyr Bay north of the Prudhoe Bay field where there are several small discoveries the company plans to drill and tie into Prudhoe Bay infrastructure. In January Pioneer said it had expanded its position in NPR-A by signing an explo- ration agreement with ConocoPhillips and Anadarko to acquire a 20 percent interest in approximately 452,000 additional acres as well as gaining rights to extensive seismic and geologic data in the NPR-A northeast planning area. In 2004, Pioneer said, it acquired a 20 percent interest in 167,000 acres in the NPR-A northeast planning area and in adjacent federal offshore waters in an agreement with the same companies. Pioneer also acquired 20 percent to 30 per- cent interests in approximately 808,000 acres in the northwest NPR-A planning area sale in 2004. Pioneer said a 2005 winter 3-D seismic survey Pioneer and partner ConocoPhillips shot over the Storms area has been conclud- ed, and said the companies “may drill the first exploratory well on the acreage as early as 2006.” Pioneer said it is also participating with ConocoPhillips and Anadarko Petroleum Corp. in two to three wells in the National Petroleum Reserve-Alaska. Doyon Drilling Inc. is a wholly owned subsidiary of Doyon Ltd., has five rigs operating on the North Slope and some 290 employees. Akita Drilling is headquartered in Calgary, Alberta, has some 37 drilling rigs in all depth ranges and at full operations employs some 750 people. Akita has operations throughout Western Canada and the northern territories. ● exploration&production

WEEK OF MARCH 27, 2005 www.PetroleumNews.com PETROLEUM NEWS 7

● GULF OF MEXICO NORTHWEST TERRITORIES Northern junior explorer links Appraisal drilling extends up with First Nations tribe International Frontier Resources, a junior explorer in northern BP’s Mad Dog field in Gulf Canada, has extended its interests by teaming up with an aborig- inal community to hunt for oil and gas in the southern Northwest Territories. Well, three sidetracks encounter 300 feet of net oil pay on Gulf of Mexico It announced March 16 that 75,000 common shares will be issued to the Katlodeeche First Nations (part of the Deh Cho field’s untested southwestern flank; BP, other owners consider options umbrella organization) to establish a joint venture to drill tradi- tional and reserve lands held by the Katlodeeche. By RAY TYSON The 1.9 million acres cover an area from the Alberta border to Petroleum News Houston Correspondent the town of Hay River. Geophysical operations are scheduled to he BP-operated Mad Dog field in the deepwa- start in the third quarter. ter Gulf of Mexico, already a sizeable discov- COURTESY UNOCAL COURTESY International Frontier already holds interests of 5 percent to ery by Gulf standards, appears to house a 10.875 percent in four exploration licenses and 10 freehold T much larger oil accumulation than initially parcels in the Central Mackenzie Valley, where an exploration thought. program is in progress involving one wildcat well and production An appraisal well and three sidetracks con- testing of the Summit Creek B-44 well at a total cost of up to firmed “significant hydrocarbon pay” on the previ- C$17.5 million. The southern NWT has extra appeal because of ously untested southwestern flank of the producing significantly lower front end costs. Mad Dog field, according to Unocal, a partner in —GARY PARK the Mad Dog project. “We are pleased with the results of this apprais- al program which has extend- NORTH AMERICA ed the limits of the Mad Dog The Unocal-leased Discoverer Spirit drillship has field,” Joseph Bryant, moved from Mad Dog to drill Unocal’s highly prospec- Canada’s rig count plummets Unocal’s president and chief tive Knotty Head prospect on Green Canyon Block operating officer, said March 512, which drew some of the highest bids in last year’s Central Gulf of Mexico lease sale. Knotty Head by 112 to 329, United States 22. is located just north the of the giant Tahiti discovery Well penetrations individ- operated by ChevronTexaco. count up by 38 to 1,320 rigs ually encountered up to about Block 782, was discovered in 1998 and began pro- The number of rotary rigs operating in North American during the 300 feet of net oil pay in the ducing in January 2005. The field currently yields week ending March 18 stood at 1,649, down a net 74 rigs from the early Miocene section and about 30,000 barrels of oil per day from two wells, previous week but up by 70 rigs from the same period last year, found hydrocarbons some Joseph Bryant, but is expected to increase over the next year as according to rig monitor Baker Hughes. 700 feet deeper on the west- Unocal’s president and CEO additional wells are completed and brought online. The rig count in Canada alone plummeted by 112 to 329 com- ern flank of the structure than The facility is designed to process about 100,000 pared to the previous week and down by 122 vs. the year-ago period. previously encountered, the company said. barrels of oil and 60 million cubic feet of gas per The number of rigs operating in the United States during the recent The appraisal well was drilled to a measured day. week rose by 38 to 1,320 compared to the prior week and rose by 192 depth of 22,890 feet from Green Canyon Block Construction of Mad Dog’s spar components from the same period last year. Compared to the previous week only, 826 to down dip targets in adjacent Block 825, and topsides began in 2002 in Pori, Finland and land rigs increased by 35 to 1,196, while offshore rigs increased by Unocal said, adding that the blocks are situated in Morgan City, La. The overall capital cost of the five to 98 and Inland water rigs decreased by two to 26. about 5,000 feet of water. project was estimated at about $1.5 billion. Of the total number of rigs operating in the United States during the recent week, 1,139 were drilling for natural gas and 180 for oil, Discovery could warrant own facility Three discoveries on Atwater Fold Belt trend while one was being used for miscellaneous purposes. Of the total, The discovery apparently is large enough to The new discovery at Mad Dog again demon- 815 were vertical wells, 347 directional wells and 158 horizontal warrant its own production facility, or could be tied strates the prolific nature of the Atwater Fold Belt wells. back to the existing Mad Dog platform, Unocal trend, which in addition to Mad Dog has given rise Among the largest U.S. producing states during the recent week, indicated. to BP-operated discoveries Holstein and Atlantis. Texas scored the largest gain, picking up 28 rigs for a total of 593 Unocal said prior to the March 22 announce- Unocal owns a 15.6 percent working interest in rigs. Wyoming gained three rigs for a total of 72, while Louisiana ment that additional exploration drilling at Mad the Mad Dog project. Operator BP owns a 60.5 gained three rigs for a total of 187, New Mexico picked up two rigs Dog could prove up as much as 450 million barrels percent interest. Australia’s BHP Billiton holds a for a total of 76 and Alaska picked up one rig for a total of 11. of oil equivalent reserves. Unocal and its partners 23.9 percent share. Oklahoma’s rig count was down by one to 146 rigs. Colorado was also may test the deeper tertiary zone that underlies Meanwhile, the Unocal-leased Discoverer Spirit unchanged with 73 rigs. Mad Dog. drillship has moved from Mad Dog to drill —RAY TYSON The Mad Dog field, located on Green Canyon see MAD DOG page 8 8 EXPLORATION & PRODUCTION PETROLEUM NEWS • WEEK OF MARCH 27, 2005

ALBERTA Junior partner joins oil sands trailblazer Petrobank to invest in Whitesands Oil sands newcomer Petrobank Energy and Resources has attracted a junior part- ner to its groundbreaking venture that it expects will generate initial results from a pilot project later this year. It has signed an agreement with Richardson Capital acting on behalf of RFG Private Equity Funds to invest C$14 million for a 16 percent stake in the Whitesands project. RFG will also acquire 3 million common shares of Petrobank for total proceeds of C$23.75 million. Petrobank will retain 100 percent of all international development opportunities for its patented Toe-to-Heel-Air-Injection or THAI heavy oil recovery technology. Whitesands will be the first field-scale application of THAI, in which air from an injector well will ignite oil in the reservoir, producing a vertical wall of burning crude that heats the oil and allows it to flow to the surface through a horizontal well. Developers of the technology believe THAI will convert bitumen into 20 degree API gravity crude within the reservoir. Petrobank has predicted that potential benefits over other in-situ recovery methods include higher resource recovery, lower production and capital costs, minimal use of natural gas and fresh water, a partially upgraded crude oil product, reduced diluent needs for transportation and lower greenhouse gas emissions. An independent evaluation of seismic and drilling activity has indicated a potential in-place resource of more than 200 million barrels over the pilot project area and about 1 billion barrels over the entire Whitesands leases. Recovery factors as high as 80 per- cent are expected. Construction is under way on the C$30 million pilot, which is designed to produce about 1,900 barrels per day over five years. Positive results will set in motion plans to design and build a commercial project. —GARY PARK

continued from page 7 the of the giant Tahiti discovery operated by ChevronTexaco. MAD DOG The ship is then scheduled to drill a third appraisal well at Unocal’s big St. Unocal’s highly prospective Knotty Head Malo discovery on Walker Ridge 677. prospect on Green Canyon Block 512, Following St. Malo, the drillship will be which drew some of the highest bids in sub-leased to another company. Unocal’s last year’s Central Gulf of Mexico lease commitment to the Discoverer Spirit ter- sale. Knotty Head is located just north minates in September, Unocal said. ● PETROLEUM NEWS • WEEK OF MARCH 27, 2005 GOVERNMENT 9

● ALASKA Governor: Gas line negotiations going well Murkowski says ‘enormous progress’ has been made in state of Alaska’s negotiations with producers, pipeline companies, others

By KRISTEN NELSON and Audit Committee in January that it hold the leases.” the producers and they won’t sell the gas Petroleum News Editor-in-Chief should be possible to get an exemption That means, he said, — either the price isn’t right, or the proj- from the Jones Act requirement that ships that “whoever is ect doesn’t make economic sense to them

egotiations between the state of moving between U.S. ports be U.S.-built, going to try to SARAH HURST or they just won’t sell the gas — “then the Alaska and two applicants under U.S.-owned and U.S.-crewed. Darcel develop the natural state has to make a decision: Does the N the state’s Stranded Gas Hulse, president of Sempra LNG, told the gas off the North state want to take on the producers?” Development Act are confidential, committee. The United States doesn’t Slope is going to At that point, Harris said, “all those but the governor and House Republican have the capability to compete in LNG have to deal with the ideas that have been talked about by other leaders recently provided some insight shipping, Hulse said. Hawaii faced the producers in some people — condemnation, reserves tax, into the process. same problems with luxury cruise liners way, shape or form.” House Speaker John other types of things — would then have Alaska Gov. Frank Murkowski met to operate between the islands — the Whether the pro- Harris to be, in my opinion, would then have to March 17 in Anchorage with senior man- United States wasn’t a competitive ship- ducers build a line be looked at.” agers of BP, ConocoPhillips and builder for these vessels — “and they’ve or somebody else does, he said, the pro- Now is not the time because there isn’t ExxonMobil to discuss the status of got an exemption from the Jones Act” ducers will be involved. a viable project — from the producers or negotiations on the allowing them to use vessels built in for- So far, he said, nobody has “come for- anyone else. producers’ applica- eign shipyards, Hulse said. ward with a proposal to the producers By next January, he said, if there is no tion for fiscal cer- that makes economic sense to buy the deal with the producers for a project, the tainty under the Producers hold all the cards gas, nobody’s made an offer … and the state might have to deal with some of JUDY PATRICK JUDY stranded gas act. Speaker Harris said the governor has producers have said they’re not really those ideas. But first, he said, “you need The governor’s been trying to work out a solution with ready to build a line yet — they’re still to have a project that, number one, makes office said the gov- the producers, who “at this point in time working on the economics and a number economic sense, and works.” ● ernor and members hold all the cards, simply because they of other things.” of his gas team spent If, he said, there is a proposal made to most of the day in Alaska Gov. Frank these negotiations. Murkowski “We have made enormous progress over the past months,” Murkowski said in a statement, “and we are now at a critical juncture. There are a number of significant issues remaining, the resolution of which are necessary to finalize a deal.” The governor’s office said representa- tives of the producers’ group emphasized to the governor that they remain fully committed to successfully concluding the negotiations, and assured the governor they will continue working diligently and in good faith with his team on this effort. The governor told the producers’ group that rapid completion of the nego- tiations is the highest priority of his administration and said he will personal- ly oversee the final phases of the negoti- ations. The other application the state is nego- tiating is from pipeline company TransCanada and Murkowski also said significant progress is occurring in those negotiations on an independent pipeline, and with the Port Authority on their liq- uefied natural gas project. The governor also met March 17 with legislators who have signed confidential- ity agreements under the Stranded Gas Development Act; the legislators were briefed by the governor’s gas team on the status of both sets of negotiations. Port authority working Jones Act issue John Coghill, R-North Pole, the House majority leader, and House Speaker John Harris, R-Valdez, said at a press briefing March 21 that they were bound by the confidentiality agreement and couldn’t say much about the negotiations. But, Coghill said, the Alaska Gasline Port Authority “is working like crazy” on their project. When legislators were in Washington, D.C., for a meeting of the Energy Council, the port authority “came to us with the heads of the marine pilots union,” who suggested they could get shipbuilder support to move a Jones Act modification. They haven’t done it yet, Coghill said, but it “would be a huge thing if they could do it.” The port authority and Sempra LNG, which believes the West Coast market can absorb Alaska gas coming in as liquefied natural gas, told the Legislative Budget 10 ADVERTISEMENT PETROLEUM NEWS • WEEK OF MARCH 27, 2005 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 GOVERNMENT 11

● CANADA Provinces beef up oil and gas incentives Saskatchewan looks at tax and royalty changes aimed at EOR; B.C. targets long-term investments in enhanced gas recovery projects By GARY PARK fiscal incentives to promote EOR designed to lower the risk for unconven- Petroleum News Calgary Correspondent research and development. Sitting quietly as No. 2 among tional projects that require heavy capital He said the province hopes to encour- Canada’s oil and gas producing spending. askatchewan and British Columbia age the creation of an infrastructure to regions, Saskatchewan is hoping Although it is not known exactly how — the sturdy bookends to the capture, store and distribute carbon for a rebound from last year when the British Columbia scheme would S bulging oil and gas world of dioxide, building on the success of the industry spent C$1.7 billion on work, it is expected royalties would kick Alberta — are putting together EnCana’s sequestration project near in after the front-end investment has fresh incentives to ensure they remain Weyburn where CO2 from North exploration and development, but been paid off or after a specified per- on a competitive footing with their cash- Dakota is injected into an aging oilfield the well count dropped to 3,673 centage of a project’s capital budget has rich neighbor. to increase production by 130 million from a record 4,195 in 2003 been spent. Saskatchewan Premier Lorne Calvert barrels over the next 30 years. because of a wet spring and British Columbia government offi- unveiled tax and royalty changes March summer. cials have indicated their objective is to 18 along with other measures to stimu- Study touts CO2 benefits develop universal rules and regulations late oil recovery, while British The Weyburn scheme received acco- methane and remote resources in unex- that also allow for case-by-case negotia- Columbia is developing a net profit roy- lades last fall from an international team plored basins such as Bowser and tions with individual producers. alty regime to quicken the pace of its of researchers who spent C$40 million Nechako that are far removed from Talks with the industry are said to be unconventional resources. over four years studying the benefits of pipelines and infrastructure. well advanced, but no timetable has been CO2 sequestration. The idea of net profit royalties is set for announcing the regime. ● British Columbia is hoping to The study was conducted under the develop a more flexible regime auspices of the International Energy Agency and funded by 15 public and that will encourage companies to private sector organizations, including make long-term investments in the U.S. Department of Energy. FLORIDA enhanced gas recovery projects, It determined that CO2 — the pri- tight gas, shale gas, coalbed mary culprit among greenhouse gases Bush calls for LNG terminals, energy methane and remote resources in — could be safely stored in old oil bill, less dependence on foreign oil unexplored basins such as Bowser wells, with just a mere fraction seeping In remarks at Pensacola Junior College March 18, President George Bush said and Nechako that are far removed into the atmosphere. A second CO2 project was launched the United States needs to be building liquefied natural gas terminals and doing from pipelines and infrastructure. in January by Apache Canada, which more with nuclear power. And he called on Congress to pass an energy bill. hopes to recover an additional 45 mil- The president was in Florida to talk about proposed lion barrels at Saskatchewan’s Midale changes in social security and mentioned energy issues in Having earlier told a business audi- field, near the Weyburn pool, while stor- passing, reminding the audience that he put together an ener- ence that it is time for his province to ing 8.75 million metric tons of CO2. gy strategy in 2001, “part of which required action by the start making major withdrawals from Sitting quietly as No. 2 among United States Congress that would encourage conservation, the “long-term deposit” of oil in the Canada’s oil and gas producing regions, encourage the use of renewable sources of energy like ground, Calvert said the new “bold and Saskatchewan is hoping for a rebound ethanol and biodiesel,” that would encourage research into broad” structure — which takes effect from last year when the industry spent “better ways to use energy in the long run,” and into ways for April 1 — will benefit enhanced oil C$1.7 billion on exploration and devel- the United States to become less dependent on foreign oil. recovery projects, which currently opment, but the well count dropped to “We’ve been debating whether or not there ought to be an account for about 9 percent of 3,673 from a record 4,195 in 2003 energy bill to my desk now for four years. And that’s too U.S. President Saskatchewan’s production, and apply to because of a wet spring and summer. much talk,” he said, given that consumers are being hurt by George Bush any future oil sands or oil shale devel- energy prices. opments. B.C. looks at royalty regime upgrade “I know we need to be building LNG, liquefied natural gas terminals. We need He said an estimated 35 billion bar- Facing an election on May 17, the to do more on nuclear power,” he said. “Congress needs to get an energy bill.” rels of oil has been discovered in British Columbia government is embark- Bush said he talked about energy issues with members of Congress who made Saskatchewan, but only 5.2 billion are ing on more upgrading of its royalty the trip to Florida with him on Air Force One, and “they’re ready to go.” recoverable using conventional means regime to build on its record as Canada’s Congress, he said, needs to pass an energy bill so that “we can start becoming and current technology. economic comeback province of the 21st less dependent on foreign sources of oil.” But the heavy oil recovery rates have Century. —PETROLEUM NEWS been confined to the 5-10 percent range. Energy and Mines Minister Richard If that rate grew to 20 percent, the Neufeld told a B.C. Oil and Gas Summit province would more than double its earlier this month that B.C. outpaced current remaining recoverable reserves Alberta in economic growth in 1991 and to 1.2 billion barrels. is determined to “get back there.” In Calvert’s view there is a trillion In a little over three years it has creat- dollars worth of oil locked in his vast ed 200,000 jobs and is paying down Prairie province. C$1.7 billion of a C$34 billion debt this Incentives benefit EOR projects year — a first for B.C. — after two years of balanced budgets. The beefed up incentives under the With oil and gas as the key contribu- Saskatchewan Petroleum Research tor to this turnaround, the government Incentive Program will provide up to has introduced a multi-phase stream of C$30 million in tax and royalty credits incentives and is now assembling the on new small-scale EOR pilot projects pieces for a net profit royalty regime to and replace two sets of royalty rates stimulate development of unconvention- with a single regime. al reservoirs and undeveloped basins. As a result, producers will pay a roy- It involves a careful juggling act to tie alty rate of 1 percent of gross revenue the changes to changing technologies before front-end costs are paid out, after and resource opportunities, unlike the which the rate will rise to 20 percent of United States where the Section 29 tax net operating revenue — mirroring the credit fired up unconventional gas devel- regime for Alberta’s oil sands. opment until it expired in 1992. There will also be sales tax and fuel The U.S. credit applied to specific tax exemptions on propane, butane and technical definitions of tight gas, just as other chemicals injected into reservoirs a special oil sands royalty rate in Alberta to increase recovery rates, bringing affects projects within a geographically them into line with the carbon dioxide defined area. already used for EOR projects. British Columbia is hoping to develop Under what he calls a 10-year strate- a more flexible regime that will encour- gy, Calvert said that rather than waiting age companies to make long-term for others to develop new EOR technol- investments in enhanced gas recovery ogy, Saskatchewan has decided to offer projects, tight gas, shale gas, coalbed 12 NATURAL GAS PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● COOK INLET Alaska approves Beluga PA at Nicolai Creek Aurora Gas has been producing from west side field since 2001; unit changes include new Beluga formation participating area

By KRISTEN NELSON before Jan. 1, 2004, and if a written plan Petroleum News Editor-in-Chief Nicolai unit shut in, needs access to CIGGS was approved by the Alaska Oil and Gas Conservation Commission. urora Gas got approval in early Aurora Gas told the state of Alaska in October that it had The royalty for the BLM lease is 12.5 March for changes to its Nicolai no firm development plans for the Nicolai Creek unit in 2005, percent, and in September 2003 the agen- A Creek unit on the west side of Cook partly because a commercial agreement to ship gas through a cies agreed on an interim payment Inlet. privately owned pipeline terminated at the end of 2004, leav- PATRICK JUDY methodology, and Aurora agreed to sub- Nicolai Creek, where gas was discov- ing Aurora with no way to get its Nicolai gas to market. mit revised royalty and operator reports ered by Texaco in the 1960s, was Aurora’s “We shut the field in because CIGGS (Cook Inlet Gas retroactive to the first day of production first operated production in Alaska. The Gathering System) is not yet a common carrier or even a con- once a final agreement was reached. company has focused on developing tract carrier,” Aurora President Scott Pfoff told Petroleum known gas accumulations which are not News March 23. Producing known gas “We’re not spending as much time developing the field in production, since there were gas dis- SCOTT PFOFF The Nicolai Creek gas field was dis- coveries made in the Cook Inlet basin until we get some of these regulatory and commercial issues covered in the 1960s when companies during oil exploration which have not ironed out,” he said. “We see a lot of potential out there and we have some new tar- were looking for oil. been developed or, like Nicolai Creek, gets, but until we have a pipeline we can ship our gas through, we won’t be” spend- Texaco found gas and formed the were no longer in production. ing a lot of money on the field. Nicolai Creek unit and participating areas Changes to the unit include renaming Aurora told the state in October that “an extensive review and interpretation of A and B in 1968. It installed facilities and two participating areas, adding a third the existing 3D seismic data will possibly lead to a new development well which will a pipeline for area B and produced shallower participating area and adding a target stacked Carya 2 (Upper Tyonek) channel sands” in the Nicolai unit. Nicolai Creek gas from 1969 through portion of a federal lease to the unit. 1977. In 1973 the Nicolai Creek unit It took two and a half years for Aurora, boundary contracted to the discontinuous the Alaska Division of Oil and Gas, the plete it. January when it submitted a revised acreage in participating areas A and B. Alaska Mental Health Trust Land Office “It quickly became apparent that the application that agreement had been Marathon and Unocal acquired the field and the federal Bureau of Land process was going to take an extended reached between the company and “all in 1988, each with 50 percent working Management to reach agreement on period of time due to the number of par- interested parties” on the size of the par- interest; they assigned their interests to where the gas lies in the unit and how to ties involved, and the unresolved land ticipating areas and the unit, including Aurora in November 2000. apportion it among the agencies, who ownership and title issues,” the division sufficient production data from the No. 9 Aurora went back into Nicolai Creek receive different royalty rates, 5 percent said. well to all interested parties to agree on and started producing gas again, begin- to the state for its leases and 12.5 percent The division and BLM were involved the lands appropriate for the new Beluga ning with production from one of the to the federal government. as lease issuers and the Mental Health participating area. Texaco wells, the NCU-3, in September Trust Land Office was involved as an Nicolai Creek was among the Cook 2001. The AOGCC approved Aurora’s First filed in 2003 adjacent mineral interest owner. Aurora’s Inlet fields eligible for state royalty relief. plan, qualifying the field for the royalty The Division of Oil and Gas signed off revised application, submitted in January, Beginning in 1998, the first 25 million reduction. March 10. The original application was shows the Mental Health Trust Land barrels of oil and 35 billion cubic feet of Aurora subsequently drilled and tested filed in September 2003, and the division Office as a 0.5 percent overriding royalty natural gas from specified fields pro- a sidetrack and a new well; and re-com- said it notified Aurora immediately that owner on two tracts in the south and/or duced within 10 years of initial produc- pleted a second of the three original the application was not complete, and Beluga participating areas. tion were eligible for a 5 percent state wells. began working with the company to com- Aurora told the division and BLM in royalty, if production for sale began New participating area approved Approved revisions at the Nicolai Creek unit include: renaming participat- ing area A the south participating area; renaming area B the north participating area; adding the Beluga participating area; adding a portion of federal lease AA-8426 to the unit; and expanding the areal extent of the unit to encompass the three participating areas. The north participating area is not con- tiguous with the south and Beluga partic- see NICOLAI CREEK page 15 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 ADVERTISER INDEX 13 Companies involved in North

America’s oil and gas industry Business Spotlight By PAULA EASLEY ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

Kuukpik Arctic Catering A Kuukpik/Veritas Aeromap ...... 14 Kuukpik - LCMF Aeromed Lasser Inc. FORREST CRANE AES Lynx Enterprises LCMF Agrium LCMF - Barrow Village Response Team (VRT) Air Liquide Lynden Air Cargo Air Logistics of Alaska Lynden Air Freight Alaska Airlines Cargo Lynden Inc. Alaska Anvil ...... 4 Lynden International Alaska Coverall Lynden Logistics Alaska Dreams Lynden Transport Alaska Interstate Construction Mapmakers of Alaska Alaska Marine Lines Marathon Oil ...... 12 Alaska’s People Marketing Solutions Gary Greener, HSE manager Alaska Railroad Corp. Mayflower Catering Alaska Rubber & Supply MEDC International Alaska Steel ...... 12 MI Swaco Quadco Inc. Alaska Telecom Michael Baker Jr...... 14 Alaska Tent & Tarp MWH For the past 20-plus years Quadco Alaska Textiles MRO Sales Alaska has provided a wide range of Alaska USA Mortgage Company equipment and services for Alaska’s Alaska West Express N-P oil industry. Quadco has been the Alliance, The leader in providing Derrick solids con- Alpine-Meadow Nabors Alaska Drilling...... 9 trol equipment, MDT instrumentation Alyeska Prince Hotel Nabors Industries ...... 2 and wireless solutions. It is also the American Marine ...... 14 NANA/Colt Engineering source for Varco top drives, pumps, Arctic Controls NANA Oilfield Services grind and inject technology, and com- Arctic Fire & Safety Natco Canada plete maintenance service. Arctic Foundations Nature Conservancy, The Gary Greener joined Quadco in Arctic Slope Telephone Assoc. Co-op NEI Fluid Technology Arctic Structures 1989 working on the Hurl State grind Nordic Calista and inject project, as Quadco was Arctic Wire Rope & Supply North Slope Telecom ...... 16 ASRC Energy Services pioneering G&I technology. Northern Air Cargo Throughout the years he has enjoyed Engineering & Technology Northern Transportation Co. supervising crews and managing Operations & Maintenance Northwestern Arctic Air training and safety courses. In 2001 Pipeline Power & Communications Offshore Divers ...... 3 Avalon Development Oilfield Improvements Gary became corporate HSE Manager. Oilfield Transport He and wife Gail have three children B-F Pacific Detroit Diesel-Allison — Shawn, Kaylee and Chelsea. Pacific Rim Institute Badger Productions of Safety and Management (PRISM) Baker Hughes Panalpina Broadway Signs PDC/Harris Group Brooks Range Supply ...... 15 Peak Oilfield Service Co. Canspec Group

Penco ...... 14 FORREST CRANE Capital Office Systems Perkins Coie Carlile Transportation Services...... 5 Petroleum Equipment & Services Carolina Mat Petrotechnical Resources of Alaska ...... 7 Chiulista Camp Services PGS Onshore CN Aquatrain Precision Power Colville ...... 15 Prudhoe Bay Shop & Storage ConocoPhillips Alaska PTI Travco Modular Structures Construction Machinery Industrial Coremongers Crowley Alaska Q-Z Cruz Construction ...... 16 Dowland - Bach Corp. Keven Schlosstein, VP, corporate QUADCO support services Doyon Drilling RAE Systems Doyon LTD Rain for Rent Doyon Universal Services Ranes & Shine Welding Northern Air Dynamic Capital Management Renew Air Taxi Engineered Fire and Safety Salt + Light Creative Maintenance ENSR Alaska Schlumberger Services Epoch Well Services Security Aviation Era Aviation Seekins Ford Northern Air Cargo formed two ESS/On-Site Camp Services Smith Consulting Services new divisions in 2004 to provide Evergreen Helicopters of Alaska ...... 8 SOLOCO Dura-Base ground services and aircraft mainte- Fairweather Companies, The ...... 3 Sourdough Express nance at Anchorage International Friends of Pets Span-Alaska Consolidators Airport. NAMS operates from a Spenard Builders Supply...... 11 hangar on South Airpark Place that G-M STEELFAB accommodates Boeing 727s and Storm Chasers Marine Services Gene's Chrysler 737s. It is an FAA Certificated 145 Sunshine Custom Promotions Repair Station staffed by qualified Great Northern Engineering Taiga Ventures Great Northwest A&P mechanics. Northern Air Aviation TOTE Services provides a variety of aircraft Hanover Canada Totem Equipment & Supply ground services. Hawk Construction Consultants Udelhoven Oilfield Systems Services Keven Schlosstein has worked for H.C. Price Umiat Commercial Hilton Anchorage...... 4 Unique Machine Northern Air Cargo for 19 years in Holaday-Parks...... 3 Unitech of Alaska various management positions. She Horizon Well Logging, Inc. Univar USA and her husband Brent have two chil- Hotel Captain Cook Usibelli dren — Hannah, age 15, and Identity Wearhouse ...... 11 U.S. Bearings and Drives Nickolas, age 20 — and both children Industrial Project Services VECO have participated in the Japanese Inspirations Weaver Brothers Immersion Program starting in first Jackovich Industrial Welding Services grade. The Schlossteins are avid soc- & Construction Supply Worksafe cer fans and enjoy camping, hiking Judy Patrick Photography XTO Energy and traveling. Kenai Aviation Kenworth Alaska All of the companies listed above advertise on a regular basis with Petroleum News 14 THE REST OF THE STORY PETROLEUM NEWS • WEEK OF MARCH 27, 2005 continued from page 1 The exploration permit program attracted interest from 122 companies, INSIDER 63 of whom got a green light to bid in

the January round. PATRICK JUDY bids that were put in” earlier this year for Talisman, no stranger to operating in 15 onshore and offshore blocks, 10 of volatile regions, notably Sudan, got shut which were awarded to international out along with Petro-Canada (which is companies who committed 80 percent or already producing oil in Libya) and more of any production to Libya’s state- Nexen. owned National Oil Co. But Oxy is eagerly seeking contract Buckee believes many of the bids are agreements with the National Oil Co. for “uneconomic under any circumstance.” the nine exploration blocks it secured, A year ago, Buckee, attracted by some of which it shares with Liwa improving relations between Libya and Energy of the United Arab Emirates, the West, played host in Calgary to visit- Woodside Petroleum of Australia, ing Libyan energy officials. Marathon Oil, Amerada Hess (which is “Whatever they’ve done in the past, counting on production from Libya this they’ve now opened Libya up,” he said at year of 20,000-25,000 bpd) and the time. ConocoPhillips. The National Oil Co. has set a target Although preliminary work is under of almost doubling Libyan oil output to 3 The only sign following an exploration season in northern Alaska is a “Christmas tree well- way on 46,000 square miles, all of the head,” such as the one above in the National Petroleum Reserve-Alaska. Nothing is left if a million barrels per day by 2010 at a pro- partners are waiting for Libya to ratify well is plugged and abandoned. jected cost of $30 billion and is eager to the terms of the re-entry by U.S. compa- develop its natural gas resources, espe- nerships with National Oil Co. with an never allowed. This northern slice of nies after an absence of 20 years. cially new liquefied natural gas capacity eye on major strategic investments with a ANWR is called the 1002 area or coastal Meanwhile, companies such as BP to service lucrative markets in Europe heavy emphasis on gas liquefaction, plain since it is adjacent to the Beaufort and Shell have been jostling to land part- and the United States. pipeline and field development projects. Sea. —GARY PARK “We’re expecting to see some increas- es in visitation” because tourist interest Rush of ANWR visitors in the Arctic refuge has climbed each time drilling appeared imminent, assis- expected; find the tant refuge manager Joanna Fox told ‘Christmas tree’ Reuters, noting there was an increase in contest in order? visitors after George W. Bush was elect- ed president in 2000. A MARCH 21 REUTERS STORY According to the U.S. Fish and said some Alaskans are expecting “a Wildlife Service, which manages U.S. rush of visitors” who want to hike, raft wildlife refuges, about 1,000 people have and camp in the 1002 area of the Arctic visited ANWR since 2001, most staying National Wildlife Refuge before “any for at least a week. drilling starts.” This is based on the Alaska “guide Wade Willis said many assumption that Congress will open the people who book tours with his company area to oil and gas exploration in the say they want to see the wildlife refuge near future, which seems likely (see top before the landscape is dotted with page 1 story in the March 20 edition of roads, pipeline and lodging facilities,” Petroleum News). Reuters reported. When the 19 million acre refuge was Perhaps someone should hold a con- established by Congress in 1980, 1.5 test for the hiker who can find evidence million acres was set aside along the of oil and gas exploration the summer coast for investigation of its oil and gas after the first winter drilling season? The potential, although exploration was rigs and camps will be gone, the ice roads melted, and, of course, pipelines won’t exist for many years and only if commercial quantities of oil are found. Even then, they might be buried. All that will be left after an exploration season will be little “Christmas trees” (see North Slope summer photo). —KAY CASHMAN

Aronson gets MMS hot seat in California Ellen Aronson has been selected for one of the more challenging U.S. govern-

see INSIDER page 15 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 THE REST OF THE STORY 15

continued from page 14 ing regulatory policy and evaluating opportunities to affect a balance INSIDER between resource development, public interest, and environmental protection. ment positions. She has been named the Aronson began her federal career as new regional manager for the U.S. a planner for the U.S. Nuclear Minerals Management Service’s Pacific Regulatory Commission in 1976. Region. Based in Camarillo, Calif., Barminski is a geologist with 27 Aronson will be in charge of managing years of experience in petroleum geolo- offshore energy and mineral resources gy and offshore oil and gas regulation. on federal lands along California, She previously served as chief of the Oregon and Washington. MMS Pacific Region’s Office of Joan Barminski has been selected as Reservoir Evaluation and Production. Aronson’s deputy manager. In this position, she was responsible Aronson has 27 years experience for ensuring compliance with estab- working in the Interior Department’s lished policies for activities on OCS Outer Continental Shelf oil and gas pro- leases and units and ensuring that the gram, having held both staff and man- public receives fair returns on energy agement positions in the Pacific Region development from offshore federal and in Washington, D.C. Most recently, lands. she held the position of MMS Pacific The MMS Pacific Region office Region Deputy Manager. Much of her employs approximately 50 people. work has been in the areas of develop- continued from page 12 Tyonek formations between 2,422 feet and 2,918 feet measured depth in the NICOLAI CREEK NCU-2 well. The north participating area is limited to the stratigraphic interval in ipating areas, which are partially overlap- the Beluga and Tyonek formations ping areas surrounding the Nicolai Creek encountered between 1,494 feet and unit pad in sections 29 and 30 of township 2,238 feet measured depth in the NCU-3 11 north range 12 west, Seward Meridian. well. The north participating area is in section The Beluga participating area is limit- 20-T11N-R12W, SM. ed to the stratigraphic interval in the The division said in its decision that Beluga formation encountered between while reservoir sandstones in the Nicolai 1,320 feet and 1,477 feet measured depth Creek unit belong to both the Tyonek and in the NCU-9 well. Beluga formations, only the Tyonek for- Aurora said in its revised January mation is currently in production. application that the reformed south par- The Tyonek formation gas is in the ticipating area, which includes a portion Upper Tyonek formation in unconsolidat- of BLM lease AA-8426, and reduces the ed non-marine sandstone reservoirs in the portions of state leases ADL 17598 and north and south participating areas. The ADL 17585 allocable to the south partic- division said eight individual sand mem- ipating area, reflects an enlargement of bers have been identified and mapped the unit area. across the Nicolai Creek field. The Beluga and north participating The south participating area is the areas contain acreage already in the unit, stratigraphic interval in the Beluga and Aurora said. ● continued from page 1 “There are quite a few wells that they’re going to drill,” Provine told ana- WELLS lysts. “ExxonMobil says they are going to However, after Blackbeard West “there drill four of these wells,” Bill Provine, is nothing else firm on the list,” said Steve Rowan’s vice president of investor rela- Campbell, Newfield’s head of investor tions, told analysts at the March 15 A.G. relations. Edwards Energy Conference in Boston, ExxonMobil holds a 25 percent stake Mass. “Even if the first three wells are in Blackbeard, followed by partners dry, they’re still going to drill the fourth Newfield with a 23 percent interest, BP well.” with a 20 percent interest, Brazil’s ExxonMobil declined to comment on Petrobras with a 20 percent interest, its drilling plans after Blackbeard West, Dominion Exploration and Production but did note that the company and its part- with a 7 percent interest and Australia’s ners have contracted with Rowan for one BHP Billiton with a 5 percent stake. well only, Blackbeard West. “It would be The Gulf’s continental shelf currently premature to speculate beyond the produces about 4.5 trillion cubic feet of drilling of this well,” an ExxonMobil natural gas per year but has been in spokesman said. decline for years. However, the Rowan expects revenues from the Blackbeard West structure is said to be so Blackbeard contract to range from $28 large it could easily house 1 tcf to 5 tcf of million to as much as $35 million, reserves. depending upon rig utilization. However, Shell is believed to be the first major drilling costs could escalate if equipment oil company to drill below 25,000 feet on problems develop down hole. the shelf, an arbitrary line that separates “They are expecting high pressures deep from the ultra-deep. The Shark well, and bottom hole temperatures as much as drilled to a depth of around 26,000 feet, maybe 400 to 600 degrees,” Provine told turned out to be a dry hole. analysts at the conference. Several other exploratory wells have been drilled to around the 25,000 foot Additional wells level on the continental shelf, including likely at Treasure Island the ChevronTexaco-operated Cadillac He indicated that additional well on Viosca Knoll Block 251. ExxonMobil-operated wells likely would BP is currently negotiating to drill a be drilled in Newfield Exploration’s 32,000 to 35,000 foot exploratory well on Treasure Island project, which includes its Antietam prospect on the continental Blackbeard West, as well as other shelf, Rowan said, adding that Shell also prospects scattered over a broad area on is negotiating to drill a 24,000 to 26,000 the shelf known as Treasure Bay, Treasure foot exploration well on its West Chest and Treasure Ship. Esplanade prospect. ● 16 THE REST OF THE STORY PETROLEUM NEWS • WEEK OF MARCH 27, 2005 continued from page 1 have a “devastating impact” on both the caribou and First Nations people of the RESPONSE Yukon and Northwest Territories who depend on the herd. American Free Trade Agreement to John Bennett, policy advisor on energy remove regulatory barriers and a clear with the Sierra Club of Canada, described mechanism to resolve disputes. the Senate vote as a “very sad day for the The reaction to the ANWR vote was planet,” arguing that 1 million barrels per left to Environment Minister Stéphane day of ANWR oil would do little to solve Dion and the Canadian embassy in U.S. energy supply needs. Washington. Drilling in ANWR would mean there Dion said Ottawa, despite Bush’s view would be “no sacred areas left in the that ANWR can help reduce U.S. depend- U.S.,” he said. ence on foreign oil, would continue to Theresa Gulliver, a spokeswoman for pressure Washington to prevent what the Canadian Parks and Wilderness Canada thinks is a “big mistake.” Society, said the fight is not over, when Two years ago, when a Senate vote questions remain about how an explo- rejected drilling, Canada’s environment ration program would proceed. minister at the time, David Anderson, said Joe Tetlichi, a member of the it was “obviously the right decision from to look “very carefully” at ways to ensure Porcupine caribou management board in our point of view … this is definitely a Canada: 1987 treaty binding the caribou are protected. the Yukon, said that for 18 years the victory.” While more subdued this time, Canada The Canadian embassy said in a state- Gwich’in have worked “in a very healthy In a flight of fancy, a jubilant Anderson still insists the United States is bound by ment that Canada opposes efforts to open way … to protect the caribou and protect said he would “hear all sorts of caribou a 1987 treaty which requires each side to ANWR to oil and gas development the Arctic refuge … without stepping on cheering cheerfully, clashing their antlers consult the other before undertaking any “because it would displace the Porcupine anybody’s toes.” ● and otherwise making caribou-like noises activities that would cause a “long term caribou herd.” of approval.” adverse impact” on the 15,000 Porcupine It said Canada has protected its portion Editor’s note: The caribou that calve He said the proposal should never have caribou herd that ranges over the northern of the herd’s habitat by imposing perma- near the giant Prudhoe Bay oil field of been in the budget resolution and coastal plain in Alaska, the Yukon and the nent wilderness status through the estab- Alaska’s central North Slope, known as described it as an “attempt by the Bush Northwest Territories, providing a food lishment of Ivvaik and Vuntut national the Central Arctic herd, have increased in administration to improperly smuggle source for the Gwich’in people. parks in northern Yukon, closing the door number since the arrival of the oil indus- ANWR through the process.” Dion said he plans an early meeting on some prospective oil and gas regions. try — from 6,000 animals 30 years ago to with U.S. Interior Secretary Gale Norton The embassy said exploration would approximately 30,000 today. continued from page 1 Until that money arrived from the said it was important to fill a vacancy that The Akaitcho and Deh Cho are Department of Indian and Northern occurred in the fall. FROZEN ready to take their fight to the Affairs his organization would “cease all Otherwise, he suggested that reporters courts unless they get assurances activities with the Mackenzie Gas should confine their questions to his gov- Review Panel and the North Energy that the transfer of powers will not Project,” Tobac said. ernment’s northern strategy, which the res- Board — the key organizations leading affect existing and future land While he waits, Tobac has appointed idents welcomed provided it gave them regulatory and environmental reviews — former Northwest Territories premier more control over land for aboriginal and held community meetings in Yellowknife, treaties — a battle that could also spill over to the Mackenzie project. Stephen Kakfwi as lead negotiator for the community governments and more Meander River and Fort Simpson earlier K’ahsho Got’ine. involvement in resource development. in March. Indian and Northern Affairs Minister Kakfwi, a vigorous supporter of the on the environmental impact of the proj- It wasn’t all goodwill and harmony, as Andy Scott was the recipient of other current Mackenzie project but a key play- ect. Kevin O’Reilly, research director with northern frustrations at a town hall meet- er in stalling the initial attempts to devel- Meanwhile, Imperial opened talks on the Canadian Arctic Resources ing in Yellowknife March 15. op Canada’s Arctic gas in the 1970s, told March 14 with the Fort Good Hope and Committee and a Yellowknife city coun- He came under fire for naming Todd Scott he does not like the notion that the Colville Lake communities to seek cilor, delivered a barbed comment at one Burlingame as chairman of the Mackenzie devolution of power to the Northwest agreement on the terms and conditions of of the organizers. Valley Land and Water Board, passing Territories “is being drafted in the bowels pipeline construction in the Sahtu settle- He suggested that next time a repre- over three nominations by board mem- of government but I’m not engaged.” ment area land covering a vast area in the sentative of the Canadian Environmental bers. He said the Akaitcho, Deh Cho and Central Mackenzie Valley. Assessment Agency should attend to Jane Groenewegen, a member of the K’ahsho Got’ine all want to participate in answer questions about federal funding Talks on hold waiting funding Northwest Territories legislature, told developing the northern strategy. for interveners — a sore point with the Scott he had “made a mockery of our The Akaitcho and Deh Cho are ready to community organizations. Arthur Tobac, president of the K’ahsho processes and you have insulted northern- take their fight to the courts unless they The late-summer start of public hear- Got’ine Land Corp., part of the Sahtu ers.” get assurances that the transfer of powers ings reflects the unhappiness among land, said he was ready to hold discus- Scott, apparently flustered by the criti- will not affect existing and future land groups such as the Arctic resources com- sions, but was waiting for C$400,000 that cisms from 120 residents at the meeting, treaties — a battle that could also spill mittee over Imperial Oil’s initial filings the Canadian government had promised. over to the Mackenzie project. ● 2 Russia bars foreigners from auctions New exploration and development license policy gives nod to Russian firms

8 Hard day’s night at Greens Creek Salaries, glimpses of wildlife make work worthwhile at underground operation

13 Analysis raises ante at Pebble Northern Dynasty announces aggressive ’05 work plans, new feasibility director

A special supplement to Petroleum News A PIECE OF EQUIPMENT SITS IDLE WEEK OF AT THE GREENS CREEK MINE NEAR JUNEAU March 27, 2005 SARAH HURST PHOTO 2 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● RUSSIA Russia bars foreign firms from auctions New exploration and development license policy gives advantage to Russian companies such as Polimetall, Basic Element, Norilsk By SARAH HURST its Mnogovershinnoye deposit in Khabarovsk in 2004, an is currently reworking their mine plan based on this Mining News Editor increase of 4.1 percent on the previous year, the compa- announcement,” the Kinross release said. “Should clo- ny announced in a release Feb. 2. Highland produced sure of the Kubaka operation become the best alterna- oreign companies will no longer be allowed to bid another 4,870 ounces of gold at Darasun in Chita and tive, this would take place only after completing the min- for exploration and development licenses in Russia, plans production of more than 70,000 ounces for 2005. ing and milling of the Birkachan open pit and Central F the country’s natural resources minister said Feb. 10. The company has adopted a new upscaled mining plan Zone Kubaka ore body, and the milling of the existing Only companies that are at least 51 percent Russian based on 1 million tons of ore for its Mayskoye deposit Kubaka stockpiles. This would provide feed for the mill owned may participate in the auctions, according to Yuri in Chukotka, and it obtained a 20-year mining license for for approximately 12 months. Closure would take place Trutnev. This will exclude mining companies like the Taseevskoye deposit in Chita (a joint venture with over an additional 12-month period. Development of the Canadian major Barrick Gold and Britain’s Highland Barrick) last November. Birkachan underground deposit is still being consid- Gold Mining, which are already active in Russia. ered.” The decision by Russia brings it more in line with Kinross will not develop Tsokol The decision was taken because Kinross was getting other countries’ policies. Now foreign companies will Meanwhile, Toronto-based Kinross will not proceed an insufficient return on its investment in the Tsokol have to form joint ventures if they wish to bid on the with development of the Tsokol vein near the Kubaka project, the company said. There were also problems huge Sukhoi Log gold deposit or Udokan copper deposit, mill in Magadan, the company said in a release Jan. 25. with Magadan’s unpredictable tax climate. “It was not both in Siberia. Sukhoi Log’s gold reserves are thought Tsokol represented around 158,000 ounces of proven the most robust ore body in the world,” Chris Hill, to be much higher than the 1,000 tons estimated in the and probable reserves in Kinross’s December 2003 Kinross’s vice president for investor relations, told 1970s. Development is expected to cost more than $1 reserve report. These reserves will be reclassified as Mining News. “We had to put money in first and get it billion. A tender for rights to explore Sukhoi Log may be resources in 2004. back three years later. We used to get a 4 percent man- postponed until after this year, the Natural Resources Kinross owns 98.1 percent of Omolon Gold Mining, agement fee that we could write off, but now the region- Ministry said Feb. 16. which operates the Kubaka mine. “Omolon management al tax guys want it.” ● Highland Gold produced 195,026 ounces of gold at

MINNESOTA

U of M geologists leads hunt for diamonds Are there diamonds buried in Minnesota? The head of the University of Minnesota’s geological survey says the science of diamond exploration has improved dramatically in recent years — and Minnesota is favorable ground. University geologists and an Australian mining company last fall quietly criss- crossed Minnesota, searching the soil for clues that might lead them to stores of pre- cious minerals — including diamonds. But whether the precious stones are anywhere to be found won’t be known for awhile. The university signed a rare secrecy deal that will keep the most sensitive research under wraps until 2007. There was scattered diamond exploration in central Minnesota 20 years ago — but it failed to find a mother lode. —THE ASSOCIATED PRESS GREENLAND Metalex finds diamond indicators B.C. based Metalex Ventures Ltd. said in mid-March that it has two samples, col- lected 430 meters apart, that contain “exceptional concentrations” of fresh diamond indicator minerals in glacial till at its West Greenland project. The company said in a press release that the “G10 garnets from both samples plot in the same part of the Cr(2)O(3)-CaO diamond stability field as some G10 garnets that occur as inclusions within diamonds at the Finsch, Bultfontein, Roberts Victor, and sev- eral other African mines, as well as from G10 garnets from commercial diamond deposits in Russia, Venezuela, Namibia and Sable (Ekati) Canada.” Most of the G10 garnets are enclosed, or partially enclosed, in friable kelyphite alter- ation rims or have angular broken near-source textures. “About 110 picroilmenite microprobe analyses from each sample indicate that the

see GREENLAND page 17

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● ALASKA INDONESIA Foo: DNR’s loss is Former Bre-X geologist surfaces at Ontario securities trial; says he will ‘clear my name’ John Felderhof is unyielding in his belief that the Busang mining lease in Indonesia Placer Dome’s gain — the core of history’s biggest mining fraud — holds a “substantial gold resource.” Emerging from his home in the Cayman Islands, the Dutch-born geologist is attend- Steps down as Alaska Department of Natural Resources mining ing Ontario Securities Commission hearings in Toronto into eight charges against him — four of insider trading involving the sale of C$84 million in shares of Bre-X section chief, returns to company to head Donlin Creek project Minerals before it collapsed in 1997 and four of issuing false press releases. “Basically I’m here to clear my name and that of my family,” he told reporters, in By SARAH HURST Cortez mine in Nevada, helping to identi- explaining his surprise appearance. Mining News Editor fy numerous gold occurrences, including the Cortez Pipeline. He was promoted to But it is not clear whether Felderhof, who has pleaded not guilty, will testify. he chief of the mining section within general superintendent at Cortez before Growing claims in the mid-1990s that Bre-X had discovered a 62 million-ounce the Alaska’s Department of Natural taking the position of mine and mainte- gold find — some later reports boosted the estimate to 200 million ounces — propelled T Resources, Stan Foo, has taken a nance superintendent at the Bald see GEOLOGIST page 5 senior position with Placer Dome. Mountain mine, also in Nevada, in 1996. Foo, 48, left DNR in A year later he became Alaska state man- mid-March, having ager for Placer Dome. INTERIOR ALASKA worked there since Completing the permitting for the 2001. He will now Pogo project was one of the biggest be Placer Dome’s accomplishments during Foo’s tenure at Studies improve MAN’s Canwell results project manager for DNR, he told Mining News. Foo empha- Follow-up studies of its 2004 drill program in the Canwell area of its MAN Alaska Alaska, representing sized that everything he achieved at DNR project look much better than originally thought, Nevada Star said March 23. As a the Vancouver-based was a team effort, and one of the high- result, the Vancouver-based junior mining company is moving forward with a more company in the state lights for him was working with the large extensive geophysical and drill program on the nickel, copper and PGE property on the and heading the mine permitting unit. Other achievements south flank of the Alaska Range 160 miles south of Fairbanks in 2005. (See Curt STAN FOO Donlin Creek proj- included permitting for the expansion of Freeman’s column this issue.) ect, a joint venture with NovaGold. True North and making an agreement “The results are much better than we initially thought,” stated Robert Angrisano, Foo spent 15 years of his career with between DNR and the Bureau of Land president of Nevada Star. “We wanted to be sure that the nickel we found in our drilling Placer Dome and was an independent Management to allow placer mine opera- was potentially recoverable before we announced the official results.” resource consultant for two years before tors on federal land to use the state bond The detailed follow-up studies indicate two possible scenarios, he told the Fairbanks moving to DNR. He started working for pool, Foo said. Daily News-Miner: Either there is a large low-grade deposit of nickel, copper and plat- Placer Dome in 1984 as a geologist at the inum group metals that could be mined for years or they’ve hit the “halo” of a massive see FOO page 5 and rich deposit. It also may be a combination of both. “It’s big,” he said. The 271-square-mile MAN Alaska project, which consists of five distinct project areas, is accessible from two paved highways and borders the trans-Alaska oil pipeline Contact North of 60 Mining News: in the Delta River Mining District (see project maps at Editor: Sarah Hurst [email protected] http://www.nevadastar.com/s/MANProject.asp). Portions of the MAN Alaska property Phone: 907.522.9469 are under joint venture with Anglo American Exploration, which is handling the Fax: 907.522.9583 Canwell exploration program pursuant to a 2004 agreement with Nevada Star. Anglo Address: P.O. Box 231651, Anchorage, AK 99523 American spent approximately $950,000 on the 2004 program. —KAY CASHMAN

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● INTERNATIONAL Alaska, B.C. get poor scores for investment Fraser Institute releases annual investment ‘report card’ for 64 mining regions; Alaska’s grade drops, B.C. scores higher than last year but companies still wary of investing in British Columbia because of tough environmental regulations, Native land claims uncertainty By SARAH HURST British Columbia fares poorly on regs Chamber: Survey shorts British Columbia Mining News Editor In a question about environmental regu- The latest yearly Fraser Institute survey of mining companies is way off base in its or the first time since the Fraser lations, Russia did much better, with 19 per- assessment of British Columbia’s attractiveness to mining investors, the B.C. & Yukon Institute began its investment survey in cent saying they encouraged investment in Chamber of Mines says. 1997, British Columbia did not score in that country and 46 percent saying they were F not a deterrent to investment. The chamber was pleased that British Columbia climbed in the institute’s rankings, the bottom 10 of the “policy potential but it said the survey fails to reflect recent positive changes in the province. index,” although it remained in the bottom On the other hand, “Yukon regulators “While we were pleased to see (British Columbia’s) improved standing, the survey third. Alaska, although it rated high for forced the repair of a 300 meter-long bull- results do not reflect the many positive changes that have taken place over the last half potential investment, dropped from 29th dozer track leading off a highway to a drill of the year that have bolstered investor confidence in (British Columbia’s) mineral place last year to 55th place this year in site,” the president of an exploration compa- exploration and mining sector,” said David Caulfield, chamber president. investment attractiveness. ny said in the survey. “Repair consisted of Investment in mineral exploration in British Columbia more than doubled last year The Fraser Institute describes the index hand-placing peat moss in the bulldozer to $130 million, 12 percent of all the exploration money spent in Canada — up from as a report card to governments on the attrac- tread marks. In spite of the fact that the track an all-time low of 5.7 percent in 2001, Caulfield said. tiveness of their mining policies. A total of was being reclaimed naturally and that there In the time since the survey opinions were gathered in June, the British Columbia 259 company exploration managers from was evidence of older bulldozer tracks government has streamlined permitting procedures, introduced an online claim stak- around the world responded to the survey, (related to highway construction) that could ing system, committed $25 million to geosciences, and unveiled a comprehensive released in March, giving their opinions on long-range mining plan for the province, Caulfield said. the investment attractiveness of 64 regions. British Columbia isn’t just tooting its own horn, the chamber said. The province Last year 159 executives responded to the In the best practices mineral was nominated in June 2004 by the London Mining Journal as one of the most survey on 53 regions. Some company presi- index, which looks at a region’s improved regions in the world for mineral exploration and mining. dents and other executives chose to respond mineral potential if it had policies —STEVE SUTHERLIN to the survey, which is sent to exploration – i.e. taxes, environmental managers. regulations, etc. — that Nevada was rated as having the best min- encouraged development, Alaska eral policies for the fifth straight year, came in third out of 64, up from Fraser report generates Alaska dissent Zimbabwe came in last. Russia, fourth from 24th place last year. Alaska dropped from 29th place last year to 55th place this year on the miner- the bottom, sunk from 40th place out of 53 al potential index of the Fraser Institute’s survey of mining executives, but the sur- in 2003-2004. Russia’s lower rating this year was prob- vey doesn’t add up, Alaska experts say. never be considered as contributing to any “It’s mystifying to a lot of us; there seems to be a good level of activity up ably due to doubts about the future of mar- ket reforms, the report said. British environmental impact problem.” here,” said mining consultant Tom Crafford, of T. Crafford & Associates in British Columbia was criticized even Anchorage. Columbia placed 44th out of 64 this year, with Yukon coming in 34th and Alaska 33rd. more strongly for its environmental regula- Crafford said the makeup of the group of respondents to the poll may have tions than Yukon and Alaska, with 31 per- affected Alaska’s standings this year, and that companies actually familiar with cent of respondents saying they were a investing in Alaska, or the United States, for that matter, may be underrepresent- Alaska has room for policy improvement strong deterrent to investment in the ed in the survey. province and another 8 percent saying they Companies active in Alaska were not included in the survey, Steve Borell, In the mineral potential index, which would not pursue investment due to this fac- executive director of the Alaska Miners Association, said in a March letter to the assesses whether a region’s mineral potential tor. National Mining Association’s Mining Week. under the current policy environment “I have now talked with six companies — three very large companies and three encourages or discourages exploration, Taxation, Native claims issues juniors — that each have one or more large exploration and/or mines in Alaska, Alaska dropped from 29th place last year to in Russia, Canada and none of the six were asked to participate in the Fraser survey,” Borell said. 55th place this year. No reason was given in Fairbanks-based mining consultant Curt Freeman concurred with Borell: the report. Yukon came in 52nd, British Russia’s taxation regime is considered a “Perception is reality in the mining game: ask anyone working in any jurisdiction Columbia 48th and Russia 42nd, with serious problem for mining companies, with worldwide what they think about working there and they are unlikely to say any- Nevada at the top here, too. only Zimbabwe faring worse in this survey thing horrible about it. Ask them what they think about other parts of the world However, in the best practices mineral question (although California was one place that compete for the same funds they are competing for and they dump all over index, which looks at a region’s mineral above Russia). A total of 29 percent of that jurisdiction.” potential if it had policies (taxes, regulations, respondents consider this factor a strong Freeman said he has heard from six of his company’s clients and none of them etc.) that encouraged development, Alaska deterrent to investment in Russia, with 14 had filled out the survey: “So the people judging Alaska don't work here and have came in third out of 64, up from 24th place percent saying they would not pursue invest- no idea what it is like to work here. In short, the survey leaves a lot to be desired.” last year. Yukon came in 29th, Russia 15th ment due to this factor. British Columbia, and British Columbia 12th in that index. Yukon and Alaska received much more Colorado treated unfairly Tasmania was the top-rated region. favorable responses to this question. Uncertainty concerning Native land In another letter to Mining Week, Stuart Sanderson, president of the Colorado Russia scored poorly on a question about claims is an important issue for miners in Mining Association, said the study was skewed. uncertainty concerning the administration, Canada. “The study is misleading in that it does not constitute a real study of the laws, interpretation and enforcement of existing “Anywhere you work in Canada, Native geology, and regulatory structure of states like Colorado ... it is a subjective sur- regulations. Only 3 percent of respondents land claims are possible at any time, and no vey of impressions — this report gives the industry in states like Colorado and thought this factor encouraged investment in matter how outlandish the claim, the provin- Alaska a black eye, which is undeserved.” Russia, while 19 percent considered it a cial or federal government will not support a The mineral potential index is designed to reflect whether a region’s mineral strong deterrent and 30 percent would not tax-paying company by applying the Mining potential under the current policy environment encourages or discourages explo- pursue investment due to this factor. By con- Act. It will inevitably run and hide,” the ration. trast, 22 percent of respondents said this fac- president of an exploration company said in —STEVE SUTHERLIN tor encourages investment in Alaska, and 41 percent said it was not a deterrent to invest- the survey. “In Canada, British Columbia (is ment in Alaska. the worst jurisdiction) because of Native land claims,” another exploration company president said. British Columbia scored last out of the 64 regions on the question about Native land claims, with 42 percent of respondents say- ing this factor is a strong deterrent to invest- ment in the province, and 14 percent saying they would not pursue investment due to this factor. Yukon and Alaska had slightly better results and Native land claims were not con- sidered a very serious problem in Russia. Another question where British Columbia did poorly was about uncertainty concerning which areas will be protected as

see REPORT page 5 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 5

● BRITISH COLUMBIA/MONTANA continued from page 3 Bre-X principals. A geologist, Michael de Guzman, reportedly jumped to his death GEOLOGIST from a helicopter in Indonesia as ques- tions were being raised and Chief Baucus riles B.C. the Calgary-based company’s market Executive Officer David Walsh died of a value to C$6 billion and turned small- heart attack. time stock players into instant multi-mil- Answering questions from the Calgary on coal, lumber, beef lionaires. Sun, Felderhof said it is now clear to him That world evaporated when that some of the Bre-X samples were salt- Strathcona Mineral Services President ed, but he would not speculate on who U.S. senator from Montana accuses province of ‘dead of night’ OK Graham Farquharson, who had been hired was responsible. of coal exploration in southeast corner of British Columbia to audit the Busang results, described the However, he remained emphatic that property as a fraud “without precedent in there is gold in large quantities in the jun- By GARY PARK wilderness area in his state. the history of mining.” gles of Busang. Mining News Calgary Correspondent Felderhof is the last survivor of the Coal prices, mining interest revives —GARY PARK ax Baucus, the five-term With the revival of coal mining interest Democratic U.S. senator from in the Flathead, propelled by a three-fold continued from page 4 “You find something of value and someone M Montana, has found another issue increase in coal prices over the last 18 will find a way to steal or expropriate any to reinforce his reputation as the months, Baucus is ready to do battle again. REPORT economic benefit from you.” biggest American burr under British He has threatened to refer the latest British Columbia was also criticized by Columbia’s saddle. wilderness or parks. British Columbia came approvals to the International Joint the president of one exploration company, Already well known for his advocacy of 62nd here, ahead of Wisconsin and Commission, a joint U.S.-Canada body who said: “Giving in to special interest bans on U.S. imports of beef and softwood California. The issue was not considered groups for reasons of political expediency lumber, he has added coal to the list. which rules on disagreements over water quite so important in Yukon, Alaska or and a history of having due process set aside He says the British Columbia govern- use. Russia. or killed by government and/or the courts ment, operating in the “dead of night,” But B.C. Energy and Mines Minister On a question about infrastructure, make British Columbia one of the worst issued approval for coal exploration in the Richard Neufeld argued the Cline project British Columbia did extremely well, com- investment climates on earth.” southeast corner of the province by Cline is a long way from any water courses that ing in 14th in the list, while Alaska and Nevertheless, British Columbia scored well Mining Corp. flow into Montana, arguing it would be Yukon scored much lower and Russia came on this question, as did Yukon and Alaska. The permit allows Cline to spend about “ridiculous” for the province to allow any in at 58. C$1.8 million on 51 diamond drill holes in harm to a river. British Columbia landed in the bottom the East Kootenay coalfields, one of the He suggested Baucus is opposed to any Russia scores poorly half of the table on a question about politi- cal stability. richest deposits in North America. The development that creates jobs and revenue on socioeconomic agreements Ontario-based company is targeting 1 mil- in British Columbia. “British Columbia has a history of lion to 2 million tons a year of coal pro- In February, the senator got a chilly On socioeconomic agreements, Russia severe swings in politics and the ideologies duction. reception in Fernie, B.C., when he invited again came near the bottom. of the political party in power. What a The fields are part of the Flathead River himself to a community meeting on the “Russia (has) a dysfunctional legal and mess!!!” the manager of an exploration company said. Russia was much further Valley, a watershed that flows into Cline proposal. regulatory system geared to favor the down the table with Yukon and Alaska scor- Montana close to Glacier National Post. Bill Bennett, a member of the British entrenched interests,” an official from an ing near the top. ● They are also in what the B.C. Energy and Columbia legislature, tangled with Baucus exploration company said in the survey. Mines Ministry has designated a “core when he first arrived, telling him “you’re grizzly bear habitat.” actually not welcome here,” after 25 years continued from page 3 Foo’s advice to his successor? “Be It is the same watershed that was at the of standing in the way of Canada’s beef, ready to hit the ground running. DNR is a center of a furor last summer when Baucus softwood lumber and coal. FOO very good group to be associated with. and the Montana government challenged “I wouldn’t dream of coming to I’ve really enjoyed working with Tom the B.C. government’s plans to sell coalbed In addition, Foo and his staff worked Montana to tell you how to manage your Irwin and Bob Loeffler.” Irwin is the methane licenses in the nearby Elk Valley on legislation to revise the financial natural resources, so I resent the fact commissioner for natural resources and area, although the cross-border showdown assurance regulations for mining in the Loeffler is director of the Division of fizzled when no bids were received. you’re here,” he said, before storming out state, so that large mines would pay the Mining, Land and Water. Interested parties in Montana and of the meeting and taking 30 supporters cost of reclamation instead of the $750 Placer Dome thanked James Fueg and Canada subsequently opened negotiations with him. per acre that placer miners are required to on a comprehensive environmental assess- “You have chosen throughout your pay. “It is a more realistic approach to Leslie Jensen for their efforts at Donlin ment of the area, in hopes of avoiding career to kick the hell out of Canada and reclamation for large mines, and a stricter Creek in a release March 3. Fueg was act- future site-specific battles. you’ve got to stop doing it,” he told regulation than before,” Foo said. He also ing project manager for the past six Baucus spearheaded the coalbed Baucus. noted the permitting for the expansion of months and will continue to be a key methane opposition, 20 years after leading Taking a conciliatory approach, Baucus the Greens Creek tailings facility. “There member of the project team. Placer Dome a successful campaign to block coal min- said his understanding had been “raised to has been a more focused effort to keep hopes to begin construction of the Donlin ing in the Flathead Valley because of the a new level” over Canadian concerns about permits moving, without stalling,” he Creek hard-rock gold mine in southwest threat to a United Nations-designated beef, lumber and mining. ● said. Alaska no later than November 2007. ●

6 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● JUNEAU, ALASKA Alaska legislators say mining matters Old hands and rookies in Juneau see economic value of the industry for the state, appreciate colorful history By SARAH HURST Ramras: Mining on the menu Mining News Editor Jay Ramras began his career by open- ing a restaurant in Fairbanks called any Alaska state legislators have a SARAH HURST personal connection with mining, Jaybird’s Wingworld, and now owns the and perhaps none more so than somewhat more up-market Pike’s M Waterfront Lodge. As a brand new Richard Foster, Nome’s Democratic representative. Foster, 58, grew up on his Republican representative for Fairbanks, father’s mine, 100 miles north of Nome. 40-year-old Ramras will occasionally Today he is glad to see Vancouver-based have to turn his attention from food to NovaGold developing its Rock Creek proj- mining. Not only are Fort Knox and Pogo ect in his district, but he also regrets the dis- located in his district, he is also co-chair appearance of “mom and pop” mining of the House Natural Resources operations like the one where he worked as Committee. a child. “I grew up with the Miscoviches, three “NovaGold has been very aggressive in generations of a mining family, they were trying to develop friends of mine,” their gold and also Ramras said. “I want their boundless miners to be able to do business in a low

deposits of gravel,” SARAH HURST SARAH HURST Foster told Mining tax, fairly regulated News. “People in industry that allows Nome are fairly for safe explo- excited, there could ration.” He dis- be maybe 100 to 150 missed former Gov. jobs at Rock Creek.” Jay Hammond’s JAY RAMRAS NovaGold is already RICHARD FOSTER recent suggestion contributing to the local economy by rent- that mining compa- ing dump trucks from private operators and nies could contribute more to the state by shipping out barge-loads of high-quality paying a severance tax. “Jay Hammond is quarry rock, Foster said. wrong. You don’t tax your way into creat- “There is still potential for mining, but ing a prosperous industry. Try being a there are more and more restrictive regula- miner, big or small, it’s hard — give the tions from the federal government,” Foster miners a break.” said. “The regulations for the most part Ramras is enthusiastic about the proj- have a constituency. Powerful fishing inter- ects in his district, with some qualifica- ests have allied themselves with environ- tions. “We love Fort Knox,” he said. “Our two biggest concerns with Pogo are that mentalists to kill off logging and mining. Alaska's capitol building in Juneau Mom and pop operations could never com- they get open and that they do so by hon- ply with the federal regulations.” wrote. “By the end of the summer, I had mined enough oring Alaska hire.” It was slightly disap- The area between Nome and Kotzebue where the gold to buy five pistols and two rifles. The fact that we pointing that operator Teck-Pogo hired Canadian electri- Fosters used to mine is now on the edge of the Bering already had 18 firearms somehow didn’t bother me!” cians, Ramras said. “The mine is going to be open for a Land Bridge National Park. Mount Foster in southeast Although Foster never used guns for anything more whole generation of Alaskans, so it will be interesting to Alaska is named after Richard’s father, Neal, who was a lethal than shooting ptarmigans, he remained an avid see what they’re going to do about workforce develop- territorial and state senator and a bush pilot, as well as a collector when he entered the state Legislature in 1988, ment. I want to see Pogo train and employ local miner. In an article for Alaska magazine in 1972, and three years later he was arrested on federal felony Alaskans.” Richard described going on expeditions hunting for rock charges of possessing unregistered guns, including sev- There isn’t a great deal of mining-related legislation samples with his brother at the age of seven. “Our trips eral machine guns. He was caught in Juneau but fortu- coming up in this session, and that is probably a good were always heralded with fanfare, father urging us to go nately the trial was held in Nome, where he was extreme- thing, Ramras said. After listening to reports that mining immediately and check the site before anyone else could ly well-liked, and he was found not guilty — but federal industry representatives gave to the Legislature on Feb. stake it, and mother weighing down each backpack with agents kept his confiscated firearms. 2, he concluded that adopting a laissez-faire approach enough food to last us for weeks,” he wrote. “We took The jovial Foster is also popular in the Legislature, would suit them best. “The mining industry seems pret- everything she gave us, rather than let her worry about us where he has a large enough office that Democrats and ty happy,” Ramras said. “They were telling us, we’re starving to death in some gulch.” Republicans can mingle socially with some of his nine doing fine, let us build ourselves into a profitable indus- By the age of 15, Richard was an experienced miner children when they come to visit. As long as Foster has a try.” himself. “I was anxious to find my own gold, so when- seat in the House, miners will always have a strong advo- Ramras supports Gov. Frank Murkowski’s $700,000 ever we quit work for the night, I would pan sections of cate in Juneau. “If it wasn’t for mining, Juneau, budget request for airborne geophysical surveys. “I’m the bedrock until I found a good area and then mine it Fairbanks and Nome wouldn’t be there,” he said. “People very excited about them, they’re really state-of-the-art,” myself with a three-foot long ‘rocker’ I had made,” he have forgotten about that.” see LEGISLATORS page 7 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 7

continued from page 6 the city’s largest industrial employer. “I the same district. The main piece of legislation that don’t hear any complaints about Greens “Initially I was hearing a lot of excite- LEGISLATORS will affect mining in this session is Creek,” Kerttula said. “It has a really ter- ment about Pebble from people in my dis- the governor’s request for the state rific safety record. It’s normally one of the trict, but as of late some of that excite- he said. “The color mapping is really to obtain primacy over National top employers for worker safety.” Kerttula, ment has cooled 21st-century. Those kinds of dollars Pollution Discharge Elimination 49, describes herself as “real supportive” down,” LeDoux come back tenfold and then some. The System permitting. Alaska is one of mining, having grown up around miners said. “I just state is so fortunate to have Tom Irwin as in Juneau and on a farm in Palmer (her received a joint res- DNR commissioner — I trust just about of only five states where the EPA father, Jay, was a legislator for over 30 olution from the SARAH HURST anything he and his people say is a good conducts NPDES permitting. years), and spent her childhood summers city council of thing.” at a mining operation along the Fortymile Nondalton and the Kensington is a historic gold mine that River. “We used to play around dredges tribal council of Kerttula: praises Coeur intends to reopen. “Kensington is and gold pan ourselves,” Kerttula said. Nondalton oppos- Greens Creek safety record raising some fascinating issues,” Kerttula “We got jewelry from the gold nuggets we ing the mine.” On said. “I think it’ll be hard, especially with If the residents of Beth Kerttula’s dis- mined. I appreciate the history of mining.” the other hand, GABRIELLE LEDOUX the precedent they may be setting — tail- trict have an opinion about mining, they The main piece of legislation that will some villages in ings disposal in Lower Slate Lake — can easily let her know: she is a affect mining in this session is the gover- the area support the project, she added. they’re going to have to work things out a Democratic representative for Juneau, and nor’s request for the state to obtain prima- “People are concerned that it’s going little more.” only has to step outside the capitol build- cy over National Pollution Discharge to have a big impact on the subsistence Kerttula has a fairly positive attitude ing to hear the Elimination System permitting. Alaska is lifestyle, the fishing,” LeDoux said. towards Coeur: “They’ve made a real word on the street. one of only five states where the EPA con- “Initially there were hopes that there effort as far as educating a lot of people Recently some- ducts NPDES permitting. would be enough good jobs from the who would have some say over the mine,” one approached “If we do it right, put the time and ener- mine to make it worth it. I haven’t made

SARAH HURST she said. “I think they try to outreach to the her in the city post gy and funding behind it, it could be a up my mind, I’ve got an open mind on this community. But some of the concerns are office to discuss good thing, it would put Alaskans in thing. Kodiak, where I live, is a fishing absolutely legitimate.” the Tulsequah charge,” Kerttula said. “I have talked to community, I know absolutely nothing A coalition of local environmentalists Chief project, one mining company that had a represen- about mining, I’m on a learning curve. appealed the Forest Service’s decision and across the border tative from the EPA come up in high heels I’m hoping that the mine can be devel- a court battle is on the cards. “I want min- in Canada. “I’m in the middle of winter and think she’d be oped in such a way that the impacts on ing to be done right, I don’t want us to be real worried about BETH KERTULLA able to walk around the mine site.” fishing and the subsistence lifestyle are left with a legacy of environmental degra- the Tulsequah minimized. Jobs are one of the main dation,” Kerttula said. “The miners who I Chief and the Taku River drainage,” LeDoux: Pebble blinking problems in your really remote areas. know don’t want to do that, either.” Kerttula said. “We don’t have any jurisdic- brightly on her radar People want to be able to stay in their area Kensington was permitted under the tion over it. The river is one of the biggest and want to be able to work. These areas Juneau coastal management system and In the past, a Kodiak legislator might spawning grounds and salmon fisheries are expensive.” Kerttula hopes that Gov. Murkowski will have expected to devote most of her ener- around Juneau.” LeDoux was born in Baltimore, grew not carry out his threat to withdraw from gies to fisheries, but not any more. The Canada’s Redfern Resources has not up in California and went back to the East the Alaska Coastal Management Program. district’s new Republican Rep. Gabrielle yet completed the permitting process for Coast after law school, moving to Alaska “It’s one of the few places where you see LeDoux, 57, will have to get up to speed the Tulsequah Chief mine. Idaho-based in 1979. “I like the people in Kodiak, you coordination of the laws and the agencies,” on mining very quickly because Coeur d’Alene’s Kensington project out- really get to know everybody,” she said. she said. Vancouver-based Northern Dynasty is side of Juneau is at a more advanced stage, “There is a sense of closeness in a small There is already an underground mine developing the huge Pebble deposit near its mining plan having been approved by Iliamna. Along with Kodiak Island, this town that sometimes a big city doesn’t in the Juneau area, Greens Creek, which is ● the U.S. Forest Service last December. part of Southcentral Alaska is included in have.” 8 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● ADMIRALTY ISLAND, ALASKA It’s a hard day’s night at Greens Creek Mining News editor visits mine near Juneau; high salaries, glimpses of wildlife make work worthwhile at this underground operation

By SARAH HURST Mining News Editor SARAH HURST o one shows up late to work at SARAH HURST Greens Creek mine. That’s because N all the employees are in the same boat, from underground miners to top managers — literally. The ferry leaves Juneau’s Auke Bay at 5 a.m. and 5 p.m. every day for the 35-minute trip to Admiralty Island, taking the day and night crews back and forth. That doesn’t leave a lot of time between shifts before you’re back on the boat again, no matter what the weather. “We don’t consider the ride rough until the seats begin folding up underneath Metallurgist Shawn Chen at the Greens you,” Ron Plantz, Greens Creek’s affable Creek mill human resources and community rela- tions manager told me. He recalls the boat being cancelled just once in the past SARAH HURST 12 years. The mine’s contract with Juneau tour operator Four Seasons Marine has helped that company to build up its busi- ness. Sarah Hurst, Mining Although in win- News editor, toured Greens Creek in ter the underground February miners are unlikely to see sunlight at all during their working periods — about four days and then a break — they feel more than adequately compensated. On the bus journey from Entrance to the underground Greens Creek mine the dock to the mine, a miner called Tony Greens Creek miner Alan Shumway told me that he earns $25.50 an hour. Loader belt completely enclosed trate: zinc, lead and bulk. Bulk concen- Island, Angoon, about 35 miles to the Tony comes from Juneau and has a trate is a mix of zinc and lead, and also The first, dramatic sign of the poly- south, which is not connected to the mine degree in political science from the contains most of the mine’s gold and sil- metallic mine that employees and visitors by road. University of Idaho. He used to work on ver. As a polymetallic mine, Greens see on arrival at the island is also the last “We provide some employment for the boat, but eight years ago he switched Creek is better equipped than most to piece of the mining process at this Angoon and we talk to the city council, to being a janitor at the mine and later weather economic storms, although it did Southeast Alaska operation. The concen- the Native elders and the tribal corpora- became trained as a miner. He doesn’t have to close between 1993 and 1996 trate ship-loader is a completely enclosed tion, we give them updates,” Plantz said. mind being underground: “It’s like a because of low metal prices. conveyor belt, a long arm rising majesti- In addition to subsistence activities, Disney ride.” Physically it isn’t too The mine’s tailings are stored in a dry- cally over the bay, with a snorkel at the the island is a popular destination for eco- demanding, except when he has to move stack facility, part-way up the road. In the end for ships to move under, so that no tourism, hiking, sport fishing and view- huge electric cables, Tony said. midst of the spectacular Tongass National fugitive dust can escape. The ships come ing some of the 1,700 brown bears that “At Greens Creek we hire a lot of peo- Forest, with tall spruce and hemlock trees about 18 times a year to take the concen- live here. However, the mine is not ple who don’t necessarily have mining on one side and snow-covered mountains trate to smelters in Japan, Korea, Canada, allowed to stage hunting or fishing on its experience, but they have translatable looming up on the other, the road was Mexico and Italy. property. skills, like operating heavy machinery,” built with the help of heavy-lift helicop- Greens Creek’s biggest trucks can Miners go directly to work, carrying Plantz said. “Mining offers a profession- ters, dropping equipment at various carry up to 50 tons of concentrate from their food for the day with them, but visi- ally rewarding career, and an opportunity points along the way. the mine down the 13-mile winding road tors can stop at the camp for a cooked to generate true wealth for Alaska — The ore body here was discovered in to the dock. There it is stored inside a breakfast, or fruit and cereal. usable, tangible products that enrich peo- 1975 and exploration drilling began in huge building in grey piles that are virtu- The camp, where some of the mine’s ple’s lives. The salaries are a strong incen- 1978. In the same year, President Jimmy ally indistinguishable to the eye, but are employees live, consists of a neat row of tive, too,” he added. Carter declared Admiralty Island a in fact three different types of concen- wooden buildings that used to belong to a national monument, but he allowed the cannery. All the trash from the camp is mine to be developed because the mining either incinerated or eaten by the camp claims predated his decision. dog, Elsie, a German shepherd, so that it Mine has small footprint won’t attract bears. “We see bears about two or three times On this 1,500-square mile island, the a week,” Plantz said, “but we last shot one mine takes up less than half a square mile. There is one village on Admiralty see GREENS CREEK page 9 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 9 SARAH HURST SARAH HURST

Greens Creek miner operating equipment underground Concentrate ready for shipping out of Greens Creek mine

continued from page 8 Juneau, on a visit to commemorate the achievements of their relative, Joe GREENS CREEK Juneau. Marcia asked to see as much

SARAH HURST equipment as possible, expressing an 10 years ago.” interest because she had spent much of Bears and deer are also drawn to the her life on a farm. Plantz gave her direc- road in the spring, when mine employees tions to the women’s bathroom, but she do hydroseeding, spraying a native flora was a little hard of hearing and walked and seed combination — mostly grass — into the men’s instead, where she was to prevent sediment from running off the treated to a view of several miners taking soil. So there is an opportunity for good a shower. George followed, put his arm wildlife viewing on the bus rides. Another round her, and announced, “Now you’ve aspect of the mine’s wide-ranging envi- seen all the equipment the miners use, ronmental work is the use of divers to Marcia!” examine clams for contamination by heavy metals. Clams give a better indica- Mill an automated system tion of pollution levels than fish because The next stop is the mill, where an fish could have come from a long way automated system separates the metals away. Ron Plantz eating breakfast at the Greens Creek camp from the tailings. Everything that is hap- When environmental groups expressed pening can be seen on a computer con- concern about Kennecott’s Eagle nickel heavy equipment we encountered from the appeal of this kind of work, apart from sole, metallurgist Shawn Chen explained. and copper project in Michigan, the com- time to time. Miners quickly learn their the money? Miners told me they like Unfortunately nothing was happening on pany flew some of their representatives to way around, Shumway said, but it’s possi- being in a temperature-controlled envi- the day of my visit, as the mill had been Greens Creek to show them how a mine ble to get lost for hours when you’re new. ronment — it is comfortably warm in the shut down for 35 hours because of a bro- can operate safely in a sensitive ecosys- The way to navigate is by the depth signs. tunnels, except near the mine entrance — ken part on the tailings thickener. This tem, Plantz said. “They were impressed In places where there is drilling going on, without having to deal with extremes of was a very unusual occurrence at the mill, by our water treatment, our ISO certifi- miners need to wear ear plugs, but there weather. which is supposed to have one scheduled cate and the mine’s small footprint,” he are also parts of the tunnels that are dead Back on the surface, it is important to 16-hour shutdown every 30 days, but on told me. silent. Then it can feel like a prehistoric wash in the correct bathroom. Plantz once cave, particularly when you come across a hosted an old couple, George and Marcia see GREENS CREEK page 10 A trip underground yawning hole, apparently bottomless, sep- “Miners have no originality about arated from the road by a rope with a naming things,” Plantz said on the drive warning sign hanging on it. from the camp to the mine, pointing to the If anything does go wrong, miners can “860” safety building, which is 860 feet go into a refuge station that looks like a above sea level. giant crate, and is outfitted with survival The entrance to the mine itself is at gear for them to use while they wait for 920 feet above, and the tunnels descend to help to arrive. Accidents happen when 200 feet below sea level. To take a tour people go places where they shouldn’t be, underground, visitors must wear the same the miners said. Interfere with someone gear as the miners, including boots, else’s work and you could cause serious gloves, a hard hat with a lamp and a belt trouble. with a compact “self-rescuer” device Miners have to enjoy their own compa- attached, which can be clipped onto the ny. Higher up, some of them work alone nose and inserted in the mouth during an all day with a machine, drilling bolts into emergency, to convert carbon monoxide the sides and roof of the tunnels to pre- into carbon dioxide. vent a collapse. Water sometimes gushes I went underground on the back of a out, but this mine is comparatively dry, tractor driven by miner Alan Shumway. It Shumway said. When he worked in was one of the smaller vehicles in the tun- Nevada he often found himself sloshing nels, and we had to do some deft maneu- around in several feet of water. What is vering into dark alcoves to avoid the 10 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005

Greens Creek vital statistics

Greens Creek is a joint venture between Salt Lake City’s Kennecott Minerals (a SARAH HURST subsidiary of Rio Tinto) and Coeur d’Alene-based Hecla Mining Co. The mine is Juneau’s largest industrial employer, with around 260 employees, and the average annual wage of a Greens Creek employee was $79,000 in 2003, according to a report by the McDowell Group titled “Socioeconomic Impacts of Greens Creek Mine,” pub- lished in May 2004. That is almost triple the average wage for Juneau private sector workers and double the average annual wage of a state worker. Around 75 percent of the Greens Creek work force are Juneau residents. Around 94 percent are male and 6 percent female. Greens Creek’s total payroll was $20 mil- lion in 2003 and the mine paid $1 million in taxes to the City and Borough of Juneau in 2003. It spent $17.4 million in Juneau on goods and services and a total of $20 mil- lion in all of Alaska in 2002. Greens Creek mines approximately 2,300 tons of ore per day, and has proven and probable reserves of 2.2 million tons of ore, containing 31.4 million ounces of silver, 256,726 ounces of gold, 237,202 tons of zinc and 89,422 tons of lead. Greens Creek was initially expected to have a 10-year mine life, but now it will continue operating until 2012, and ongoing exploration work may extend the mine life still further. —SARAH HURST

continued from page 9 she is in no way intimidated. “You’re not listening!” she admonished more than GREENS CREEK one man when they had difficulty answer- ing questions about emergency proce- the positive side, it meant I could hear dures. Greens Creek received the ISO everything Chen was saying without him 14001 certificate for its environmental having to shout. management practices last December, Chen is from China and he worked at and now employees are required to famil- two mines there before taking a metallur- iarize themselves with the new regula- gy degree at the University of Alaska tions, for example on cleaning up spills. Fairbanks and then moving to Greens Lyons did a degree in mineral engi- Creek. “The difference is the technology, neering at Leeds University and then and the safety here is much, much better,” joined Rio Tinto’s graduate scheme. She Tail thickener at Greens Creek mill Chen said. He showed me around the was based in Bristol, England, for a year, labyrinth of metal stairways, pointing out then went to work at a uranium mine in the SAG grinding mill, which resembles Namibia. There Lyons was a metallurgist, an Apollo space capsule, past a maze of an operator and a shift boss. After return- pipes to the rows of flotation devices, like ing to Bristol for another year, she came SARAH HURST yellow saucepan lids. to Alaska three years ago and has been “Not many people like to buy bulk mill manager since last October. “People concentrate, so we have to play the bal- are real self-thinkers here, they’re bright ance, because if we make lead concen- and pro-active and they can identify the trate we don’t get paid for any zinc that’s hazards,” she said of her Alaskan col- in it, and if we make zinc concentrate we leagues. don’t get paid for any lead that’s in it,” “Safety comes ahead of production, Chen said. There has been a decline in the nobody should be rushing around,” Lyons bulk market recently, so the mine has told the mill employees. Greens Creek scaled down its production of bulk con- has been hammering home the safety centrate. The mill also produces silver message for a long time. On arrival at and gold doré which is marketed to a pre- Admiralty Island the miners are greeted cious metal refiner. Greens Creek has its by a billboard advising them to “Think own souvenir silver coins with a bear, fish Safety!” In 2003 the mine won the U.S. mountains and mining symbols on one Department of Labor’s Sentinels of side and an outline of Alaska on the other. Safety award. Lyons handed out several pages of instructions with diagrams on Focus on safety how to avoid everyday accidents. A After giving me the tour, Chen joined woman who works at the mill had tripped the other mill workers for an hour-long over a hose that day and hurt her hand. safety meeting. The mill manager is Plantz sent her back to Juneau on a Ward Geraldine Lyons, 29, from England, who Air floatplane in the afternoon so that she with her slim build and correct manner of could go to the hospital. I went with her. speaking looks a little incongruous Half of a miner’s shift is a long day for the among the burly group she manages, but rest of us. ● The mill at Greens Creek PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 11

● SOUTHWESTERN ALASKA Moly adds cool gleam to Pebble’s hot prospects Not only are gold and copper fetching good prices, but demand for gray metal drives cyclical market in small mining niche By ROSE RAGSDALE New demand sparked denum. But the impetus for the sharp Mining News Contributing Writer moly’s price rally climb in molybdenum came when China cut its exports of the metal by about 6 urrent market conditions favor the A booming steel industry driven by million pounds early in 2004. Analysts three metals uncovered in the stainless steel makers who use about two- say the sudden reduced supply, combined Pebble project operated by thirds of the world’s molybdenum is an with increasing demand from the United C important factor in the recent leap in Northern Dynasty Minerals Ltd. in States, created a short-lived 5-million- southwestern Alaska. Not only are gold moly prices. Analysts predict demand for pound deficit in the first quarter of 2004. steel will continue to grow upwards of 6 and copper fetching good prices, but a OF PHELPS DODGE CORP. COURTESY China boosted its molybdenum exports recent run-up in molybdenum prices percent annually over the next few years, by 5 million pounds in the second quarter could deliver a nice bonus for the project. with China, Chile and the United States of 2004 and late in the year, analysts say consuming about three-quarters of global supply again exceeded to demand, creat- Little known metal molybdenum output. ing a surplus of the metal in the market. makes big contributions U.S. demand for molybdenum This pattern of increasing demand and rebounded in 2003 after a nearly 19 per- Molybdenum, pronounced “meh-LIB- prices quickly generating new supplies is cent drop by 2002 to 66 million pounds. deh-nem,” is mainly a byproduct of cop- the historical norm for the molybdenum A sample of ore containing molybdenum. That demand reduction led to the nose- per mining but some standalone molyb- market. The highest level of output from dive molybdenum prices took that year to denum mines do exist. primary western molybdenum mines about US$2 a pound. This, in turn, caused The element was discovered by Carl Earlier this year, molybdenum prices came in 1980, the year after the last great global molybdenum producers to moth- Welhelm Scheele, a Swedish chemist, in slipped nearly 10 percent and by mid- price spike, with production reaching ball a lot of mine capacity, analysts say. 1778 and isolated from a mineral com- March had settled in at about US$29 a over 130 million lbs. When the price When the U.S. economy revived in late pound by Peter Jacob Hjelm in 1781. pound. 2003, so did western demand for molyb- Today, molybdenum is obtained from see MOLY page 12 molybdenite (MoS2), wulfenite (PbMoO4) and powellite (CaMoO4). The word molybdenum is derived from the Greek “molybdos,” which means “lead like.” A soft, gray metal, molybdenum is known as “moly” in the mining industry. In its pure form, moly is used as an alloy additive, a lubricant and a catalyst, as well as in compounds used in the chemical industry. The element also has a high melting point and is used to make electrodes in electrically heated glass furnaces. Some electrical filaments are made from molybdenum. The metal is used to make missile and aircraft parts; in the nuclear power industry; and in refin- ing petroleum. Its main application, how- ever, is as a versatile and cost-effective alloying element in steel. Added as a molybdenum oxide or as an alloy with iron — ferromolybdenum — moly enhances the strength, hardness, weld- ability, toughness, elevated-temperature strength and corrosion resistance of steel. Steel enhanced with molybdenum can withstand pressures up to 300,000 pounds per square inch. That’s roughly six times the strength of steel typically considered to have moderate- to high-strength char- acteristics. The United States Geological Survey has said Pebble is the most extensive min- eral system of its type in the world. It includes a central deposit and several por- phyry gold-copper-molybdenum deposits and gold occurrences spread over an area two miles long by 1.2 miles wide about 86 miles west of Cook Inlet. Price climb energizes mining sector Until two years ago, molybdenum had offered little to excite the mining industry for more than two decades. After a price spike in 1979 in which moly climbed to US$35 per pound, the price plummeted to near US$5 per pound and eventually bot- tomed out near US$2 a pound in 2002, analysts say. But global market conditions sent moly prices soaring in 2004. The metal jumped to US$15 a pound by April 2004 and then more than doubled between October and December, to peak just below US$35 a pound by the Christmas holidays — a 1,300 percent run-up from the humble price of US$2.40 per pound in 2002. Analysts say this makes molybde- num the third biggest metal gainer in the market, just behind little known selenium and germanium in the past two years. 12 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005 continued from page 11 ing a stable demand for molybdenum, the In 2004, molybdenum, valued at about ing to advance the Ruby Creek project in USGS said. US$1.18 billion (based on average oxide northeastern British Columbia. Ruby MOLY price), was produced by seven mines in Creek was first drilled in 1969 and Industry responds the United States, according to the USGS. Adanac recently completed 9,022 meters crashed soon afterward, production fell to to higher moly prices Molybdenum ore was produced at three of drilling aimed at upping the resource less than 10 million pounds by 1983. Strong copper prices and a deficit of primary molybdenum mines, one each in from its 1971 figure of 104 million tonnes Analysts and industry officials say Colorado, Idaho and New Mexico, where- grading 0.16 percent MoS2. there’s every reason to believe this pattern refined copper allowed the Bagdad and Sierrita Mines in Arizona to return to full as four copper mines (two in Arizona, one Fellow junior Roca Mines is looking to will continue. each in Montana and Utah) recovered work the Max molybdenum project in For Northern Dynasty, this isn’t neces- production capacity, thus increasing byproduct molybdenum production. The molybdenum as a byproduct. southeastern British Columbia where sarily bad news. Iron and steel, cast and wrought alloy, Newmont Mining outlined 49 million The molybdenum market, for one Continental Pit operation in Butte, Mont., resumed mining activities and was and super-alloy producers accounted for tonnes grading 0.19 percent MoS2. thing, is tiny, less than 1 percent as big as about 75 percent of the molybdenum con- the copper market, so a little shortfall in expected to produce about 3,200 tonnes Moly’s good fortune (7 million pounds) of molybdenum in sumed. demand goes a long way Although molybdenum bodes well for Pebble in pumping up the price. is not recovered from scrap Unlike copper, which Molybdenum is more commonly asso- steel, recycling of steel ciated with copper porphyry deposits, trades on exchanges in alloys is significant, and London, New York and especially in the United States, Chile and some molybdenum content Peru, and copper miners often produce Shanghai, molybdenum is reutilized. The amount of is bought and sold only the metal as a byproduct. Because molyb- molybdenum recycled as denum and copper are both processed by over the counter, so the part of new and old steel price has the tendency of flotation, it is easy for copper miners to and other scrap may be as turn on or off the molybdenum tap. Thus, moving up and down like much as 30 percent of the a roller-coaster, analysts such operations generally fare better apparent supply of molyb- throughout the ups and downs of the say. denum. U.S. imports of molybdenum market, analysts say. The United States also In fact, unlike the cyclical production molybdenum for con- imports ferromolybdenum sumption increased an numbers seen from primary mines, from China, 78 percent; molybdenum production from secondary estimated 34 percent United Kingdom, 20 per- from those of 2003, while mines has increased more or less steadily

COURTESY BRITISH COLUMBIA MINISTRY OF ENERGY AND MINES OF ENERGY BRITISH COLUMBIA MINISTRY COURTESY cent; and other countries, 2 U.S. exports rose 51 per- throughout the last 25 years, from about percent; and molybdenum 100 million pounds in 1980 to a forecast- cent from those of 2003, ores and concentrates from according to the USGS. ed record of 195 million pounds in 2004. British Columbia Minister of State for Mining Pat Bell tours Teck Cominco’s Mexico, 58 percent; Analysts say this means that there’s a lot The increase in exports Huckleberry Mine near Vancouver, B.C., in April 2004. The ore at Huckleberry Canada, 38 percent; Chile, more secondary molybdenum out there reflects the return to full is mined with standard open-pit truck and shovel equipment, and processed 2 percent; and other, 2 per- production levels by the through a SAG/ball mill circuit producing a copper concentrate and molybde- today — a supply that requires relatively num concentrate. The copper concentrate is trucked to Stewart, B.C., for ship- cent, according to the little capital cost to bring to production — end of 2004 by some ment to Japan, while the molybdenum concentrate is trucked to and sold in USGS. competing with supplies from primary copper companies after Vancouver. The world’s biggest cop- reduced byproduct mines that either have to be developed per miners are appreciative from scratch or restarted after months or molybdenum production in 2003. The of molybdenum’s increased popularity. USGS reported consumption increased 7 2004. With the continuing high price of years on standby. In recent months, nickel-bearing stainless steel in 2004, The world’s second-largest producer of numerous secondary producers have percent from that of 2003 and mine the red metal, Phoenix-based Phelps capacity utilization was about 53 percent. consumers increasingly considered use of announced plans for new copper-moly duplex stainless steel, which has higher Dodge posted outstanding earnings in mines or expansions of existing opera- China continued its high level of steel 2004, thanks in part to high molybdenum production and consumption, thus provid- molybdenum content, the USGS said. tions. prices. In the fourth quarter of 2004, The Pebble project is such a venture. It molybdenum sales added US$32 million has the potential to become a huge sec- to the company’s operating income. To ondary producer of molybdenum. But put things in perspective, Phelps Dodge Pebble is also rare because of the pres- produced 16.5 mil- ence of copper, gold lion pounds of and molybdenum, molybdenum and says Ron Thiessen, then sold it for an president and chief average price of executive of US$25.92 per Northern Dynasty. pound. That com- “Generally, this style pared with 14.4 of porphyry deposit, million pounds contains copper and sold in the fourth

COURTESY OF PHELPS DODGE CORP. COURTESY (either) gold or quarter of 2003 for molybdenum, but an average of not both,” Thiessen US$6.35 per told North of 60 pound. Mining News March Molybdenum’s 14. rising star also Molybdenum additions give alloy steel A new independ- boosted earnings at and iron a combination of strength, toughness and wear resistance not possi- ent mineral resource Vancouver-based ble with unalloyed steels. This modern estimate of Pebble Teck Cominco. building is made of glass and stainless pegs the porphyry Output of the gray steel enhanced with alloys containing molybdenum. gold-copper-molyb- metal from Teck denum deposit in Cominco’s Highland Valley copper mine southwestern Alaska as a much larger in British Columbia added substantially find (see related story in this issue). to the major’s C$162 million in fourth- Prepared by Roscoe Postle Associates quarter operating profits from the mine, Inc., a leading geological and mining con- up 440 percent from C$30 million for the sultant, the new estimate of Pebble’s moly same period in 2003. Sales of 3.2 million resources — measured and indicated pounds of molybdenum at an average of resources of 3 billion tonnes, containing US$30 per pound during the fourth quar- 993 million pounds of molybdenum, with ter contributed C$110 million to Teck an additional inferred resource of 1.1 bil- Cominco’s revenues. This was up sharply lion tonnes, containing 361 million from sales of 1.5 million pounds at about pounds of molybdenum — is roughly 50 US$6 per pound, which added C$10 mil- percent bigger than previously believed, lion to comparable revenues a year earli- according to Thiessen. er. “Moly is a saleable metal, and as such While copper producers are reaping adds to the value of the ore,” he said. “So the rewards of high molybdenum prices the more value in the ore the better the today, several junior companies are using margins of profitability.” the surging price to bring back to life the Thiessen said Pebble’s molybdenum prospects of primary molybdenum min- will be treated as a byproduct and any rev- ing. In Canada, Adanac Gold Corp. is look- see MOLY page 13 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 13

● SOUTHWESTERN ALASKA Independent analysis raises ante at Pebble Northern Dynasty announces aggressive 2005 work plans, new feasibility director and bigger ownership stake

By ROSE RAGSDALE Company picks new Mining News Contributing Writer feasibility director orthern Dynasty Minerals Ltd., A few days earlier, Thiessen announced owner and operator of the Pebble the appointment of Stephen Hodgson, N project in southwestern Alaska, is P.Eng, as feasibility study director for the gearing up for a new season with a Pebble project, effective March 15. The new larger ownership stake in the gold-copper- hire also will serve as vice president of molybdenum deposit and a C$36 million DYNASTY NORTHERN COURTESY engineering at Northern Dynasty’s related work program for 2005. company, Hunter Dickinson Inc. The company announced results March Hodgson has more than 28 years of 4 of a recent independent analysis that indi- experience in mine operations, mine devel- cated the world-class mineral system at opment, and project engineering, most Pebble is significantly larger than previous- recently, as the technical director, mining ly envisioned. and study manager for AMEC Americas Northern Dynasty also said March 14 it Ltd. His background includes a focus on agreed to acquire the remaining 20 percent copper-gold projects and he has led study ownership interest in Pebble in a stock teams for projects such as Patricia Mining’s transaction from Hunter Dickinson Group Island Zone in Ontario and NovaGold’s Inc., a related company. • Higher-grade measured and indicated Dickinson said March 4 the company has Donlin Creek in Alaska. Hodgson holds a The Pebble deposit is located about 60 resources of 569 million tonnes grading launched a work program for 2005, budget- bachelor’s degree in mineral engineering miles from tidewater in Cook Inlet. Mineral 0.50 grams gold per ton, 0.46 percent cop- ed at C$36 million that will include delin- (mining) from the University of Alberta and deposits in the area appear to be relatively per, and 0.021 percent molybdenum, or eation drilling of its new East Zone discov- sits on the advisory committee of the British shallow with almost no internal waste over 0.88 percent copper-equivalent, with an ery at Pebble. The East Zone is located on Columbia Institute of Technology’s Mining a broad area measuring almost two miles additional inferred resource of 143 million the eastern flank of the deposit, where sub- Technology Program. east-west and 1.25 miles north-south. A tonnes grading 0.56 grams gold per ton, stantial open-ended volumes of higher- recent preliminary assessment indicates that 0.40 percent copper, and 0.020 percent grade gold-copper-molybdenum mineral- State, locals join in search the Pebble project could generate very molybdenum, or 0.85 percent copper equiv- ization have been encountered, Dickinson for transportation plan attractive rates of return at production rates alent above a cut-off grade of 0.70 percent said. Challenges for developing Pebble of 100,000 to 200,000 tonnes (metric tons) copper-equivalent. “Comprehensive engineering, environ- include designing an efficient transporta- per day over a 30- to 60-year mine life, The higher-grade measured and indicat- mental, and socioeconomic programs, tion system for getting the remote mine’s according to Northern Dynasty. ed resources also compared favorably with designed for the completion of a feasibility ore to tidewater. The state of Alaska’s results of the 2004 Norwest study, which study and permit applications for a large Southwestern Transportation Plan includes New estimate builds confidence showed 435 million tonnes grading 0.49 scale, long-life mining operation, have been the development of a port and a 55-mile in Pebble resources grams gold per ton, 0.42 percent copper, ongoing for the past year and will continue road from Cook Inlet to the town of and 0.021 percent molybdenum, or 0.84 in parallel with the drill program,” he said. Ronald W. Thiessen, president and chief Iliamna, located some 16 miles to the south- percent copper-equivalent above a cut-off executive of Northern Dynasty, said the grade of 0.70 percent copper-equivalent. new estimate shows Pebble is bigger in all see PEBBLE page 17 The latest resource estimate is based respects. “The March 2005 resources esti- upon drill core assay results from 70,719 mate has increased in both the contained meters of drilling in 265 holes, which metal, but more importantly in the level of Northern Dynasty completed during 2003 JUNEAU confidence of the resources,” he said. and 2004, and 19,245 meters in 118 holes Prepared by Roscoe Postle Associates completed by Teck Cominco American. Inc., a leading geological and mining con- Steller Sea lion finding good news for (Teck Cominco American sold its owner- sultant, the analysis found that the 55- ship stake in Pebble to Northern Dynasty in Kensington gold mine near Juneau square-mile mineral system contains: 2004 for C$12 million and now holds a 5 • Measured and indicated resources of 3 The proposed Kensington gold mine near Juneau would disrupt Steller sea lion percent interest in any net profits that billion tonnes, containing 31.3 million populations but wouldn’t jeopardize the species, federal regulators said in a late Northern Dynasty realizes from the original ounces of gold, 18.8 billion pounds of cop- March finding. Pebble deposit.) per and 993 million pounds of molybde- The decision by the National Marine Fisheries Service bodes well for Coeur Mark Rebagliati, P.Eng and Dr. Morris num, with an additional inferred resource of Alaska’s proposed Kensington gold min- Beattie, P.Eng, are supervising Pebble’s 1.1 billion tonnes, containing 10.8 million ing operation, which wants to use Berners The finding that the mine quality control and assurance program. ounces of gold, 5.9 billion pounds of copper Bay as a transportation corridor for its Logging and sampling is completed in won’t threaten the existence of and 361 million pounds of molybdenum workers and materials. The finding allows Northern Dynasty’s facility at Iliamna and federally protected species in using a 0.30 percent copper-equivalent cut- other agencies to complete their permits then transported to the ALS Chemex labo- Alaska prevents the marine off grade. for the mine. ratory in Fairbanks for drying, weighing This estimate compares favorably with The finding that the mine won’t threat- fisheries service from and crushing. Samples are shipped by air- results of an analysis in 2004 by Norwest en the existence of federally protected enforcing its stringent freight to the main ALS Chemex laboratory Corp. that pegged Pebble’s measured and species in Alaska prevents the marine fish- requirements on the mine to in North Vancouver, British Columbia, for indicated resources at 2.74 billion tonnes, eries service from enforcing its stringent final preparation and analysis. limit disruptions to the marine containing 26.5 million ounces of gold, 16.5 requirements on the mine to limit disrup- tions to the marine mammals. mammals. billion pounds of copper and 905 million 2005 work focuses on East Zone pounds of molybdenum. “You really would have to prove that a Northern Dynasty’s Chairman Robert A. species will face an increased risk of extinction,” said federal biologist Aleria Jensen, who was in charge of developing continued from page 12 age of moly smelting capacity, and a the agency’s biological opinion. strong demand for steel products that Other regulatory agencies stalled their permits for the mine this winter while MOLY have combined to create an environment the agency prepared the 166-page opinion. where moly prices have spiked upward,” “The key conclusion is no jeopardy” to the marine mammals, said Luke enues generated from its sale will be cred- he said. Russell, an environmental official for Coeur Alaska’s Idaho-based parent compa- ited to the cost of production for gold and But he cautioned that one must be con- ny, Coeur d’Alene Mines Corp. copper, thereby reducing the mine’s cash strained by history and conservatism in Still, the agency is trying to persuade Coeur Alaska and other regulatory agen- operating costs and improving profit mar- planning for mine development, though cies to reconsider locating proposed docks and ferry traffic outside of Berners gins. “Higher moly grades, which are current moly prices are “phenomenal.” Bay to prevent disruptions to sea lions, whales and their prey, herring and hooli- something else we’re seeing in some of Thus, all of Northern Dynasty’s plan- gan. the new regions, again means higher ning, at this point, is based on a long-term The agency cited possible harm such as nutritional stress, collisions, noise and value ore, and improved margins,” price of US$6 per pound for moly, he oil pollution. Thiessen said. “More moly is better, as is said. The mine could disrupt the unique feeding activities of sea lions in Berners more copper, gold or silver.” Added Thiessen: “I would not antici- Bay, Jensen said. The sea lions gather up in long lines like football players and Thiessen said current spot prices for pate that today’s moly prices would per- chase their prey from one side of the bay to the other. molybdenum on the London Metal sist in the longer term, two-plus years or Jensen said her agency does agree with many measures Coeur Alaska has pro- Exchange are US$30 per pound and on more. But let’s enjoy them while they posed to reduce its effects on the bay. some days even better. “At this point in last.” ● —THE ASSOCIATED PRESS time, there is a shortage of moly, a short- 14 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● COLUMN Alaska mining news update from Curt Freeman: Investment up significantly for 2004 Production of $1.2B a record high for state; development expenditures more than double from 2003; 2005 looking even better he Alaska Division of Geological resource includes 1.130 billion tonnes Alaska Range and Geophysical Surveys and the The grading 0.24 percent copper, 0.30 grams Alaska newcomer Canaco Resources T Department of Commerce and author gold per tonne and 0.014 percent molyb- Inc. announced that it had acquired an Economic Development have denum equivalent to 10.8 million ounces option on the Macomb and Hajdukovich released their annual preliminary report The author of gold, 5.8 billion pounds of copper and gold prospects on the north flank of the on Alaska’s mining industry for 2004. As Curt Freeman, 361 million pounds of molybdenum Alaska Range south of Delta Junction. expected, investment in all categories CPG #6901, is a using a 0.30 percent copper-equivalent The properties were acquired from Teck was up significantly over previous years. well-known geol- cut-off grade. Do the math — all in Cominco and allow Canaco to earn a Exploration spending in 2004 was esti- ogist who lives in that’s 42.1 million ounces of gold and Fairbanks. He pre- 100 percent interest in both properties by mated at $63.7 million, up from $27.6 24.6 billion pounds of copper! Perhaps pared this column CURT FREEMAN spending a total of $2,000,000 in staged million in 2003. more important is the fact that higher March 22. Freeman can be reached by commitments over the next four years. The 2004 expenditures were the high- grade resources have been increased sub- mail at P.O. Box 80268, Fairbanks, AK Teck retains a back-in right and can est in the state since 1981. Development stantially to a measured and indicated 99708. His work phone number at acquire a 50 percent interest by making expenditures jumped to $105.6 million resource of 569 million tonnes grading Avalon Development is (907) 457-5159 expenditures equal to twice Canaco’s vs. $39.2 million in 2003, thanks largely 0.50 grams gold per tonne, 0.46 percent and his fax is (907) 455-8069. His email expenditures, to a maximum of to initiation of construction at the Pogo copper, and 0.021 percent molybdenum, is [email protected] and his web site is $8,000,000. The Hajdukovich property mine. Production value was up to or 0.88 percent copper-equivalent, with www.avalonalaska.com. was discovered by Teck in 2000. Gold $1,178.5 million vs. $1,000.7 million in an additional inferred resource of 143 mineralization at Hajdukovich property 2003. This increase was largely due to an million tonnes grading 0.56 grams gold acquired an option on the Illinois Creek includes numerous areas of mineraliza- increase in the price of all metals over per tonne, 0.40 percent copper and 0.020 gold property near Galena for an initial tion having been identified to date. The the course of 2004. The production value percent molybdenum, or 0.85 percent payment of $20,000. The company can Sneaker Zone is the principal exploration was a record for Alaska since records copper-equivalent above a cut-off grade acquire 100 percent of the property by target on the property and is defined by have been kept. Total mineral value in of 0.70 percent copper-equivalent. The making payments totaling $250,000 by sheeted, northeast trending, low-sulfide 2004 was $1,347.8 million, another resource estimate is based upon drill April 30, 2009, expending $1.5 million gold-bismuth quartz veins over a mini- record high for Alaska. core assay results from 70,719 meters of on exploration on the property and mak- mum 600 meter by 900 meter area at the As good as this was, 2005 is looking drilling in 265 holes which were com- ing a further payment of $1.0 million eastern property boundary. A total of like it will turn in even better numbers. pleted by Northern Dynasty during 2003 within 30 days of completion of the pay- 1,293 mineralized grab samples have and 2004, and 19,245 meters in 118 ments and expenditures. Immediate been assayed from the property with 145 Western Alaska holes completed by Teck Cominco plans for the property were not released. returning values in excess of 1.0 gram American Inc. up to 1997. The 2005 NovaGold Resources announced NovaGold also announced the final gold per tonne. These samples range up exploration program is budgeted at $36 year-end 2004 financial and operating feasibility study has been initiated at the to 184.46 grams gold per tonne with an million and will include delineation results which included a summary of Rock Creek project. The company is average of 10.97 grams gold per tonne. A drilling of the East Zone discovery on plans for their Donlin Creek deposit. The completing additional in-fill drilling and number of secondary exploration targets the eastern flank of the deposit where company and joint venture partner Placer metallurgical test work as part of the also are known on the property. The substantial higher-grade gold-copper- Dome indicated that efforts in 2005 will final feasibility study. The budget of $4 highest priority amongst these targets is molybdenum mineralization was discov- include a 20,000 meter drill program million is planned for the development stockwork quartz veining within granodi- ered in 2004. In additional the company designed to increase the existing 11 mil- work in 2005 with the objective of the orite and monzonite at the Gert zone. A will continue engineering, environmen- lion ounce measured and indicated program to advance Rock Creek to a total of 109 mineralized grab samples tal, and socioeconomic evaluations resources by converting a portion of the stage of being fully permitted and ready have been assayed from the Gert zone designed for inclusion in a feasibility 14.3 million ounce inferred resource to to construct. An additional $1.75 million with 16 returning values in excess of 1.0 study and in permit applications. The the indicated category. Three drill rigs drilling program is planned for the Big gram gold per tonne. These samples company also announced that it had will be working on site by the end of Hurrah project, located 45 miles from range up to 19.41 grams gold per tonne acquired the remaining interests in the March. In addition detailed engineering Rock Creek. with an average of 5.61 grams gold per Pebble project that were held by Hunter and design studies are continuing to The biggest news out in March was tonne. Rock sampling returned up to Dickenson Inc. and Teck Cominco leav- bring all capital and operating cost esti- the updated resource calculations for 12.62 grams gold per tonne from a target ing it with 100 percent interest in the mates up to a pre-feasibility level of con- Northern Dynasty’s Pebble copper- area that may exceed 300 meters across project subject to a 5 percent net profits fidence and preparation of environmen- gold-molybdenum deposit near Iliamna. slope. At the Macomb prospect 1999 interest held by Teck Cominco. tal assessment documentation and gath- The new resources include measured and stream sediment sampling returned val- ering of baseline environmental data are indicated resources of 3.026 billion Eastern Interior ues up to 3,770 parts per billion gold. continuing. The 2005 budget for the pro- tonnes grading 0.28 percent copper, 0.32 Additional stream sediment sampling gram is estimated at $11 million. The grams gold per tonne and 0.015 percent Golden Spirit Minerals announced identified 14 contiguous drainages on the company also announced that Stan Foo molybdenum equivalent to 31.3 million plans to conduct diamond drilling on its plateau which returned greater than 100 has become the new project manager for ounces of gold, 18.8 billion pounds of Ester Creek project in the Fairbanks dis- parts per billion gold defining a 15 kilo- Donlin Creek. Congratulations Stan! copper and 993 million pounds of trict. Details of the program, planned for NovaGold also announced that is has molybdenum. An additional inferred the summer, were not released. see FREEMAN page 15 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 15 continued from page 14 its Ambler massive sulfide project in the southern Brooks Range. The 6,000 meter FREEMAN drilling program is designed to advance ALASKA the project to scoping level by continuing meter long southeast trend. Prospecting to define the project resource, complete Linux Gold, Teryl extend joint venture and geochemical work carried out by transportation and energy studies, Linux Gold Corp. and Teryl Resources Corp. said March 22 that they had Teck in 2000 was successful in defining increase the resource base by testing pos- several areas of anomalous gold and agreed to extend the term of their original Fish Creek claims agreement until sible ore zone extensions defined through March 5, 2007, giving Teryl a 50 percent interest in 30 Fish Creek claims, which locally heavy metals in soils on the West deposit modeling and confirming and and East Berry Creek grids. Mapping are within six miles of Kinross Gold Corp.’s Fort Knox mill. The Fish Creek expanding mineralization on select outly- claims are also adjacent to the Teryl/Kinross joint venture Gil claims. and prospecting resulted in discovery of ing prospects and targets. two quartz vein float samples in East Other than this extension, all other terms of the original agreement remain the same, the companies said in a joint release from their Vancouver offices. Berry Creek grid area that returned Southeastern Alaska assays of 17.6 grams gold per tonne and The original Fish Creek agreement gives Linux a 5 percent royalty interest Hecla Mining (29.73 percent) and 39.2 grams gold per tonne and one float until US$2 million has been received from the royalty payments, or the company Kennecott Mining (70.27 percent) sample of granitic host rock from the may convert its interest into a 25 percent working interest. Under the deal Teryl announced fourth quarter and year-end same area (quartz/sericite altered) with may purchase the 5 percent net royalty for US$500,000 within one year after pro- production results from the Greens Creek quartz stockwork that assayed 20.5 grams duction. mine near Juneau. For the year the mine gold per tonne. Four diamond drill holes Teryl also agreed to expend a minimum of US$500,000 after two years from produced 9,708,254 ounces of silver, totaling 425.4 meters were completed in the date of the March 22 amended agreement. 86,184 ounces of gold, 24,836 tonnes of 2003 on the Macomb property while The proposed consideration is the issuance of 100,000 common shares of Teryl lead and 76,182 tonnes of zinc. Cash under option to Geologix Explorations. to Linux. operating costs were 98 cents per ounce Only one hole intersected bedrock with John Robertson, Teryl’s president and director, is also president and director of while total costs were $3.47 per ounce. no significant gold values returned. The Linux. Teryl and Linux also have common directors. Average head grade mined for the year results confirmed that the appreciable With interests in four gold properties, Teryl is one of the main landowners in was 16.65 ounces of silver per tonne. glacial cover hinders the process of target the Fairbanks Mining district. The Gil project is a joint venture with Kinross (80 Year-end proven and probable reserves generation and that a detailed analysis of percent Kinross/20 percent Teryl). The company’s holdings also include the Fish stood at 2,358,189 tons grading 0.11 the local glacial geology be developed Creek claims, 50 percent optioned from Linux Gold Corp. and the Stepovich ounces of gold per ton, 14.1 ounces of prior to additional drilling of the high claims, where Teryl has a 10 percent net profit interest from Kinross. silver per ton, 3.9 percent lead and 10.2 grade gold float and soil geochemistry Teryl also has a 100 percent interest in the West Ridge property, and has percent zinc. Inferred resources stood at anomalies. Immediate plans for the 2005 obtained a mining lease on the adjoining Fox Creek claims in Alaska. 785,276 tons grading 0.14 ounces of gold season were not released. Welcome to Teryl also has one joint venture silver prospect located in northern British per ton, 14 ounces of silver per ton, 4 Alaska Canaco! Columbia. percent lead and 11.1 percent zinc. Nevada Star Resources announced In addition to its Fish Creek interests, Linux has mining investments in China Exploration efforts in 2004 discovered additional results from a six-hole 2,275 and British Columbia. mineralization west of the Gallagher fault foot reverse circulation drilling program —MINING NEWS with the longest continuous intercept of completed on the Canwell nickel-copper- mineralization stretching over a 280 foot platinum group element prospect in interval in one hole. Assays for these September 2004. The drilling intersected holes are pending but are expected to significant thicknesses of weakly dissem- return significant lead, zinc and silver inated sulfide mineralization in the east values. central part of the major Canwell Intrusive complex. Drill hole CAN0405 Other has the thickest intersection, with 550 feet of 0.27 percent nickel, 0.02 percent All right, let’s get it over with. The copper, 0.01 percent cobalt and 0.15 annual Fraser Institute survey on min- gram per tonne platinum group element ing companies has been released to less plus gold in altered dunite starting at a than enthusiastic response here in Alaska. depth of 50 feet. Other intersections Alaska dropped to 33rd place of 64 juris- included 90 feet at 0.26 percent nickel in dictions measured in the policy potential drill hole CAN0401, 120 feet at 0.20 per- index, a measure of the regulatory regime cent nickel in CAN0403, 335 feet of 0.21 in a given political jurisdiction. With cur- percent nickel in CAN0404, and 45 feet rent land use policies in effect, Alaska of 0.30 percent nickel in CAN0406. plummeted to 55th place in the mineral Detailed thin-section petrographic studies potential index, a measure of the poten- indicate the presence of trace to minor tial of a jurisdiction. Remove the policies amounts of sulfides (up to 1 percent), and Alaska was a stellar third place mainly pyrrhotite and pentlandite, inter- behind only Tasmania and Nevada (yes, grown with magnetite and chromite with- Tasmania). A new index, measuring a in and at the margins of serpentinized jurisdiction’s room for improvement, olivine grains. Additional evaluations of placed Alaska a dismal 62nd, ahead of the Canwell prospect are planned. only Montana and California. In short, Golconda Resources announced that Alaska got hammered! How about some it had completed two additional holes even more disturbing news? Turns out (633 meters) at its Shulin Lake diamond there is a disturbing lack of companies project west of Talkeetna. The core who are active in Alaska that have been obtained from these holes has been asked to fill out a Fraser Institute survey shipped for laboratory analysis but con- form. In fact, I can find nobody active in tained similar rocks that produced micro- Alaska who filled out such a survey! If diamonds and diamond indicator miner- mining companies active in Alaska are als in their 2004 drilling program. The not filling out the form, who is? Will company is continuing to drill on the Rogers said “Everybody is ignorant, only third of three circular volcanic features on different subjects.” Given the amazing believed to be genetically related to min- changes that have improved Alaska’s eralization. mining climate over the last 10 years, Alaska can only blame itself for allowing Northern Alaska mining companies to remain ignorant of superb opportunities that exist in the NovaGold Resources announced state. If it feels like a glove across plans for a $4 million drilling program at Alaska’s cheek, perhaps it is! ● 16 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005

● ALASKA Gold rush judge’s diaries go digital Territory’s Judge Wickersham’s colorful tales of life among Nome stampeders are on Alaska State Library Web site By SARAH HURST — in short a large amount of business of Mining News Editor great public importance in the most dis- tant parts of my district that ought to have he adventures of an intrepid judge at immediate attention. If I wait until the the height of Alaska’s gold rush have river opens I cannot get down to Rampart T been published online, thanks to the and back by July 1st the date when the Alaska State Library. Judge James regular term of this court must meet at Wickersham was appointed district judge Eagle City. So I have called a special term in 1900, and came up from Washington, of Court to meet at Rampart on Mch 4, initially to Eagle City, but soon after- and I start for that place in the morning wards cleaned up scandal-ridden Nome. accompanied by Ed. Crouch and a dog On his death in 1939, Wickersham left team — a journey of 519 miles afoot over behind 47 diaries containing a detailed COLLECTIONS LIBRARY/HISTORICAL ALASKA STATE the Yukon river ice. No other official goes account of Alaska’s formative years as a with me, — no one wanted to go! territory of the United States. The first 13 diaries, up to 1908, were 1901: Feb. 15 transcribed by Mary Anne Slemmons at 50° below this morning & we did not the Alaska State Library. Slemmons leave Coal Creek until 10 a.m. Bray, who worked on the project for several months, is prospecting for coal up that stream funded by a grant from the Bureau of came down to Mocks — keeper of the Land Management’s Gold Rush roadhouse, before we left. Says he has Centennial Task Force. “I transcribed his good bituminous coal 9 miles up the spelling mistakes faithfully,” she told creek. Mining News. “Some words are archaic, but were common to the time he lived in, 1901: March 7 so they added to the color.” Went out to Little Minook Creek, Putting the remaining diaries online today — 8 a.m. this day — Dog team may be easier because Edmund Schuster, went also. Visited “Idaho Bar”, and met a retired University of Alaska Anchorage Mr. Wm G. Atwood, U.S. Min. Sur. and sociology instructor, has offered the Mr. Crowley, manager in charge. “Idaho library his own transcripts of the diaries, Bar” belongs to Erastus Brainerd Esq. & which he typed in the 1970s and ‘80s. associates of Seattle. They have run a ter- Schuster had planned to write a book minal in from the hillside on bedrock 500 about Wickersham, but stopped the work feet above valley, and have sunk 3 shafts when Evangeline Atwood’s book came to bed rock, all of which will be connect- out. He transcribed the diaries from ed by the tunnel. 12 men working there: microfilm. “I’m not a professional typist, two steam thawers, &c. It looks prosper- but it’s all readable,” he told Mining ous and more like mining than any thing I News. “I haven’t looked at it in probably have seen this side of the “Gold Hill” 15 years.” mines at Bonanza Creek Dawson. Visited Both Slemmons and Schuster agree James Wickersham seated at desk with law books McGraws claim on Little Minook — they that Wickersham had a rare integrity in a & put up at Hotel. Visited mines, Valdez mail goes out. Sent out receipt were unfortunate enough a few days ago situation where most people were out to to drift too near some old diggings — line their own pockets. “He was a very explored tunnels &c. “sniped” from for salary for months of July, Aug, Sept bedrock, washed gravel, and all hands and Oct. Have not been paid a cent of tunnels, and water broke through and strong character. He fought for Alaska,” filled all their shafts and drifts, and they said Schuster. Below are extracts from were treated everywhere as royally as salary yet, and will not until this receipt American miners treat visitors. Gold & reaches Washington, when I will receive are now fitting up a steam pump to clear Wickersham’s early years in Alaska, start- them out. Did not go over to Minook, Jr. ing with his journey to Eagle City. The CheChaco Hills are the most interesting in due course of Alaska winter mail a mining camps I ever saw. check! When this is somehow exchanged as I intended. This is an interesting local- diaries can be accessed online at Alaska’s ity aside from its mines. Ore miner has Digital Archive, http://vilda.alaska.edu/. — about spring I may expect to get the 1900: July 12 money. removed from his mine the long 9 ft. tusks of a mastadon with teeth & other 1900: July 11 After visiting mines and talking with 1901: Jan. 5 remains. Mr. Ed. S. Orr, who as Mayor of people, seeing operations and generally Tacoma, appointed me City Atty, is a res- surveying the plan of mining at this rich One feature of Seventy Mile River 1901: June 16 ident of Dawson, and the head of the firm and interesting spot we returned to strikes me as peculiar: — the valley bed Dawson by Orrs coach this afternoon. We rock is everywhere higher than the river Reports all confirm Noyes suspension of Orr & Tukey [?], freighters to the and my transfer to Nome, — well I must mines. He invited our party to go out to El were treated right royally by Orr, who is — every bar can be worked by the voted a prince by every one in our party. hydraulic method — water plenty, and the hunt and play now, for that means very Dorado and Bonanza Gulches as his hard, — hard work, but I am ready and guests: went in his stage coach with four entire valley is said to have fine gold in 1900: Oct. 28 the earth. prepared for it. Left Eagle at 3 oclock horses, Orr driving. Went to Grand Forks, afoot and reached Torrances mining camp 1901: Feb. 8 at 6:00 for supper. He is doing placer mining at the mouth of Colorado Creek, I have several important cases involv- — employs several men and is making ing valuable mines, and the organization quite a show with the water from the of the civil authority in Rampart, as well creek. as some important cases relating to man- damus of mining recorders at Circle City see WICKERSHAM page 17 PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 17 continued from page 16 WICKERSHAM

1901: Aug. 16 Had a delightful trip over from (St. M. to) Nome and reached here this morning at 9 oclock. ... Judge Noyes left here last Monday for Washington and the outside — San Francisco. There is an intense, bit- ter and widespread feeling here against him. The bar held a meeting last night and sent out a strong petition to President ask- COLLECTIONS LIBRARY/HISTORICAL ALASKA STATE ing for his removal. ... The situation here is bad — last night — 75 armed men went upon a valuable claim, ousted the posses- sor shot one badly — and are now in pos- session — claims are now being worked out by the strong party in open violation of injunctions of the court — the court orders are treated with open contempt and disdain. A reign of anarchy exists — so far as it can exist — in an American camp. 1901: Sept. 28 Heavy storm raging for two days past, but quieting tonight. Large steamer in the front of Nome — flags at half mast. Word also received from Kaltag, by telegraph that President McKinley died on 17th. General expressions of sorrow from all Wickersham headquarters, Nome, Alaska classes of citizens. Profs. Mendanhall, Schrader & Peters, U.S. Geological sur- Sam Milligan. Mr. Orton, attorney, Mr. Anvil Creek, in the center — $3800 in feeling of safety over property rights & vey came in yesterday from the Arctic Chilberg, financial manager of P.M. Co. virgin gold. Each guest was given a do me the honor to say that investments coast. Mendenhall, from jaundice, is as Mr. Sodenberg, owner of the “Hot Air” choice of nuggets excluding the giant can now be made with assurance of fair yellow as a pumpkin. His bald head looks mine, and two other young men connect- worth $1752.00. protection. Judge Noyes seems never to like the full moon — Two men in landing ed with the Co. We had a fine dinner, — have rendered even one mining opinion from schooner drowned in front of town the centerpiece — the peice de resistance, 1901: Oct. 29 and but one mining case was tried by on beach. was a great china platter in the center of The attorneys now tell me that the him in the more than a year that he was the table filled with the last cleanup of the case decided yesterday involved more here. ● 1901: Oct. 1, 1901 “Hot Air” mine, with the great nugget than half a million dollars. I am pleased Present Capt. Hibbard, Mr. & Mrs. recently found on “Discovery” claim, to know that mine owners now express a continued from page 2 continued from page 13 just over 14 million shares of Northern Summary GREENLAND PEBBLE Dynasty common stock. The shares repre- The numbers of diamond and kimberlite indicator sent about 20 percent of the company’s adjusted market capitalization, Northern two samples are likely derived from the minerals recovered from the samples are summa- east of the Pebble deposit. The Alaska Dynasty said. same kimberlite source and that conditions rized below: Department of Transportation and Public In November 2004, Northern Dynasty within this source allowed good preservation Facilities has commissioned engineering purchased all of Teck Cominco American of any contained diamonds,” Metalex said. Sample 1 Sample 2 studies for the selected road corridor and Inc.’s interest in the resource lands portion The near-source surface textures and distri- Weight (kg) 7.4 11.0 port site. Homer Electric Utility and of Pebble by issuing US$9.94 million in bution of anomalous kimberlite indicator G10 garnets 83 342 Northern Dynasty are jointly funding a fea- common stock and recently bought Teck count samples “suggest that the source of Group 1 eclogitic garnets 1 1 sibility study of a power development plan Cominco’s residual 50 percent working the diamond indicator minerals lies within, Titanium chromite 9 6 to connect the deposit site to the state of interest in the exploration lands portion of or at the edge, of a large ice covered lake on Chrome diopside 83 4 Alaska’s Railbelt electrical grid. the Pebble property by issuing US$4 mil- a Metalex claim.” Diamond inclusion olivine 12 4 lion in common stock. Field work aimed at discovering the kim- Picrolimenite 276 341 Northern Dynasty acquires nearly 100 Once the latest acquisition is complete, berlite source was to start in late March and percent mine ownership Northern Dynasty will hold a 100 percent be done before the ice melts in May. and Jan. 20, 2008. Metalex has given Kel-Ex Northern Dynasty’s board of directors working interest in the entire Pebble proper- Metalex has a 100 percent interest in the Development, owned by Dr. Charles Fipke, agreed March 14 to acquire the remaining ty, subject only to a maximum 5 percent net claims. Cantex Mine Development has an a 10 percent net carried interest in return for 20 percent working interest in Pebble’s profits interest held by Teck Cominco in the option to buy a 25 percent contributing operating the project. exploration and resource lands from Hunter exploration lands portion of the property. ● interest for $120,000 between Jan. 1, 2008 —MINING NEWS Dickinson Group for a purchase price of 18 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005 Companies involved in Alaska and northern Canada’s mining industry Ace Transport bishing, and relocation/remodel services. Authorized cializing in remote locations and helicopter supported core- Anchorage, AK 99502 Steelcase dealer for Alaska. drilling programs. Services range from feasibility studies, Contact: Henry Minich, owner shaft sinking, mine construction to contract mining. Phone: (907) 243-2852 Carolina Mat Co. 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Alaska Marine Lines • Alaska Railbelt Marine Web site: www.securityaviation.biz Alaska West Express • Lynden Air Cargo All twin engine turbine and piston fleet. Alaska, Canada, Arctic Controls Lynden Air Freight • Lynden International Lower 48. Crew changes, hot freight/HAZMAT, VIP tours, Anchorage, AK 99501 Lynden Logistics • Lynden Transport emergency response and aerial surveys. Approved by all oil Contact: Scott Stewart, president Anchorage, AK 99502 and gas companies, Alyeska Pipeline Service Co., Dept. of Phone: (907) 277-7555 • Fax: (907) 277-9295 Contact: Jeanine St. John Defense, Dept. of Interior, Dept. of Transportation and the E-mail: [email protected] Phone: (907) 245-1544 • Fax: (907) 245-1744 State of Alaska. Website: www.arcticcontrols.com E-mail: [email protected] An Alaskan owned and operated company since,1985, Arctic The combined scope of the Lynden companies includes truck- U.S. Bearings & Drives Controls has been highly successful as manufacturer repre- load and less-than-truckload highway connections, scheduled Anchorage, AK 99518 sentatives for the state of Alaska in the Process Control and barges, intermodal bulk chemical hauls, scheduled and char- Contact: Dena Kelley, branch mgr. Instrumentation field. tered air freighters, domestic and international air forward- Phone: (907) 563-3000 • Fax: (907) 563-1003 ing and international sea forwarding services. Email: [email protected] Arctic Foundations Web site: www.bearings.com Anchorage, AK 99518-1667 MRO Sales U.S. Bearings & Drives has been providing solutions to it cus- Contact: Ed Yarmak Anchorage, AK 99518 tomers for over 25 years. We offer quality components, name Phone: (907) 562-2741 • Fax: (907) 562-0153 Contact: Don Powell brands and highly trained personnel. Email: [email protected] Phone: (907) 248-8808 • Fax: (907) 248-8878 Website: www.arcticfoundations.com E-mail: [email protected] Usibelli Coal Mine Soil stabilization – frozen barrier and frozen core dams to Website: www.mrosalesinc.com Fairbanks, AK 99701 control hazardous waste and water movement. Foundations MRO Sales offers products and services that can help solve Contact: Bill Brophy, vp cust. relations – maintain permafrost for durable high capacity foundations. the time problem on hard to find items. Phone: (907) 452-2625 • Fax: (907) 451-6543 Email: [email protected] Capital Office Systems Nana Dynatec Drilling & Mining Web site: www.usibelli.com Anchorage, AK 99508 Anchorage, AK 99508 Other Office Contact: Leslye Langla, managing direct. Contact: Anita Williams P. O. Box 1000 • Healy, AK 99743 Phone: (907) 777-1501 • Fax: (907) 777-1515 Phone: (907) 345-2511 • Fax: (907) 345-8923 Phone: (907) 683-2226 Email: [email protected] Email: [email protected] Usibelli Coal Mine is headquartered in Healy, Alaska and has Asset management, systems furniture, project coordination, Web site: www.dynatec.ca 200 million tons of proven coal reserves. Usibelli produced space planning, systems delivery/installation, furniture refur- Nana Dynatec provides rotary and core drilling services spe- one million tons of sub-bituminous coal this year.

All of the companies above are regular advertisers in North of 60 Mining News. PETROLEUM NEWS • WEEK OF MARCH 27, 2005 NORTH OF 60 MINING 19

● SOUTHWEST ALASKA Northern Dynasty aims to get Pebble right first time Environmental study plan is online and company welcomes public comments, increases community outreach in project area

By SARAH HURST “fantastic” airport infrastructure, Ede jeopardize a one-and-a-half billion-dollar Pebble’s mine life is currently estimat- Mining News Editor said: “We made a commitment to the project with innovative, experimental ed to be 30-40 years. The two-year con- communities that we would only access alternative power generation… You rely struction of the mine will provide around orthern Dynasty is taking an inno- the area by helicopter, not using ATVs.” on wind — you can’t guarantee power… 2,000 jobs and the mine itself will vative approach to the permitting The current focus is on how we make use require 1,000 employees throughout its N process, the company’s environ- 2,500 samples in 2005 of the capacity that’s already on the grid.” life. ● mental project manager for Pebble, More than 30 different consulting Ella Ede, told the Alaska Association of firms and laboratories are providing Environmental Professionals March 18. expertise on the environmental side of Unlike other mining companies, the project, more than 80 percent of Northern Dynasty took the unusual step of submitting its 2004 environmental study plan to all the relevant agencies so “You name an energy source and that they could comment before the per- we’ve investigated it. Including mit application nuclear,” Jenkins said. “This is a process even start- ed. one-and-a-half billion-dollar Pre-application project that requires power, secure meetings are a com- power on a sustained basis 24 mon practice in hours a day, 365 days a year. You Alaska’s oil and gas do not jeopardize a one-and-a-half industry and have billion-dollar project with helped to expedite innovative, experimental the permitting process for explo- Ella Ede, Pebble alternative power generation… ration and develop- environmental proj- You rely on wind — you can’t ment projects, Bill ect manager guarantee power… The current Van Dyke, petrole- focus is on how we make use of um manager for the the capacity that’s already on the state Division of Oil grid.” and Gas, told Mining News. Northern them Alaska-based. Northern Dynasty Dynasty also hoped has surveyed 100,000 acres of wetlands to solicit comments so far. In 2004 the company took from the public, and approximately 1,950 primary samples of the 132-page plan is Bruce Jenkins, water, soils, sediments, fish tissue, vege- online at the Alaska Northern Dynasty’s tation and so on, spending $8 million on Department of COO its environmental studies for the year. Natural Resources’ In 2005 Ede expects to take 2,500 website, although the company was dis- samples and spend $13 million, which appointed with the public’s lack of will include work on providing power for response. the project. “Our goal is to get it right, to collect Northern Dynasty made an agree- the right data and make sure we haven’t ment with Homer Electric Association in missed anything,” Ede said. “We don’t January to work on supplying power to want to find out two years from now that the proposed mine. we should have been collecting some- “You name an energy source and thing that we didn’t. We did get review we’ve investigated it. Including nuclear,” comments from most of the state and Jenkins said. “This is a one-and-a-half federal agencies.” Northern Dynasty still billion-dollar project that requires power, welcomes comments from the public secure power on a sustained basis 24 about the plan and is stepping up its hours a day, 365 days a year. You do not community outreach program in 2005. The company recently hired an Alaska Native as a community relations consult- ant, and Ede herself was raised in rural Alaska. More than 100 ‘Iliamnans’ hired Last summer Northern Dynasty hired more than 100 people from the Iliamna area to work on the Pebble project, including Native observers who accom- panied the field teams to air their ques- tions and concerns. Many of the observers became so interested in the project that they started working as tech- nicians, Ede said. To keep in touch with local people, Northern Dynasty holds community meetings, representatives make informal visits to villages — Ede could name all 14 of the villages in the region off the top of her head — and publishes newsletters about Pebble. A website at www.ndmpebblemine.com is under construction. “We have an open door policy. We’ll engage and talk to any stakeholder, espe- cially in the community,” Northern Dynasty’s chief operating officer, Bruce Jenkins, added. The company accesses the site using six or seven helicopters, and Iliamna’s 20 NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF MARCH 27, 2005