Mining and exploration review north of the 60th parallel

AIDEA continues to invest in Alaska development as infrastructure projects generate revenue and create jobs

IMG_3305Distinguished by the fact that it is a self-sustaining entity, the Alaska Industrial Development and Export Authority (AIDEA) was created as a public corporation of the State of Alaska in 1967. Its mission: to provide various means of financing to promote economic growth and diversity within the state. AIDEA accomplishes this by acting as a funding resource in partnership with other financial institutions, economic development groups, and guarantee agencies.

“We’re a $1.2 billion corporation with three different legs,” explains Jim Hemsath, AIDEA deputy director of Project Development and Asset Management. “One third of our investments is used to generate revenue. One third is used as loans through our commercial finance group, which partners with Alaska’s lending community. And one third is comprised of the specific assets that we own.”

These specific assets can be large or small, but one thing in common is that they all have meaningful economic development impacts on both the state of Alaska and its people.

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New Roads Extend Potential
The DeLong Mountain Transportation Systems (DMTS) is one example of an AIDEA asset that has a significant economic development impact. It is the largest, single infrastructure project in the organization’s history. It comprises a 52-mile, 30-foot wide, all-weather industrial haul road; a shallow water dock; offshore conveyor loading facility; fuel distribution and storage systems; and other port facilities. The road leads from the Red Dog Mine district to a port site located on the Chukchi Sea. Initial construction was completed in 1990 and a port expansion took place in 2000.

The DMTS gave the NANA Regional Corporation (a Regional Alaska Native corporation formed in 1971), the essential road and port access needed to mine their Red Dog Mine ore deposit, which they then contracted to Teck Alaska. Teck Alaska, in turn, has contracted AIDEA for a priority non-exclusive right to use the DMTS system until 2040. From the mine’s inception, NANA has been paid $466 million in nominal royalty payments while the Northwest Arctic Borough has received approximately $90 million in revenue.

“AIDEA can take a very patient position on return of capital, and on this project we have taken a 50-year window of return,” explains Hemsath. “This resulted in lower cash flow requirements for Teck, and through the DMTS, Teck is able to get their product to market at a competitive price. Ultimately this has been good for the local community because the Red Dog project maintains over 500 jobs a year and provides a tax base for the Northwest Arctic Borough.”
The opportunity for a sustainable future is present with the adjacent Aqqaluk Deposit, a rich ore deposit that will produce 20 more years of operating life for the Red Dog Mine and continuing jobs for the region.

AIDEA is also working with another company, Zazu Metals Corporation, to assist them with financing a 24-mile road extension (and port expansion) off of the DMTS to provide access to their Lik Deposit of zinc, lead, and silver. Zazu Metals intends to use this 24-mile road, along with 40 miles of the existing DMTS, to convey the concentrate produced from the mine to commodity vessels offshore for export to world markets. If the project does happen, it would mean even more potential jobs – and revenue – for the community.

“The DMTS project has been a significant one in terms of promoting major economic development and activity,” explains Karsten Rodvik, Project Manager, External Affairs, AIDEA. “With this key infrastructure in place, stable, high-paying jobs for hundreds of people have been created in a region that wouldn’t otherwise feature this level of employment opportunity. And the majority of the people working on this world-class project are members of NANA, which means that the jobs are predominantly local.”

OLYMPUS DIGITAL CAMERABuilding as Asset
The Skagway Ore Terminal is another AEDIA infrastructure project. It consists of a 6.7-acre industrial waterfront lot, whose primary features include a 98,000-square-foot, 16-inch concrete floor (the concentrate storage facility situated on this floor was demolished in 2003) surrounded by concrete containment walls; office; shop; laboratory; electrical and wash buildings; enclosed materials handling loadout conveyors and shiploader; and a .37-acre adjacent lot which contains a fuelling facility (two 10,000 gallon day tanks), and tank farm (four 30,000 gallon storage tanks).

AIDEA purchased the Skagway Ore Terminal in 1990 to promote year-round economic activity in Skagway, as well as to fund necessary environmentally efficient renovations to the facility, and to open the door to future economic growth through the marketing of the facility to other potential users.

Unfortunately, the shipping of metal concentrates did not continue beyond 1998 when soft zinc prices forced the Yukon’s major zinc mines to shut down. AIDEA took the opportunity to proceed with the land remediation and to tear down the storage facility. A modest rebuild took place in 1997. Since then, AIDEA has been working with Minto Explorations Ltd. to use the facility to store and ship ore concentrates. At the behest of Minto Explorations, the Skagway Ore Terminal was expanded by 14,000 square feet in 2008. But that still leaves 60 to 65 per cent of the concrete floor space available for development.

“We are in the early stages of discussion with Eagle Whitehorse LLC, which is looking at reclaiming about 350,000 tons of magnetite a year over a five-year period,” explains Hemsath. “We are also working with a number of Yukon and B.C.-based mining companies on other potential opportunities. We anticipate building out the Skagway Ore Terminal to its capacity over the next five years and then to expand that by an additional 25 per cent, as well as to replace the ore handler with an expanded one to better meet the needs of the mining companies.”

Although the Skagway Ore Terminal is nowhere near the size of the DMTS project, it nevertheless has a positive economic impact on the local community.

“The community of Skagway is only about 900 residents,” explains Hemsath. “We’re hoping that our work on the terminal will ultimately create around 30 new jobs. In a community of that size, those 30 jobs can have a tremendous impact.”

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Working for a Better Future
With as many as 10 new projects being proposed each year, AIDEA is in a pivotal position to help guide the State of Alaska toward additional revenue-generating opportunities and job-creation activities. Unlike many other State-owned economic development agencies, AIDEA remains a self-funded organization. It not only operates independently of State general funds but it pays an annual dividend to the State. Since the inception of the dividend program in 1995, AIDEA has paid the State of Alaska more than $345 million in dividends.

“We are governed by our seven-member Board of Directors,” concludes Hemsath, who adds that the board was recalibrated a couple of years back from a board of three commissioners and two private sector members to a board of two commissioners and five private sector members. “We’re all about partnerships, about partnering with private organizations in Alaska’s business and development community to provide access to capital and to generate jobs.”

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