August 2007

Pogo project creating wealth in the North

By D. Zlotnikov

Congratulations! It’s a gold mine!

Not quite newly-born, but definitely in the very early stages of its life, the Pogo gold project has gone from making its first steps to a confident walk. There are excellent reasons for Pogo and its owners Teck Cominco (40 per cent share and the operators of the site), Sumitomo Metal Mining (51 per cent), and Sumitomo Corporation (9 per cent) to be confident. The mine achieved its commercial production goal on April 26 of this year, and is moving towards its full production goal of 2,500 tons of ore per day. According to Teck Cominco Director of Investor Relations Dave Splett, full production rates will be reached some time in the second half of this year. At the moment, the mine averages 2,100 tons of ore a day.

The site was originally discovered in 1994, by Sumitomo Metal Mining, explained Teck Cominco’s Vice President of International Mines Dale Andres. By 1997, an agreement was reached with Teck Cominco, whose predecessor had a history of working with Sumitomo. The same year, Teck Cominco began exploratory drilling at the site.

The exploration continued until 2000, by which time a significant amount of reserves was found, allowing the venture to move forward with engineering, permitting, and construction. The permitting, Andres noted, was completed in only four years, which is a credit to the team that handled it. “Typically, permitting a mine in under four years in the United States is a very good and uncommon achievement.” The permitting also included permits for an 80-kilometre (50 mile) access road, the first such in Alaska in a long time, according to Andres. Following the receipt of the final permit and the withdrawal of a permit challenge by the Northern Alaska Environmental Center (NEAC), construction could continue at the site. Teck Cominco managed the project, with AMEC providing engineering services. It is around this time that Bob Jacko was brought in by Teck Cominco as the project’s general manager, a role he continues to fill today.

No doubt, both the mine owners and Jacko himself would have preferred to say “and they all lived happily ever after” at this point, but the Pogo tale is not without its twists and surprises. To start with, the mine was being explored when gold dropped to $300 an ounce in 1997 and stayed down, only reaching the $400 point in 2003. Andres explained how this affected the project.

“Gold prices were depressed in the first part of this decade, so Pogo stayed on the table, waiting to be approved, and it had quite a bit of detailed engineering done because of the low gold prices at the time. We wanted to make sure it would be economic and that we could get all the permitting. We didn’t want to make an approval decision before we had all the permitting in place.”

Of course, once the mine was approved and built, the challenges didn’t disappear - they simply changed to new ones.

“Starting up a new mine isn’t the same as moving into a house where all you have to do is hang the curtains,” said Jacko. “You get the plant up, you get it commissioned, and you start operating right away, and the only thing you’re dealing with is the information from the feasibility study.” There’s no such thing as “typical” when it comes to gold mines, Jacko explained. “The filtering plant is a prime example. There was lots of good work done on filtering capacity and the bulk sample was taken and you’ve come up with all the information at the time. But now you start mining the orebody. You took a 5,000-ton sample out of one little corner, but now, all of a sudden, we’re mining in 14 different faces, and all the faces are slightly different. The mineralogy is slightly different, the materials are slightly different. This affects the fineness of the grind, for example.”

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