Final Report
Economic Analysis of Rail Link
Port MacKenzie to Willow, Alaska
By
Paul A. Metz, Ph.D., DIC, P.G.
Consulting Economic and Mining Geologist
P.O. Box 73795
Fairbanks, Alaska 99707
Submitted to:
Matanuska-Susitna Borough
February 2007
Table of Contents
Executive Summary……………………………………………………………………….5
1.0 Introduction……………………………………………………………………………6
1.1 Definition of critical terms relating to mineral and energy resources………………...7
1.2 General assumptions, point of view, and period of analysis…………………………..8
1.2.1 Assumed area of analysis……………………………………………………………8
1.2.2 Assumed interest rates………………………………………………………………8
1.2.3 Assumed average rail freight rates…………………………………………………..8
1.2.4 Commodity price levels and other assumptions…………………………………….9
1.3 Estimation of Category 1 Benefits – Rail freight savings……………………………..9
1.4 Estimation of Category 2 Benefits – Economic impact of natural resource
development on Rail Belt communities………………………………………………9
1.5 Previous investigations of the economic impact of mineral resource development….9
1.6 Review of Rail Link capital cost estimate…………………………………………...10
2.0 Significance of the Alaska Railroad to the mining history and mineral
development in the rail belt…………………..............................................................10
3.0 Methodology…………………………………………………………………………11
3.1 Estimation of rail freight from metallic mineral development………………………12
3.2 Rail freight from industrial mineral development…………………………………...15
3.3 Rail freight from coal development………………………………………………….16
3.4 Rail freight from petrochemical development……………………………………….17
3.5 Rail freight from forest products and agricultural development……………………..17
3.6 Economic analysis of Port MacKenzie rail freight savings relative
to other south-central port facilities………………………………………………….18
3.7 Economic benefits from metallic mineral development……………………………..19
2
4.0 Conclusions…………………………………………………………..........................19
5.0 Other non-quantified benefits………………………………………………………..20
6.0 References cited……………………………………………………………………...20
Appendices
Appendix A Alaska Resource Data Files and U.S.G.S. Mineral Deposit Models………22
Appendix B Gross metal value, tonnage of rail freight and estimated annual
economic benefits – Port Mackenzie to Delta Junction…………………….26
Appendix C Gross metal value, tonnage of rail freight and estimated annual
economic benefits – Port Mackenzie to the Canadian Border………...……28
Appendix D Gross metal values and metallic mineral concentrate tonnages
of identified mineral occurrences in the rail corridor………………...D1-D45
Plate
Plate I Location of railroad corridor Point MacKenzie to Canadian Border and
Major mineral occurrences………………………………………………In Pocket
Tables
Table 1 Number of known mineral occurrences within the 120-mile
wide railroad corridor in each 1;250,000 Quadrangle from
Port MacKenzie to the Canadian Border………………………………………..13
Table 2 Net present value of the Port MacKenzie freight savings relative
To other port facilities for natural resource development within a
120-mile wide corridor from the port to Eielson AFB.…………………………18
Table A1 Alaska Resource Data Files primary data fields as developed
By the U.S. Geological Survey………………………………………………….22
Table A2 Mineral deposit model parameters for description and
Description and classification by Cox and Singer (1986)…………………….23
Table A3 Mineral deposit model types known within the 120-mile wide
railroad corridor from Port MacKenzie to the Canadian Border………. ………24
3
Table B1 Net present value of the Port MacKenzie freight savings relative
To other port facilities for natural resource development within a
120-mile wide corridor from the port to Delta Junction……………………….27
Table C1 Net present value of the Port MacKenzie freight savings relative
To other port facilities for natural resource development within a
120-mile wide corridor from the port to the Alaska/Canada border…………...29
4
Executive Summary
A railroad link of 43 miles from Willow to Port MacKenzie will result in rail
freight savings for bulk commodities and heavy freight transported to and from the Rail
Belt area of interior Alaska. Tidewater access at Port MacKenzie from interior Alaska is
26.4, 89.1, and 140.7 miles shorter than the Ports of Anchorage, Whittier, and Seward
respectively. Bulk freight from metallic and industrial mineral development, coal and
petrochemical production, and forest products are estimated. These bulk freight
quantities are then multiplied times a per mile cost for the number of miles saved by
using Port MacKenzie versus other ports. This results in an annual monetary savings. The
net present value of these savings is calculated at a public tax-free bond interest rate of
4.5%, for payback periods of 25 and 30 years.
Metallic mineral and other natural resource freight loads are estimated from a
probabilistic analysis of the known mineral and resource occurrences within a 120-mile
wide transportation corridor in three separate segments. The primary economic analysis
is on the existing Alaska Railroad from Port MacKenzie to the northeastern end of the
Alaska Railroad at Eielson AFB. A secondary analysis is conducted on a planned
railroad extension from Eielson AFB to Delta Junction and tertiary analysis is conducted
on a potential railroad extension from Delta Junction to the Canadian Border.
The primary analysis indicates that the net present value of rail freight savings
from the proposed rail link relative to the Ports of Whittier and Seward greatly exceeds
the capital cost of the proposed project. The net present value of the rail freight savings
for Port MacKenzie relative to the Port of Anchorage over a 30 year period equals 92%
of the capital cost of the project.
The economic benefits to the State of Alaska from the development of the
metallic mineral occurrences in the rail corridor from Port MacKenzie to Eielson, AFB,
assisted by the line extension, greatly exceed the capital cost of the project. These
benefits are estimated to range between $61 and $773 million per year for a 100 year time
period. Industrial minerals, coal, petrochemicals, and forest products will add
significantly to the economic benefits of metallic mineral production.
The citizenry of the state will be the prime beneficiaries of the proposed rail
extension addition to the infrastructure of the state that will reduce bulk transportation
costs, increase economic development, decrease transportation congestion in the
Anchorage area, and decrease the adverse impact of natural disasters on the surface
transportation systems in central and south-central Alaska.
5
1.0 Introduction
This report was commissioned by the Matanuska-Susitna Borough on September
19, 2006. The objective of the project as stated in the Scope of Work is to “complete an
independent analysis of the benefits of extending the Alaska Railroad from Willow to
Port MacKenzie”. This connection will include 43 miles of new track. The project
analysis is to focus on the viability of the proposed rail extension based on the natural
resources along the rail belt from Willow through to the interior of Alaska and the
resulting freight loads that would be generated as a consequence of such resource
development.
The quantifiable benefits from the Port MacKenzie to Willow rail link with
respect to resource development can be divided into the following two major categories:
1. Benefits in the form of rail freight savings derived from the reduced
haulage distances from natural resource production sites to tidewater
at Port MacKenzie relative to the Ports of Anchorage, Whittier, and
Seward.
2. Benefits to the Rail Belt communities in the form of enhanced
economic diversification and economic development as a consequent
of increases in natural resource production.
Rail transport is essential for bulk freight loads with low unit value or heavy
freight loads that are not easily transported overland by truck. Generally unrefined
mineral commodities, coal, grain, and unprocessed forest products constitute such low
unit value freight. Large machinery or structural materials generally fall in the category
of high density and heavy freight loads. Since there is little heavy manufacturing in
Alaska the later category of rail freight is unlikely to contribute significantly to the
railroad revenues necessary to return the capital investment in the proposed rail
extension.
The economic analysis will be conducted primarily under the assumption that
near term future natural resource production shall come from areas within a 120 mile
wide corridor along the existing route of the Alaska Railroad that has a northeastern
terminus at Eielson AFB (see Plate I). A secondary analysis shall be completed under the
assumption that the existing Alaska Railroad will be extended another 80 miles from
Eielson AFB to the Delta Junction area. A tertiary analysis will include a brief discussion
of potential freight from the further extension of the Alaska Railroad to the Canadian
Border and on to the Canadian rail system in northeastern British Columbia,
approximately an additional 1,100 miles of track eastward from Delta Junction. The
secondary and tertiary analyses are included in Appendix B and Appendix C respectively.
6
1.1 Definition of Critical Terms Relating to Mineral and Energy Resources
•
Mineral Resource: Any mineral commodity potentially useful to mankind.
•
Resource Base: Sum total of mineral raw materials present in the earth’s crust
within a given geographic region.
•
Mineral Reserve: Known mineral resources within mining districts that are
recoverable under current economic and technological conditions and these are
sub-divided into measured, indicated, and inferred based on the degree of
certainty in their quantity (tonnage) and quality (grade).
•
Marginal Mineral Resources: Known mineral resources within mining districts
that are recoverable at prices 1.5 times those prevailing now or with comparable
advances in technology.
•
Sub-marginal Mineral Resources: Known mineral resources within mining
districts that are recoverable at prices greater than 1.5 times those prevailing or
with comparable advances in technology.
•
Mineral Deposit: An identified accumulation of minerals with sufficient tonnage
and grade that the minerals can be produced at a profit (contains enough measured
reserves to result in a positive cash flow from operations sufficient to produce at
least the required minimum attractive rate of return on the capital investment).
•
Mineral Occurrence: An identified accumulation of minerals at a particular site
however there has been either insufficient investment in mineral exploration to
delineate an economic accumulation or the exploration has demonstrated that
within the extent of the drilled and sampled area there is inadequate tonnage and
grade to support a profitable operation under current price levels and
technological conditions.
•
Hypothetical Resources: Undiscovered mineral commodities that may reasonably
expected to exist in known mining districts under known geologic conditions.
•
Speculative Resources: Undiscovered mineral commodities that may occur in
known types of deposits in geologic settings outside known mining districts or in
as-yet-unknown types of deposits that remain to be recognized.
7
1.2 General Assumptions, Point of View, and Period of Analysis
This analysis will be conducted from a macroeconomic point of view. The State
of Alaska is both the owner and operator of the Alaska Railroad. The citizenry of the
state will be the prime beneficiaries of the proposed rail extension addition to the
infrastructure of the state that will reduce bulk transportation costs, increase economic
development, decrease transportation congestion in the Anchorage area, and decrease the
adverse impact of natural disasters on the surface transportation systems in central and
south-central Alaska.
Rail freight estimates from identified natural resources will be assumed to be
uniformly distributed over a 100 year time period. Although there is significant potential
for the discovery of additional subsurface resources such as metallic minerals, industrial
minerals, and coal, no estimates of potential freight loads shall be made from mineral
resources classified as Hypothetical or Speculative. This is a conservative approach
since all three of the operating lode mines and the two of the three lode mines currently
under development in Alaska are from mineral deposits that were discovered in the past
thirty years. Mineral exploration expenditures in Alaska are at record levels and thus
over the next one hundred years additional discoveries are expected to occur.
1.2.1 Assumed Area of Analysis
Expected freight loads will be estimated from the known mineral and other
natural resource occurrences in the corridor. The corridor width was limited to a distance
that a road or spur rail line could be reasonably constructed by a mine developer of a
median size mineral deposit. Larger tonnage or higher grade mineral deposits could
support a much longer spur lines. This would result in a wider corridor and a larger
number of potential mines from the larger number of known mineral occurrences. The
known mineral occurrences in the 120 mile wide corridor from Port Mackenzie to the
Eielson AFB are only 7 percent of the known mineral occurrences in Alaska.
1.2.2 Assumed Interest Rates
Estimated freight savings will be discounted over shorter time periods of 25 and
30 years respectively at an interest rate of 4.5%. The 25 and 30 year time periods reflect
alternate payback periods for non-recourse revenue bonds that may be sold to finance the
capital cost of the railroad extension. The rail extension will be financed by tax-free
revenue bonds by either the Alaska Railroad or the Matanuska-Susitna Borough. The
4.5% assumed interest rate is based on tax-free revenue bond interest rates currently
estimated by the ARR and the Borough for this project and agrees with interest rates
discussed with financial institutions for the rail extension from Eielson AFB to Delta
Junction.
1.2.3 Assumed Average Rail Freight Rates
A freight rate of $0.06 per ton-mile is used for the estimation of annual freight
revenues based on discussions with the Alaska Railroad Corporation. No attempt has
8
been made to differentiate freight rates for different commodities since the exact
commodity mix cannot be estimated with any level of certainty.
1.2.4
Commodity Price Levels and Other Assumptions
Current commodity price levels are assumed to continue to rise at the same level
as the general price level thus there is expected to be no differential inflation over the
period of analysis. Foreign exchange rates are also assumed to remain constant over the
period of analysis. These assumptions also impart additional conservative components to
the analysis since the dollar has continued to decline over the past several years relative
to the currencies of our major trading partners and this trend will favor increased levels of
investment in mineral and energy development in Alaska and thus increases in freight
loads for the rail link.
1.3 Estimation of Category 1 Benefits – Rail Freight Savings
Estimating rail freight savings from future natural resource development requires
an estimation of the quantity of natural resources that will be developed over the 100
year time period. This estimation must be based on the existing natural resource database
and the ranges in probability that the natural resources will be developed over this time
period.
1.4 Estimation of Category 2 Benefits – Economic Impact of Natural Resource
Development on Rail Belt Communities
Estimating the economic impact of natural resource development on Rail Belt
communities requires an estimation of the quantity and quality of the natural resources
that will be developed over the 100 year time period. This estimation must also be based
on the existing natural resource database and the ranges in probability that the natural
resources will be developed over this time period. The product of resource quantity times
the unit price of the resource is the gross value of the resource. This gross value of
natural resources can and will be utilized in this economic analysis to estimate the
economic impact of natural resources development related to the Willow to Port
MacKenzie Rail Link.
1.5 Previous Investigations of the Economic Impact of Mineral Resource
Development
The McDowell Group and Information Insights (1999) investigate the economic
impact of the Fort Knox Mine on the Fairbanks North Star Borough. The findings
indicate that the mine contributes approximately $100 million annually to the economy of
Fairbanks through wages, taxes, and supply and material purchases. Over the initial 12
year mine-life, the contribution is expected to total at least $1.2 billion. Based on the ore
reserve estimate of 4 million troy ounces and the price of gold at the time of development
the gross metal value in the initial feasibility study was $1.2 billion. Thus the mine is
returning to the community an equivalent of the gross metal value of the deposit. This is
a graphic demonstration of the multiplier effect from the extractive industries.
9
1.6 Review of Rail Link Capital Cost Estimate
Capital costs estimates for the Willow to Port Mackenzie rail link range from
$165 to $200 million (Tryck, Nyman, Hayes, Inc., 2004 and personal communication,
Alaska Rail Road Corporation, 2006). In early 2007, the Alaska Railroad Corporation
analyzed the rail link capital costs in detail, and estimate the capital cost will be $274
million. For the current analysis, the recent $274 million capital cost estimate will be
utilized.
2.0 Significance of the Alaska Railroad to the Mining History and Mineral
Development of the Rail Belt
The Alaska Railroad was constructed to allow the development of the major
placer gold deposits of the interior of Alaska in general and the Fairbanks Mining District
in particular. The Alaska Railroad was constructed to deliver the large placer mining
equipment to Fairbanks Mining District. The electrically driven placer mining equipment
also required a coal fired electrical power generating plant to be located in Fairbanks near
the mining operations. The Alaska Railroad was also necessary to transport coal from the
coal deposits near Healy to the Fairbanks power plant.
The rail corridor from Seward to the Fairbanks area transects several mining
districts and metallogenic provinces. The Fairbanks Mining District was discovered in
1902 and is the largest gold producing district in the state. From 1902 to 1962 small and
large scale placer mining operations produced approximately 8 million ounces of alluvial
gold. During this period the district was one of the largest gold producing area in the
United States. This production would not have occurred without the construction of the
Alaska Railroad.
From 1962 until 1982, there was little placer mining activity and little significant
modern exploration for lode gold deposits or other mineral commodities. As a
consequence of state sponsored geological mapping and systematic ore deposit studies
conducted jointly by the University of Alaska Fairbanks Mineral Industry Research
Laboratory and the Alaska Division of Geological and Geophysical Surveys from 1982
through 1991 (Metz, 1991), the private sector delineated significant lode gold
mineralization. In 1996, the Fort Knox Lode Gold Mine was brought into production and
since then the mine has produced approximately 4 million ounces of lode gold (Hughes
and Szumigala, 2006). Although large scale lode gold mining does not required a
railroad for the transport of the dore bars of gold to market, it does require large amounts
of freight to be transported to the mine site. Rail is the most cost effective method for the
transportation of large equipment, fuels, and chemical reagents needed in all types of
mining activity.
Mineral deposits and mineral occurrences are found as clusters of mineralization
referred to as mining districts. In some mining districts, more than one significant
mineral commodity is often produced. Gold mining districts may also include significant
amounts of antimony, copper, molybdenum, and silver mineralization. These other
10
commodities are generally transported as mineral concentrates rather than as
intermediately refined metals such as dore bars of gold. Thus these commodities require
a railroad for the most cost effective form of transport to market.
Other gold producing districts within the rail corridor with potential for other
mineral commodities include:
•
•
•
•
•
Bonnifield Mining District– 85,000 troy ounces of placer gold
Circle Mining District – 1,000,000 troy ounces of placer gold
Richardson Mining District -120,000 troy ounces of placer gold
Tolovana Mining District – 600,000 troy ounces of placer gold
Willow Creek Mining District– 670,000 troy ounces of placer and lode gold
During 2006, the Pogo Lode Gold Mine east of Fairbanks was commissioned. The
mine has proven reserves of 10 million tons of ore at 0.55 ounces per ton Au thus 5.5
million ounces of proven gold. The Fort Knox and Pogo Mine discoveries have
stimulated extensive mineral exploration in what a defined as the Tintina Gold Belt. The
belt is bounded on the south by the Denali Fault and on the north by the Tintina Fault.
The Fairbanks and Tolovana Mining Districts form the apex of the arcuate mineral belt
also known as the Alaska Orocline. In 1982 there were essentially no lode gold reserves
within the belt. Today, within a 25 year time period, proven and drill indicated gold
reserve in the Tintina Gold Belt exceed 100 million troy ounces with a gross metal value
of at least $60 billion and thus a positive economic impact on interior of Alaska of $60
billion. This impact over the 25 tear time period can thus be used as a gauge of the
estimated economic impacts of future mineral development in the current investigation.
Wolff (1976), Mitchell and Garson (1981), Hollister (1990), Sawkins (1990),
Metz (1991), Hutchinson and Grauch (1991), Singer (1995), and Laznicka (2006) have
all noted the significance of large earth structures as controls of major mineral deposits,
mining districts, and metallogenic provinces such as the Tintina Gold Belt. The oroclinal
bend in the regional structural trend of central Alaska, the past mineral production, the
proven lode gold reserves, and the large number of other mineral occurrence types
(Nokleberg and others, 1987; Plafker and Berg, 1994; and Goldfard and Miller, 1997) all
indicate the high potential for significant additional mineral deposit discoveries within
south-central and interior Alaska including the Rail Belt Corridor.
3.0 Methodology
Port MacKenzie provides an alternate deepwater port for the export of bulk
commodities developed in the rail corridor and for the import of heavy equipment and
supplies to support such development. For the transport of bulk and heavy materials to
and from interior Alaska Port, MacKenzie provides the following advantages with respect
to distance to tidewater:
Port Mackenzie vs Seward – 140.7 miles shorter to tidewater
Port Mackenzie vs Whittier – 89.1 miles shorter to tidewater
Port MacKenzie vs Anchorage – 26.4 miles shorter to tidewater
11
This analysis will consist of estimations of the potential bulk freight requirements
that may be realized by the development of natural resources within the rail corridor over
the next 100 years and the freight savings that will accrue as a function of the shorter
transport distances. Freight forecasts will be made for each of the follows categories of
natural resources:
•
•
•
•
•
Metallic Minerals – Antimony Copper, Lead, Molybdenum, Silver, Tin,
Tungsten, Zinc, etc.
Industrial Minerals –, Asbestos, Chemical Grade Limestone for Portland
Cement and Lime, Crushed Stone for Aggregates, Gypsum, Sulfur, etc.
Coal
Refined Petroleum Products
Forest Products
3.1 Estimation of Rail Freight from Metallic Mineral Development
Metallic mineral resource estimates were made by analyzing the data
contained in the Alaska Resources Data Files (ARDF) that were created and maintained
by the U.S. Geological Survey (USGS). The ARDF contains data on each known
mineral occurrence in Alaska. The files are compiled by USGS 1:250,000 scale
Quadrangle (see Table A1 in appendices).
Each mineral occurrence in the ARDF is classified according to the mineral
deposit models developed by Cox and Singer (1986). These models include geological,
geochemical, and geophysical characteristics of similar types of deposits worldwide that
are either present or past producers of mineral commodities. The models include a
compilation of tonnage (quantity) and grade (quality) data and thus allow estimates of
tonnage and grade that may be expected from the development of the known mineral
occurrences in the railroad corridor (see Table A2 in appendices). The mineral deposit
model types that are represented by known mineral occurrences in the railroad corridor
are listed in Table A3 in appendices.
12
The number of known mineral occurrences within the railroad corridor within
each U.S.G.S. 1:250,000 Quadrangle is listed in Table 1.
Table 1. Number of known mineral occurrences within the 120-mile wide Alaska Railroad Corridor in
each USGS 1:250,000 Quadrangle from Port MacKenzie to the Canadian Border.
Port MacKenzie and along existing railroad line
to Eielson, AFB.
Quadrangle
Tyonek
Anchorage
Talkeetna
Talkeetna Mountains
Healy
Fairbanks
Livengood
Total Known Mineral Occurrences - 606
Number of Known Mineral Occurrences
17
98
37
147
37
115
155
Planned rail extension from Eielson, AFB to
Delta Junction and Fort Greely area.
Total Known Mineral Occurrences - 169
Quadrangle
Number of Known Mineral Occurrences
2
14
153
Potential rail extension from Delta Junction and
Fort Greely area to the Canadian Border.
Total Known Mineral Occurrences - 112
Quadrangle
Number of Known Mineral Occurrences
29
17
21
45
Circle
Big Delta
Mt. Hayes
Gulkana
Eagle
Tanacross
Nabesna
Total Number of Known Mineral Occurrences
Port MacKenzie to the Canadian Border
887
A total of 887 mineral occurrences were examined in order to estimate the potential
freight loads and economic benefits that would be generated and derived respectively
from their development. A total of 606 of these occurrences were examined as part of the
primary analysis focused on the existing rail line.
The only two producing metallic mineral deposits in the Rail Corridor are gold
mines that do not ship bulk mineral concentrates. The mines produce dore bars of gold
that are low volume and very high unit value products that can readily be transported by
truck or air. Since insufficient mineral reserve data exists for all the other known mineral
occurrences in the Corridor that require bulk freight transport by rail, the potential
railroad freight from the development of these occurrences must be estimated. This
estimation relies on the mineral resource data in the ARDF as well as the tonnage and
grade distribution curves from Cox and Singer (1986). In addition, the estimation of the
tonnage of freight and the estimation of the economic benefits of this mineral
13
development required the following: data on mineral commodity prices; estimated
probabilities of mine development; and estimation of mining and mineral processing
recovery rates.
The gross metal value of a mineral deposit is the product of the tonnage of ore
(quantity) times the ore grade (quality) times the metal prices of the contained mineral
commodities. The recoverable metal value is the product of the gross metal value times
the mine recovery rate times the mineral processing recovery rate.
The tonnage of rail freight from a mineral occurrence is the recovered metal
content plus the gangue minerals and sulfur and oxygen that are included in the ore
minerals prior to the smelting and refining processes. Thus data on the ore and waste
rock mineralogy is needed to estimate the tonnage of mineral concentrates from a
particular mineral deposit. Such data has is extrapolated from the data in the ARDF and
the mineral deposit models of Cox and Singer (1986).
The tonnage and grade data from Cox and Singer (1986) is in the form of
distribution curves that include the smallest economic tonnage and the lowest economic
grade as well as the largest tonnage and highest grade for each deposit type. For this
analysis two tonnages one at the 50th Percentile and another at the 90th Percentile
were used to estimate the potential ranges of deposit tonnages for each mineral
deposit type. Similarly two grades at the 50th and 90th Percentile were used to
estimate the potential ranges of deposit grades for each mineral deposit type.
Since the mineral occurrences do not contain proven mineral reserves, there is
uncertainty with respect to the development of each occurrence. Thus there is uncertainty
with respect to the total gross metal value of the occurrences as well as the total tonnage
of rail freight that they would generate over each mine life. Thus it is necessary to
calculate expected gross metal values and expected tonnages of mineral concentrates.
In order to calculate expected values, probabilities of mineral development must be
assigned to each mineral occurrence. Geoscience Canada has developed data from the
mining industry in Canada on the rates of mineral deposit discoveries. Rates of discovery
have been found to vary depending on the proximity of past or present producing mines.
Adjacent to past mining operation approximately 10 mineral occurrences are examined
before a new mine is discovered. Within historic mining districts the discovery rate is
approximately 1/100. Outside of metal mining districts the rate of discovery is
approximately 1/1000. These discovery rates are not specific with respect to the size of
the mineral deposit discovered.
All of mineral occurrences within the Rail Corridor are proximal to past placer
gold producing districts and some are adjacent to past lode producing mines such as those
in the Willow and Fairbanks Mining Districts. Not withstanding such spatial
associations, the probabilities of development for most of the mineral occurrences at the
50th Percentile for this analysis are assumed to be 1/1000 and 5/10,000 for the 90th
Percentile. Thus the assigned probabilities of discovery rates are between 100 and 2000
times smaller than discovery rates in Canada. This approach produces very
14
conservative estimates of both total expected gross metal value and total expected
freight loads.
Using the above data sources and assumptions a model was developed to calculate
the expected gross metal value and the expected tonnage of mineral concentrates for the
known mineral occurrences in the Rail Corridor. This model is included as Appendix D.
For the 606 mineral occurrences examined in the Rail Corridor from Port
MacKenzie to the Eielson AFB area (Table 1), the following results from Appendix D
were determined:
•
At the 50th Percentile of Tonnage and Grade
1. Expected Gross Metal Value – $6,079,003,378
2. Expected Tonnage of Mineral Concentrates – 173,763,158 tons
Assuming a 100-year period for the total development at the 50th Percentile of
tonnage and grade the expected annual economic benefit to the communities along the
Rail Corridor is $61 million. The annual expected rail freight load is 2 million tons. This
value of 2 million tons is used in Table 2 to calculate rail freight savings.
•
At the 90th Percentile of Tonnage and Grade
1. Expected Gross Metal Value – $77,326,471,549
2. Expected Tonnage of Mineral Concentrates – 607,268,939 tons
Assuming a 100-year period for the total development at the 90th Percentile of
tonnage and grade the expected annual economic benefit to the communities along the
Rail Corridor is $773 million. The annual expected rail freight load is 6 million tons.
3.2 Estimation of Rail Freight from Industrial Minerals Development
The ARDF only contains data on metallic minerals. Industrial mineral data has
been acquired for industry sources. The major industrial mineral that is likely to be
developed in the near future within the corridor is high purity limestone for the
production of lime, portland cement, and ag-lime. A very large (1.6 billion tons)
limestone deposit is located at 38 mile on the Elliot Highway north of Fairbanks. The
deposit is adjacent to the Trans-Alaska Oil Pipeline and along the route of the Alaska
Natural gas Pipeline. Either a lime or cement operation will require large amounts of
competitively price fuel for the kiln operations. Fairbanks Natural Gas shall be
transporting liquefied natural gas (LNG) past the site beginning in 2007. This will
provide a competitive source of fuel.
Current markets for lime in Alaska include: metal mining, water and wastewater
treatment, and oil well completions. The current market for portland cement in Alaska is
small compared to the minimum economic sized operation. However the U.S. currently
imports 24 million tons of cement. For this analysis it is estimated that a portland cement
operation at Globe Creek could provide at least 15% of the U.S. import requirement.
Thus it is estimated that at least 3.5 million tons of Portland cement would be shipped
from the mine site by rail to the port for export to the contiguous states.
15
Gravel resources in interior Alaska are unlikely to compete in the export
market with gravel resources near the port site. For this reason no estimate of sand
and gravel freight savings are included in this analysis.
3.3 Estimation of Rail Freight from Coal Development
Current Coal Production: Coal production in Alaska is currently limited to the Usibelli
Coal Mine in Healy. Approximately, 1,000,000 tons are exported per year. Recently, the
export level has been in the 400,000 to 600,000 ton range. However, with the completion
of the rail extension to Port MacKenzie, it is expected that additional tonnage will be
exported due to savings in rail transportation costs that will make the coal price more
competitive. It is thus felt that using the historical coal export number of 1,000,000 per
year is appropriate for this analysis. In addition, a small power plant may be built at Port
MacKenzie by 2015 that would require 500,000 tons of coal annually.
Agrium Coal Demand: The Agrium fertilizer plant on the Kenai Peninsula is conducting
a feasibility study of the production of methane from coal to use as a fertilizer plant
feedstock in place of natural gas that is no longer available in adequate quantities at an
economical price. Agrium estimates that the plant would require 3.3 million tons of
Usibelli coal per year. If the rail extension is completed, this coal would be shipped to
Port MacKenzie and then barged to the Nikiski plant. This coal must be available by the
2011 – 2012 time period. This analysis utilizes the 3.3 million ton quantity as Agrium
coal in addition to and separate from the 1,000,000 million ton quantity for current coal
production.
Petrochemical Industry: In-state processing of natural gas liquids from the North Slope
of Alaska shall generate a significant increase in in-state demand for coal. This demand
is discussed in the following section on refined petroleum products and petrochemicals.
Coal Fuel Pellets for Domestic Heating: Coal fuel pellets are an environmentally and
economically attractive alternative to high cost fuel oil for domestic heating in rural
Alaska. The combustion of coal fuel pellets produced with lime as a bonding agent
results in the removal of all sulfur from the combustion gas stream. Sulfur dioxide
produced from the combustion of sulfur bearing fuel oil is a greenhouse gas several times
more deleterious to the environment than carbon dioxide. In addition, on per unit of
thermal energy basis (Btu), fuel oil (fuel oil at $2.20 per gallon and furnace efficiency of
80%, the cost is $19.97 per million Btu) is more than five times the estimated cost of coal
fuel pellets (coal cost of $40 per ton and furnace efficiency of 70%, the cost is $3.74 per
million Btu) in Fairbanks. Also, coal fuel pellets can be transported in bulk and stored as
a solid in ‘supersacks’ without the hazards of a liquid fuel spill. Transport of the fuel
pellets from Port MacKenzie to coastal communities and communities along the Yukon
and Kuskokwim Rivers could significantly reduce domestic fuel costs in many rural areas
of Alaska.
16
3.4 Refined Petroleum Products and Petrochemicals
Dow, Shell, and others completed a Feasibility Study for Petrochemical
Production in Alaska in1981. The Dow-Shell study was predicated on a 2.7 Bcf/day
natural gas pipeline to bring the ethane and other natural gas liquids from the North Slope
to potential production sites in central and south-central Alaska. Metz and others (2005)
revised production estimates based on the proposed 4.5 Bcf/day Alaska Highway Natural
Gas Pipeline.
A compelling argument for the location of the petrochemical complex at Port
MacKenzie can be made but is beyond the scope of this investigation. Assuming that the
plant is located at the Port site and that the plant is fueled with coal rather than methane,
the plant would require 9.5 million tons of coal per year and at least 200,000 tons of
benzene depending on the final mix of petrochemical products. The benzene would be
produced from the Flint-Hills Refinery in Fairbanks. The source of coal could be the
Nenana Coal Field, the Matanuska Coal Field, Lower Susitna Coal Field or the Beluga
Coal Field. Only the 200,000 tons of benzene is included in this analysis.
3.5 Forest and Agricultural Products
The major timber resources on state land occur in the Tanana State Forest which
extends from the Nenana area eastward toward the Alaska/Yukon Border. The native
village corporations of the Tanana Chief Conference also possess significant timber
resources in this region. The timber resources in the interior from Fairbanks to Canadian
Border are estimated at 1.6 billion board feet with 30 million board feet per year as
sustainable yield.
It is estimated that at least one third of this resource or 10 million board feet per
year would be produce if rail transport was available to tidewater. A similar production
rate is assumed for the Susitna Valley. Thus a total production of 20,000 tons per year is
estimated for this analysis. The tonnage is based on a dry specific gravity of 0.34 for
kiln-dried spruce.
No estimate is made in this analysis for the export of agricultural products such as
barely, canola, of red meet. These quantities are expected to be small since current
production is much less than in-state demand for agricultural goods.
17
3.6 Economic Analysis of Port MacKenzie Rail Freight Savings Relative of Other
South-Central Port Facilities
Table 2 is a tabulation of the net present value (NPV) of Port MacKenzie
freight savings relative to other south-central port facilities for natural resources
developed within the 120-mile wide corridor from the port site to Eielson AFB.
Table 2. Net present value of Port MacKenzie freight savings relative to other south-central Alaska port facilities for natural
resources developed within a 120-mile wide corridor from the port site to Eielson AFB calculated at 4.5%for n=25 and n=30
years.
Port
Anchorage
Whittier
Seward
Distance
26.4 miles
89.1
140.7
Differential
Freight Savings
@ $0.06 per ton
$1.58
$5.35
$8.44
mile
Annual Freight
Net Present Value
Net Present Value
Net Present Value
(millions tons)
Annual
($M) for n=25/n=30
Annual
($M) for n=25/n=30
Annual
($M) for
($M)
years @
($M)
years @
($M)
n=25/n=30 years @
4.5%
4.5%
4.5%
P/A=
P/A=
P/A=
14.828
14.828
14.828
P/A=
P/A=
P/A=
16.289
16.289
16.289
Metal Minerals1
Cu, Pb, Au, etc.
(2)
Industrial
Minerals
(3.5)
Coal
(Export)
(1)
Coal
(Agrium)
(3.3 )
Petrochemicals
(Benzene)
(0.2)
Forest Products
Wood Chips etc.
(0.02)
Totals
n=25
n=30
3.16
49
51
10.70
159
174
16.88
250
275
5.53
82
90
18.73
278
305
29.54
438
481
1.58
23
26
5.35
79
87
8.44
125
137
5.21
77
85
N/A
N/A
N/A
N/A
0.32
4
5
1.07
16
17
1.69
25
28
0.03
0
0
0.11
2
2
0.17
3
3
235
257
534
585
841
924
The NPV is calculated at 4.5% for n=25 and n=30 years.
1
The freight loads for metallic minerals included in this calculation are those estimated at
the 50th Percentile of tonnage and grade for all the mineral occurrences in the rail
corridor. The expected tonnage of metallic mineral concentrates is thus 2 million tons
per year.
18
The analysis results set forth on Table 2 indicate that the NPV of freight savings
from using Port Mackenzie for the noted estimated freight loads over a 30-year period
would be $257 million as compared to using the Port of Anchorage, $585 as compared to
using the Whittier Port, and $924 million as compared to using the Seward Port.
Assuming the cost of the rail extension is $274 million, the NPV freight transportation
cost savings over 30 years, greatly exceeds the estimated capital cost of the rail extension
for the Seward and Whittier comparisons and accounts for over 90 percent of the capital
costs for the Port of Anchorage comparison.
3.7 Economic Benefits from Metallic Mineral Development
The McDowell Group (2006) examined the economic impact of Alaska’s Mining
Industry. The total contributions of the industry to the economy of the State are several
times larger than the rents and royalty payments to the Alaska Department of Revenue.
In this investigation the expected gross metal values of the known mineral occurrences in
the rail corridor that may be developed over the next 100 years range from $6 to $77
billion or $61 to $773 million per year. This estimated range is less than $100 million per
year currently produced from the Fort Knox Mine and the $2,400 million per year for the
next 25 years that will accrue from the production of the $60 billion worth gold reserves
in the Tintina Gold Belt.
4.0 Conclusions
The economic benefits of the rail extension from Port Mackenzie to Willow
greatly exceed the estimated capital cost of $274 million for the 43 miles of new tracks
and support structures. This conclusion takes into consideration the rail freight savings
resulting from the shorter haul distances to Port MacKenzie and the general economic
benefits associated with additional natural resource development stimulated by a shorter
bulk freight distance to tidewater.
The net present value of estimated rail freight savings alone resulting from the
shorter haul distances to Port Mackenzie relative to the Ports of Whittier and Seward
greatly exceeds the capital cost of the rail extension over a 25 or 30 year payback period.
The net present value of such savings over a 30 year period relative to the Port of
Anchorage, which is only 26.4 miles further to tidewater than Port MacKenzie, equals
$257 million or over 92 % of the capitol cost of the rail extension.
The estimated annual economic benefit from metallic mineral development alone
to the rail belt communities is between $61 and $773 million. Non-metallic or industrial
minerals, coal, petrochemical products, and forest products will add significantly to these
economic benefits.
It is concluded that the expected economic benefits to the State of Alaska from
natural resource development will be several times greater than the capital cost of the
railroad extension from Willow to Port MacKenzie. Thus the State of Alaska, the Alaska
Railroad Corporation and the Borough should develop a Financial Plan for the capital
requirements of the project.
19
5.0 Other Non-Quantified Benefits
In addition to the economic benefits from natural resource development, rail
access to Port Mackenzie will provide bulk freight access to another port site in southcentral Alaska. Such access will contribute to the mitigation of the adverse consequences
of natural disasters in the region such as earthquakes, tsunamis, land subsidence, and land
slides and avalanches. In addition the alternate port site will provide infrastructure
improvement benefits to Southcentral Alaska resulting in reduced rail congestion and
minimizing the need to transport bulk natural resource freight through the center of
Anchorage. These considerations are beyond the scope of this investigation but should
be addressed in an addendum to this report.
6.0 References Cited
Cox, D.P., and Singer, D.A., 1986, Mineral deposit models: U.S. Geol. Survey Bull.
1693, 291 p.
Goldfarb, R.J., and Miller, L.D., eds., 1997, Mineral deposits of Alaska: Econ. Geology
Monograph 9, 483 p.
Hollister, V.F., 1990, Case histories of mineral discoveries: AIME, Littleton, Colorado,
Hughes, R.A., and Szumigala, D.J., 2006, Alaska’s mineral industry 2005: Alaska
Division of Geological and Geophysical Surveys Special Report 60, 82 p.
Hutchinson, R.W., and Grauch, R.I., eds., 1991, Historical perspectives of genetic
concepts and case histories of famous discoveries: Econ Geol. Monograph 8, 359 p.
Laznicka, Peter, 2006, Giant metallic deposits – future sources of industrial metals:
Springer, N.Y., N.Y., 732 p.
Metz, P.A., 1991, Metallogeny of the Fairbanks Mining District, Alaska and adjacent
areas: University of Alaska Fairbanks, Mineral Industry Research Laboratory Report No.
90, 370 p.
Metz, P.A., and others, 2005, Economic impact of a petrochemical industry in Alaska:
Petroleum News, July, 2005.
Mitchell, A.H.G., and Garson, M.S., 1981, Mineral deposits and global tectonic settings:
Academic Press, London, 405 p.
Nokleberg, W.A., and others, 1987, Significant metalliferous lode deposits and placer
districts of Alaska: U.S. Geol. Survey Bull. 1786, 104 p.
Plafker, G., and Berg, H.C., 1994, The geology of Alaska, in: The geology of North
America, v. G1, Geol. Soc. America, Bolder, Colorado,
20
Roberts, R.G., and Sheahan, P.A., eds., 1990, Ore deposit models: Geoscience Canada,
194 p.
Sawkins, F.J., 1990, Mineral deposits in relation to plate tectonics: Springer-Verlag, NY,
461 p.
Sheahan, P.A., and Cherry, M.E., eds., 1993, Ore deposit models – Volume II:
Geoscience Canada, 154 p.
Singer, D.A., 1995, World-class base and precious metal deposits: A quantitative
analysis: Econ. Geol., v. 90, p. 88-104.
Staff, McDowell Group, 1999, Economic impact of the Fort Knox Mine on the Fairbanks
North Star Borough: Juneau, Alaska, 16 p.
Staff, McDowell Group, 2006, The economic impact of Alaska’s Mining Industry:
Juneau, Alaska, 35 p.
U.S. Geological Survey, 1988, Mineral resource data system (MRDS), Reston, Virgina.
Wolff, K.H., 1976, Handbook of stratiform and strata-bound ore deposits, volumes 1-14,
Elsevier, Amsterdam.
Woodall, R., 1994, Empiricism and concept in successful mineral exploration: Australian
Journ. Earth Sci., v 41, p 1-20.
21
Appendix A Alaska Resource Data Files and U.S.G.S. Mineral Deposit Models.
Table A1. Alaska Resource Data File primary data fields as developed by the U.S. Geological Survey.
Site name(s):
Names included in claim location documents or in the
published literature.
Site type:
Prospect, development, producing mine, past producing
property etc.
ARDF no.:
Two letters and up to three-digit number with letters
designating the host 1:250,000 Quadrangle.
Latitude:
Up to four decimal places.
Longitude:
Up to four decimal places.
Quadrangle:
1:63,360 Quadrangle name.
Location description and accuracy:
Detailed description from claim location data or the published
literature.
Commodities:
Main and secondary mineral commodities.
Ore minerals:
Minerals of economic significance.
Gangue minerals:
Non-economic minerals associated with ore minerals.
Geologic description:
Detailed description of the deposit geology including the
significant characteristics of the ore deposit.
Alteration:
Secondary minerals associated with the ore forming processes
for the mineral occurrence.
Age of mineralization:
Range of geologic time scale for the mineralization.
Deposit model:
Deposit model name based on Cox and Singer (1986)
classification system.
Deposit model number:
Deposit model number based on Cox and Singer (1986)
classification system.
Production Status:
Past or present production if known.
Site Status:
Current status of mineral property.
Workings/exploration:
Description of mine workings or exploration
activities if known.
Production notes:
Past production statistics.
Reserves:
Measured, indicated, or inferred reserves if known.
Additional comments:
Any other data as is available.
References:
All known references.
Primary reference:
Key reference to mineral site.
Reporter:
Person(s) compiling data.
Last report date:
Date of last data entry.
22
Table A2. Mineral deposit model parameters for description and classification by Cox and Singer (1986).
Description
Short summary of the lithology, mineralogy, and structure
of the deposit.
General Reference:
Key reference(s) to the model type.
Geological Environment
Rock Types
Predominant associated rock types.
Textures
Texture of predominant rock types.
Age Range
Geological time scale range for mineralization.
Depositional Environment
Geological environment for the deposition of the host rocks
and the ore minerals.
Tectonic Setting(s)
Regional structural controls of the mineralization within the
framework of plate tectonics.
Associated Deposit Types
Other mineral deposit types that may occur concurrently or
may be spatially associated with the deposit type.
Deposit Description
Mineralogy
Primary ore minerals.
Texture/Structure
Local structures and structural controls of the
mineralization and grain size distribution of the ore
minerals.
Alteration
Secondary minerals associated with the ore forming
processes and the zonation of these minerals within and
surrounding the ore mineral zones.
Ore Controls
The predominant controls of the tonnage and grade of the
mineral deposit.
Weathering
Chemical or mechanical changes to the mineral deposit
subsequent to the major ore forming processes.
Geochemical Signature
Elemental associations including the zonation of the
elements and the ratios of the elements.
Examples
Classic examples of the mineral deposit type for
comparative analysis.
Tonnage Distribution
Tonnage (quantity) distribution based on a relatively large
number of analogous deposit types worldwide.
Grade Distribution
Grade (quality) distribution based on a relatively large
number of analogous deposit types worldwide.
23
Table A3. Mineral deposit model types known to occur within the 120-mile wide Alaska Railroad Corridor
from Port MacKenzie to the Canadian Border (model types from Cox and Singer, 1986).
Model
Model Name
Model Description
Number
1.
Stillwater Ni-Cu
Crosscutting ultramafic to felsic intrusive rocks with
approximately concentric zoning of rock types
containing chromite, platinum, and Ti-V-magnetite.
7a.
Synorogenic-synvolcanic Ni-Cu
Massive lenses, matrix and disseminated sulfides in
small to medium sized gabbroic intrusions in
greenstone belts.
8a.
Minor podiform Cr
Podlike masses of chromite in ultramafic parts of
ophiolite complexes.
8b.
Major podiform Cr
Same as above but larger tonnage and grade
distribution.
8c.
Limassol Forest Co-Ni
Irregular veins, pods, and lenses associated with
serpentinized peridotite and dunite or nearby
country rocks.
8d.
Serpentine hosted asbestos
Chrysotile asbestos developed in stockworks in
serpentinized ultramafic rocks.
10.
Carbonatite
Apatite-magnetite and rare-earth deposits and
combinations of these in zoned complexes
consisting of central plug of carbonatite or syenite
breccia surrounded by ring dikes and cone sheets of
alternating rock types.
14a.
W skarn
Scheelite in calc-silicate contact meta-somatic
rocks.
14b.
Sn Skarn
Tin, tungsten, beryllium minerals in skarns, veins,
stockworks, and greisens near granite-limestone
contacts.
14c.
Replacement Sn
Stratabound cassiterite-sulfide (chiefly pyrrhotite)
replacement of carbonate rocks and associated
fissure lodes related to underlying granitoid
complexes.
15a.
W veins
Wolframite, molybdenite, and minor base-metal
sulfides in quartz veins.
16.
Climax Mo
Stockwork of quartz and molybdenite associated
with fluorite in granite porphyry.
17.
Porphyry Cu
Includes various subtypes all of which contain
chalcopyrite in stockwork veinlets in hydro
thermally altered prophry and adjacent country
rock.
18b.
Cu-skarn
Chalocopyrite in calc-silicate contact metasomatic
rocks.
18c.
Zn-Pb skarn
Sphalerite and galena in calc-silicate rocks.
18d.
Fe skarn
Magnetite in calc-silicate contact metasomatic
rocks.
20c.
Porphyry Cu-Au
Stockwork veinlets of chalcopyrite, bornite, and
magnetite in porphyritic intrusions and coeval
volcanic rocks.
21a.
Porphyry Cu-Mo
Stockwork veinlets of quartz, chalcopyrite, and
molybdenite in or near a porphyritic intrusion.
Ratio of Au (in ppm) to Mo (in percent) less than 3.
21b.
Porphyry Mo low F
Stockwork of quartz-molybdenite veinlets in felsic
porphyry and in its nearby country rock.
24
Table A3. Continued
Model
Model Name
Number
22a.
Volcanic hosted Cu-As-Sb
22b.
Au-Ag-Te veins
22c.
Polymetallic veins
23.
Basaltic Cu
24b.
Besshi massive sulfide
25a.
Hot-springs Au-Ag
25c.
Comstock epithermal veins
26a.
Carbonate hosted Au-Ag
27d.
Sb deposits
28a.
Kuroko massive sulfide
29a.
36a.
Qtz-pebble conglomerate Au-U
Low-sulfide Au-quartz veins
36b.
Homestake Au
37a.
Unconformity U-Au
39a.
Gold on flat faults
Model Description
Stratabound to pipelike massive copper sulfosalt
deposits in volcanic flows, breccias, and tuffs near
porphyry systems.
Gold telluride minerals and fluorite in viens and
breccia bodies related to hypabayssal or extrusive
alkalic rocks.
Quartz-carbonate veins with Au and Ag associated
with base metal sulfides related to hypabyssal
intrusions in sedimentary and metamorphic terranes.
A diverse group including disseminated native
copper and copper sulfides in the upper parts of
thick sequences of subaerial basalt, and copper
sulfides in overlying sedimentary beds.
Thin, sheetlike bodies of massive to well-laminated
pyrite, pyrrhotite, and chalcopyrite within thinly
laminated clastic sediments and mafic tuffs.
Fine-grained silica and quartz in silicified breccia
with gold, pyrite, and Sb and As sulfides.
Gold, electrum, silver sulfa salts, and argentite in
vuggy quartz-adularia veins hosted by felsic to
intermediate
volcanic
rocks
that
overlie
predominately clastic sedimentary rocks, and their
metamorphic equivalents.
Very fine grained gold and sulfides disseminated in
carbonaceous calcareous rocks and associated
jasperoids.
Stibnite veins, pods and disseminations in or
adjacent to brecciated or sheared fault zones.
Copper- and zinc-bearing massive sulfides deposits
in marine volcanic rocks and intermediate to felsic
composition.
Placer Au, U and PGE in ancient conglomerate.
Gold in massive persistent quartz veins mainly in
regionally metamorphosed volcanic rocks and
volcanic sediments
Stratabound to stratiform gold deposits in iron-rich
chemical sediments in Archean metavolcanic
terrane.
Uranium mineralization occurs as fracture- and
breccia-filling in metapelites, metapsammites and
quartz arenites located below, above, or across an
unconformity separating Early and Middle
Proterozoic rocks.
Elemental gold and platinum-group alloys in grains
and (rarely) nuggets in gravel, sand, silt, and clay,
and their consolidated equivalents, in alluvial,
beach, eolian, and (rarely) glacial deposits.
25
Appendix B. Gross Metal Value, Tonnage of Rail Freight and Estimated Annual
Economic Benefits – Port MacKenzie to Delta Junction.
For the 775 mineral occurrences examined in the Rail Corridor from Port
MacKenzie to the Delta Junction area (Table 1), the following results from Appendix D
were determined:
•
At the 50th Percentile of Tonnage and Grade
1. Expected Gross Metal Value – $8,494,199,924
2. Expected Tonnage of Mineral Concentrates – 916,210,444 tons
Assuming a 100-year period for the total development at the 50th Percentile of
tonnage and grade the expected annual economic benefit to the communities along the
Rail Corridor is $84 million. The annual expected rail freight load is 9 million tons.
•
At the 90th Percentile of Tonnage and Grade
1. Expected Gross Metal Value – $81,211,147,567
2. Expected Tonnage of Mineral Concentrates – 2,066,244,595 tons
Assuming a 100-year period for the total development at the 90th Percentile of
tonnage and grade the expected annual economic benefit to the communities along the
Rail Corridor is $812 million. The annual expected rail freight load is 21 million tons.
Table 6 is a tabulation of the net present value (NPV) of Port MacKenzie freight
savings relative to other south-central port facilities for natural resources developed
within the 120-mile wide corridor from the port site to the Delta Junction area. The NPV
is calculated at 4.5%, 7.0%, and 10.0% for n=25 and n=30 years. The freight loads for
metallic minerals included in this calculation are those estimated at the 50th Percentile of
tonnage and grade for all the mineral occurrences in the rail corridor. The expected
tonnage of metallic mineral concentrates is thus 9 million tons per year.
26
Table B1. Net present value of Port MacKenzie freight savings relative to other south-central Alaska port facilities for natural resources
developed within a 120-mile wide corridor from the port site to the Delta Junction area calculated at 4.5%, 7.0%, and 10.0% for n=25 and
n=30 years.
Port
Anchorage
Whittier
Seward
Distance
26.4 miles
89.1
140.7
Differential
Freight Savings
@ $0.06 per ton
$1.58
$5.35
$8.44
mile
Annual Freight
Net Present Value ($M)
Net Present Value ($M)
Net Present Value ($M)
(millions tons)
Annual
for n=25/n=30 years @
Annual
for n=25/n=30 years @
Annual
for n=25/n=30 years @
($M)
($M)
($M)
4.5% 7.0%
10.0%
4.5%
7.0%
10.0%
4.5%
7.0%
10.0%
P/A= P/A=
P/A=
P/A= P/A=
P/A=
P/A= P/A=
P/A=
14.828 11.654 7.458
14.828 11.654 7.458
14.828 11.654 7.458
P/A= P/A=
P/A=
P/A= P/A=
P/A=
P/A= P/A=
P/A=
16.289 12.409 8.176
16.289 12.409 8.176
16.289 12.409 8.176
Metal. Minerals
Cu, Pb, Au, etc.
(9)
Industrial
Minerals
(3.5)
Coal
(Agrium)
(3.3)
Coal
(Export)
(1 )
Petrochemicals
(Benzene)
(0.2)
Forest Products
Wood Chips etc.
(0.02)
Totals
n=25
n=30
14.22
210
232
166
176
106
116
48.15
714
784
561
597
359
394
75.96
1,126
1,237
885
943
567
621
5.53
82
90
64
69
41
45
18.73
278
305
218
232
140
153
29.54
438
481
344
367
220
242
5.21
77
85
61
65
39
43
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.58
23
26
18
20
12
13
5.35
79
87
62
66
40
44
8.44
125
137
98
105
63
69
0.32
4
5
4
4
2
3
1.07
16
17
12
13
8
9
1.69
25
28
20
21
13
15
0.03
0
0
0
0
0
0
0.11
2
2
1
1
1
1
0.17
3
3
2
2
1
1
396
438
313
334
202
220
1,089
1,195
854
909
548
601
1,717
1,886
1,349
1,438
864
948
The NPV of the freight savings from this estimated freight load exceeds the estimated
capital cost of the rail extension at interest rates of 4.5%, 7.0%, and 10.0% for both 25
and 30-year payback periods.
27
Appendix C Gross Metal Value, Tonnage of Rail Freight and Estimated Annual
Economic Benefits – Port MacKenzie to the Canadian Border.
For the 887 mineral occurrences examined in the Rail Corridor from Port
MacKenzie to the Alaska/Yukon Border (Table 1), the following results from Appendix
D were determined:
•
At the 50th Percentile of Tonnage and Grade
1. Expected Gross Metal Value – $9,136,967,824
2. Expected Tonnage of Mineral Concentrates – 1,085,301,326
Assuming a 100-year period for the total development at the 50th Percentile of tonnage
and grade the expected annual economic benefit to the communities along the Rail
Corridor is $90 million. The annual expected rail freight load is 11 million tons.
•
At the 90th Percentile of Tonnage and Grade
1. Expected Gross Metal Value – $83,422,708,896
2. Expected Tonnage of Mineral Concentrates – 2,698,652,081
Assuming a 100-year period for the total development at the 90th Percentile of tonnage
and grade the expected annual economic benefit to the communities along the Rail
Corridor is $834 million. The annual expected rail freight load is 27 million tons.
Table C1 is a tabulation of the net present value (NPV) of Port MacKenzie freight
savings relative to other south-central port facilities for natural resources developed
within the 120-mile wide corridor from the port site to the Alaska/Canada Border. The
NPV is calculated at 4.5%, 7.0%, and 10.0% for n=25 and n=30 years. The freight loads
for metallic minerals included in this calculation are those estimated at the 50th Percentile
of tonnage and grade for all the mineral occurrences in the rail corridor. The expected
tonnage of metallic mineral concentrates is thus 11 million tons per year.
28
Table C1. Net present value of Port MacKenzie freight savings relative to other south-central Alaska port facilities for natural resources
developed within a 120-mile wide corridor from the port site to Alaska/Canada border calculated at 4.5%, 7.0%, and 10.0% for n=25 and
n=30 years.
Port
Anchorage
Whittier
Seward
Distance
26.4 miles
89.1
140.7
Differential
Freight Savings
@ $0.06 per ton
$1.58
$5.35
$8.44
mile
Annual Freight
Net Present Value ($M)
Net Present Value ($M)
Net Present Value ($M)
(millions tons)
Annual
for n=25/n=30 years @
Annual
for n=25/n=30 years @
Annual
for n=25/n=30 years @
($M)
($M)
($M)
4.5% 7.0%
10.0%
4.5%
7.0%
10.0%
4.5%
7.0%
10.0%
P/A= P/A=
P/A=
P/A= P/A=
P/A=
P/A= P/A=
P/A=
14.828 11.654 7.458
14.828 11.654 7.458
14.828 11.654 7.458
P/A= P/A=
P/A=
P/A= P/A=
P/A=
P/A= P/A=
P/A=
16.289 12.409 8.176
16.289 12.409 8.176
16.289 12.409 8.176
Metal. Minerals
Cu, Pb, Au, etc.
(11)
Industrial
Minerals
(3.5)
Coal
(Agrium)
(3.3)
Coal
(Export)
(1 )
Petrochemicals
(Benzene)
(0.2)
Forest Products
Wood Chips etc.
(0.02)
Totals
n=25
n=30
17.38
258
283
203
216
130
142
58.85
873
959
686
730
439
481
92.84
1,377
1,512
1,082
1,152
692
759
5.53
82
90
64
69
41
45
18.73
278
305
218
232
140
153
29.54
438
481
344
367
220
242
5.21
77
85
61
65
39
43
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.58
23
26
18
20
12
13
5.35
79
87
62
66
40
44
8.44
125
137
98
105
63
69
0.32
4
5
4
4
2
3
1.07
16
17
12
13
8
9
1.69
25
28
20
21
13
15
0.03
0
0
0
0
0
0
0.11
2
2
1
1
1
1
0.17
3
3
2
2
1
1
444
489
350
374
224
246
1,248
1,370
979
1,042
628
688
1,968
2,161
1,546
1,647
989
1,086
The NPV of the freight savings from this estimated freight load exceeds the
estimated capital cost of the rail extension at interest rates of 4.5%, 7.0%, and 10.0% for
both 25 and 30-year payback periods.
In addition to the 887 mineral occurrences within the rail corridor in Alaska, there
are approximately 2900 mineral occurrences in the Yukon Territory. The base-metal,
ferro-alloy, iron ore and coal deposits in the Territory will benefit from alternate
tidewater access. The Port of Skagway has limited capacity (10 million tons per year
maximum) and serious environmental constraints while the Port of Prince Rupert is too
distance for these low unit value commodities. The development of the Crest Iron Ore
Deposit in east-central Yukon is totally dependant on the availability of and access to a
large deepwater port. The deposit appears to require a export market of at least 25
million tons per year to justify the required investment in the mining, milling, and
29
infrastructure facilities. The Port of Skagway has inadequate capacity and the Port of
Prince Rupert is too distance for this low unit value commodity. The export of the iron
ore through the Port MacKenzie would result in freight loads greater than those estimated
for all other sources of freight under the most optimistic scenarios.
There are approximately 4400 mineral occurrences in northeastern British
Columbia. Freight from the development of these occurrences would be transported
through the Port of Prince Rupert until the capacity of that port is reached. That is not
expected to occur within the foreseeable future.
30
Appendix D Gross Metal Value of Identified Major Mineral Occurrences in the
Alaska Railroad Extension Corridor in Alaska.
(see attached EXCEL Spreadsheet in Landscape Format)
31