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Constantine Metal Resources, the Canadian mining company that has explored hard-rock mining in the Chilkat Valley for 13 years, came out with a preliminary economic assessment (PEA) this month that projects an 11-year mine that would earn a $266 million profit.

The CVN reporters spoke with Alaskan mining trade associations, the state permitting agency and Constantine Metal Resources officials to come up with three key-takeaways from the report: utilizing existing infrastructure is important to the Palmer Project’s profitability, $266 million is ‘a lot’ of money for an 11-year mine, and 11 years is only the initial estimate for a potential mine’s lifespan.

Alaska Journal of Commerce reporter, Elwood Brehmer, who frequently writes about mining in Alaska says that PEAs, “are like the first official marketing tools that a lot of these exploration companies have.”

Alaska Department of Natural Resources’ associate director Kyle Moselle, who has worked on permit approvals for all five active Alaskan metal mines, said that while a PEA is a key document in moving forward, it doesn’t inform the permitting process.

“A PEA does not have the level of confidence to base a permit on,” Moselle said.

Constantine’s spokesperson, Liz Cornejo, said, “A PEA is often conducted as a guide to inform company planning and shareholder decisions, but also is a detailed ‘conversation starter’ that can now frame discussions with local stakeholders over the coming months and years.”

Infrastructure

According to an Alaska mining representative agency, The Council of Alaskan Producers, the Palmer Project’s proximity to an existing road system is hugely beneficial.

“All of our large mines, with the exception of Fort Knox on the road system in Fairbanks—all of them have had to build major infrastructure,” executive director Karen Matthias, said. “In three cases they built ports. Pogo built a 50-mile road and power transmission line. Whether it’s roads, energy requirements or ports, those things are not in place in many of the areas in Alaska where you have rich deposits.”

Brehmer’s article about Constantine’s Palmer Project in the Chilkat Valley was recently published by the Anchorage Daily News. In it, Brehmer wrote that the Palmer Project’s PEA shows, “the potential to produce a big payback if developed into a mine largely due to its proximity to established infrastructure.”

“Alaska is unique in the aspect that yeah, there are countless metal prospects, but this is one of the few that’s on any sort of road system,” Brehmer said.

Infrastructure is one of the most expensive aspects of mining projects. The DeLong Mountain Transportation System, a 52-mile haul road connecting Red Dog Mine to a port on the Chukchi Sea cost the Alaska Industrial Development and Export Authority (AIDEA) $265 million, nearly as much as Constantine’s entire PEA profits. Rough estimates for the the Ambler Mining District Industrial Access Project to construct a 211-mile gravel road north of Fairbanks are between $200 and 300 million.

Profit

A $266 million profit after taxes is nothing to scoff at. Brehmer said $266 million over 11 years is a very robust projection.

Cornejo said, “We were very pleased to see the analysis show the project could be operated with strong economics and an environmental conscious design.”

On Constantine’s website, it compares the possibilities of the Palmer Project to the billion-dollar valued Greens Creek Mine: “The Palmer Project is a volcanogenic massive sulphide (VMS) type deposit that is located within the same belt of rocks that is host to the Greens Creek and Windy Craggy VMS deposits – both widely recognized to be world class systems.”

According to Constantine, Windy Craggy is the world’s fourth largest VMS deposit by size, and Greens Creek is in the top five of silver producing mines in the world.

The Palmer Project’s main mineral deposits, according to Constantine, are copper and zinc, which are less valuable than silver.

Mine life

Constantine’s PEA is unique for one more reason: 11 years is a short mine life. Brehmer said that mines in Alaska usually last between 20 and 40 years. But said he wasn’t surprised that Constantine’s PEA shows an 11-year mine life initially.

“Most mines, they’ll start with a plan like that, to make (an economic picture), based on the minerals or the metals they know are in the ground there. But then, they always find more. If there’s copper in one mountain, there’s a good chance there’s copper in the next mountain, and if you build all the infrastructure based on the amount of copper you get off the first mountain, there’s enough copper to get into the second,” said Brehmer.

He called the 11-year projection ‘highly unlikely.’ “That’s their initial plan, but almost every mine that I know of has always exceeded its initial life,” he said.

Matthias agreed that “It is not uncommon in Alaska for projects to go into production and end up producing past their initial time.”

Cornejo said that the property has “tremendous exploration potential,” but said, it takes time to explore each individual prospect. “A longer mine life would be great for everyone,” she said.

Constantine will be hosting a luncheon in July to talk more about its PEA.