Sometime this summer, Seabridge Gold Inc. (TSX:SEA) hopes to clear the first major hurdle on a proposed $5.3 billion mega-mine project near the Alaska Panhandle: getting an environmental assessment certificate.
Located 65 kilometres northwest of Stewart, B.C., and 30 kilometres from the Alaskan border, the Kerr-Sulphurets-Mitchell (KSM) project is four deposits that would be mined as a combined open-pit and underground gold, copper, silver and molybdenum mine.
The operation would be in two locations connected by twin 23-kilometre-long tunnels, which would be used to transport miners and ore. It would produce an estimated 130,000 tonnes of ore per day and employ 930 miners – three times the number to be employed at the new Red Chris mine, which is due for commissioning in August.
During a joint environmental assessment last year, environmentalists and First Nations on both sides of the B.C.-Alaska border raised red flags about KSM's impact on fish-bearing rivers from acid-producing waste rock. While the mine would have an estimated life of 50 years, environmentalists say the tailings ponds would have to be monitored for 200 years.
“The KSM calls for the application of unproven technology applied on an unprecedented scale that will have to operate for eternity in order to offer any level of protection to downstream communities,” said Guy Archibald, mining and clean water co-ordinator for the Southeast Alaska Conservation Council.
While the Nisga'a First Nation has signed a benefits agreement with Seabridge Gold on the KSM project, the Gitanyow First Nation has spoken out about the impact mine tailings would have on salmon-bearing rivers.
But economics, not environmental concerns, may be the project's biggest obstacle.
According to Seabridge, the KSM is “one of the largest undeveloped gold projects in the world.”
But mining analysts say there's a reason it's undeveloped.
“The problem with this project is that it's not economic,” said Mickey Fulp, publisher of mercenarygeologist.com.
Large though KSM might be, Fulp said the ore quality is low and the costs to build a mine are too high.
“The idea they could raise $5.3 billion is, in my opinion, ludicrous,” he said.
Leonard Melman, a B.C. precious metals analyst and publisher of the themelmanreport.com, said the KSM project also has geographic disadvantages. The site is in a remote region of B.C. that currently can be reached only by helicopter.
Sid Rajeev, an analyst with Fundamental Research Corp., said gold needs to be in the “sweet spot” of $1,300 and $1,400 per ounce to make new mines economically feasible.
A Seabridge spokesman told Business in Vancouver the company would not be commenting on the project until after a decision is made sometime this summer by provincial and federal environment ministers.