The McDowell Group presented the results of a study in early 2013 on the proposed mine that assessed the potential economic benefits in Alaska related to construction and operation of the proposed Bokan Mountain Heavy Rare Earth Mine, located on Prince of Wales Island in Southeast Alaska, approximately 37 miles southwest of Ketchikan. This advance stage exploration project is owned and operated by Ucore Rare Metals Inc.
Ucore’s exploration program to date has included 134 drill holes and 64,000 feet (19,662 meters) of core samples as well as collection of bulk samples for metallurgical studies and ore processing pilot-scale tests. In 2011 and 2012, environmental baseline studies were also conducted, in addition to initial engineering and mine planning work. The drilling program has identified resources of 5.3 million metric tons with an average grade of 0.654 percent total rare earth oxides (TREO).
The TREO concentration includes 0.39 percent light rare earth oxides and 0.26 percent of the more valuable heavy rare earth oxides (HREOs). Work to date has established Bokan as one of the largest National Instrument (NI) 43-101 compliant HREO resources in the United States. The Bokan Mountain rare earth element (REE) deposit is unusual among REE deposits worldwide due to the high proportion of heavy rare earth oxides (HREO) relative to light rare earth oxides (LREO).
The Bokan deposit includes approximately 40 percent HREO/TREO. In comparison, the deposit at the Mountain Pass mine in California (the only active REE mine in North America) averages 1 percent HREO/TREO. Given the strategically critical nature of HREOs to U.S. national defense, transportation, communications, health care and supercomputing, Bokan’s high HREO content has drawn the active interest of the U.S. Defense Logistics Agency, and has been documented by the U.S. Department of Defense (USDOD), U.S. Department of Energy (USDOE), and U.S. Geological Survey (USGS).
Bokan is one of a very limited number of HREO deposits outside of China capable of production within the next 3-5 years. Beyond the size, grade, and strategic value of the resource, the Bokan project has a number of characteristics that enhance its potential for development. It has immediate access to deep water, a key advantage for low-cost shipping of materials to and from the mine. The proposed underground mining technique (long-hole stoping with tailings back-fill) will eliminate the need for permanent surface tailings disposal and result in a limited environmental footprint. Further, the full extent of the REE deposit at Bokan has not yet been determined. Additional exploration work is likely to identify resources beyond those already quantified.
The project’s Preliminary Economic Assessment (PEA) calls for development expenditures of $221 million to construct a 1,500 metric-ton-per-day operation with an annual production of approximately 2,250 metric tons of rare earth oxides. The PEA indicates this investment and scale of operation would have an internal rate of return of 43 percent and a payback period of less than three years.
The expected economic impacts in Alaska resulting from development and operation of the Bokan project are summarized below:
- CONSTRUCTION PHASE
• The construction phase is expected to last approximately 18 months to 24 months (for purposes of this economic analysis, a two-year construction phase is assumed).
• The $221 million mine-development project will directly generate an estimated $40 million in payroll for the construction-related workforce or approximately $20 million annually over a two-year construction period.
• An annual average construction labor force of 200 workers is expected. Peak employment could reach approximately 300 workers.
• Approximately 80 percent of the construction labor force will be Alaska residents (based on Alaska construction industry averages). At that percentage, Alaskans would earn approximately $32 million in payroll over the two-year construction phase ($16 million annually). Alaska resident employment would average roughly 160 workers.
• There will be additional indirect and induced impacts, also known as multiplier effects, associated with in-state spending by construction workers and those businesses providing goods and services to the project. Including multiplier effects, construction related payroll is expected to total $54 million
($27 million per year), with employment effects averaging 325 jobs in Alaska. - MINE OPERATIONS
• Current project planning indicates a mine life of 11 years. Because the full extent of the deposit has not been determined, additional exploration work could extend the mine’s life well beyond that time frame.
• Once in full operation, the mine is expected to employ an average of 190 workers. The operations workforce would be housed on-site, working 2-weeks on, 2-weeks off shift schedules.
• The Bokan Mountain workforce will earn approximately $18 million in annual payroll. This indicates an annual per worker average of approximately $95,000, slightly lower than the 2011 statewide metal mining industry average of $100,020, which does not include camp support personnel (who
earn less than workers actually engaged in mine and mill operations).
• It is expected that Alaska residents would account for 70 percent of the mine operations labor force, equal to the statewide metal mining industry average. At that percentage, approximately 135 Alaskan workers would earn just under $13 million in direct annual payroll. Regional transportation provisions and training opportunities could result in a higher level of Alaskan participation in the mine operations labor force.
• Including indirect and induced employment and income (the multiplier effects), mine operations related employment would average 340 jobs and $28 million in annual payroll in Alaska.
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