ALASKA STATE MINING LAWS
While exploration investments are leaving the western United States, Alaska state land offers an alternative place to explore that has the same language, culture and legal system as the lower-48 states. The very reasons for the exodus of exploration investments from the western states, uncertainty over the future of the federal mining law and the increasingly overbearing regulatory system, are generally settled in Alaska.
The opportunities for new mineral discoveries in Alaska are tremendous. State-owned lands cover an area larger than the entire State of California, and most of these lands are open to mining under a location system which is a modem version of the federal mining law. And although operations in Alaska were for many years held to a higher standard than in other states, today the field is nearly level and in several states the requirements are more stringent than in Alaska.
In general terms - Alaska has tremendous opportunities, a system of environmental and reclamation laws that can work, and a state government and a population that want jobs and economic development. Furthermore, there are now six major gold projects in Alaska that within the next 24 months should be in construction and many more that are in various stages of exploration. Now to discuss the lands available and the Alaska mining laws and regulations and how they function.
Alaska's 104 million Acres
At the time of statehood, the State of Alaska was given the right to select 104 million acres from the "public lands" that were then managed by the Bureau of Land Management (BLM). The total area of the state is 365 million acres and at statehood only about 60 million acres had been designated as federal parks, monuments, etc.
Alaska began evaluating and selecting lands with the first million acres being lands to generate revenues for a mental health trust which had been established while Alaska was still a territory. The selection process continued until January 1, 1994 which was the statutory end date for completion of selections. As of today, approximately 90 million acres have been transferred (TA'd, tentatively approved) to the State and processing of the remainder continues. Of the 104 million acres (California's total area is 100 million acres) of state land, approximately 95 million acres are, or once TA'd will be, open to mineral entry (claim staking).
The Alaska Mining Law
The Alaska mining law is a location system and can be summarized as having: self-initiation; 40 acre claims following legal subdivision or protracted survey; claims aligned in cardinal directions but different orientations can and typically are approved; vertical sidelines without extralateral rights; tenure is established when the stakes arc placed; filing and recordation must occur within 90 days of staking.
State mining law also contains a provision for staking 160 acre upland prospecting sites that can hold the ground for one year with a one year extension that is nearly always approved. Rules and requirements are the same as for claim except that the prospecting sites must be converted to claims before more than minor surface disturbing activities can begin.
One aspect of State land management law is that lands can be closed to location by administrative order (MCO, mineral closing order), subject to valid existing rights, but remain open to "leasehold location." This can be applied to areas of special sensitivity, close to communities, etc. The location rules and rights are the same for such lands except that the claimant must enter into a lease with the State before more than minor surface disturbing activities can begin.
Another variation involves offshore areas within the state-owned three mile limit. These lands can be obtained through use of OPPs (offshore prospecting permits). The use of the term "permit" here is however a misnomer because once issued, an OPP is actually a tenure right that can become a lease at the discretion of the holder. This entire topic is quite complex and time and space does not allow for a full discussion here.
Claim Maintenance Requirements
The other major area that must be addressed involves the claim maintenance requirements. The State has requirements for: assessment work, an annual claim rental, a mining license tax, and a production royalty. As a side note, the Alaska Miners Association is working hard to establish an exploration incentive program that will allow credits against these items and against State corporate income tax, even though the costs were expensed in the year expended.
Annual assessment work of $100 per 40 acre claim is required. Work can be performed in excess of the year's requirement and applied to future labor years for up to four years. alternately, payment can be made in lieu of assessment. Assessment work must be filed and recorded.
Annual claim rental is prepaid beginning at $20 per claim ($0.50/acre if claim is full 40 acres). This rental escalates to $40 per claim after five years and then by year 11 it is up to $ 100 per claim ($2.50/acre).
A mining license tax (MLT) is payable on all production from State, federal or private lands. This tax is on a net profits basis with a no-tax grace period for the first 3.5 years from when the mine goes into production. If annual net income is less than $40,000, there is no MLT. If annual net income is between $40,000 and $ 100,000 the MLT rate is 5%. If annual net income is above $100,000, the MLT rate Is 7%. Applying to State lands only, there is also a 3% production royalty that is calculated on the same net profits basis as the mining license tax. This production royalty is payable on all State land production and does not include the 3.5 year grace period. Failure to file and pay this royalty will result in loss of claims.
Further regarding State lands, at any time in the exploration or production process, the claimholder, at his discretion may take the area covered by mining claims to a lease. This lease will have the same rental and production royalty rates as for the claims and will still require annual claim filing and recordation. The lease will also define specific rights of control and tenure that may otherwise be open to conflict with third party claimants or other multiple use users of the State land. Minerals on State lands cannot be patented.
Alaska has a modem mining law based on self-initiation and location of mining claims. This has been a brief look at that law. Times have definitely changed for mineral development in Alaska. The opportunities are tremendous and the attitudes and regulatory climate 'in the state are greatly unproved as compared to the past, and they continue to improve on a yearly basis.
Steven C. Borell is the Executive Director of the Alaska Miners Association which represents all aspects of the mining industry in Alaska. For more information contact the Alaska Miners Association, 3305 Arctic Boulevard, Suite 202, Anchorage, AK 99503, Phone (907) 563-9229, FAX (907) 563-9225
Alaska Miners Association
News In Brief
News in Brief is a feature of our monthly journal. The Alaska Miner welcomes information for inclusion in News in Brief. Send to: Alaska Miner, 3305 Arctic Blvd., #105, Anchorage, Alaska News in Brief
"The Alaska Miner" welcomes information for inclusion in News in Brief.
Send news items to: Alaska Miner, 3305 Arctic Blvd., #105, Anchorage, Alaska 99503. The DEADLINE for news items is the 5th day of the month.
Andover Identifies New VMS Prospects on Sun Property - Andover Mining Corp., currently conduction exploration at its SUN Cu-Pb-Zn-Ag-Au Volcanogenic Massive Sulfide (VMS) Prospect, reports that it has identified, mapped and sampled at least six new VMS prospects. Initial results from three of the prospects (SAL, STU, and Picnic Creek) have generated immediate drill targets. Initial drill testing of these targets is scheduled for this summer with a Versadrill field portable drill, operated by Core One Drilling of Delta Colorado. At the SAL prospect, grab samples from gossan and altered rocks in the area have returned assay values of up to 1.8% Copper, 1.48% Lead, 1.34% Zinc, 42 g/T Silver, and 0.54 g/T Gold. At the STU prospect, grab samples have returned values of up to 2.04% Copper, 0.95% Lead, 1.21% Zinc, 64 g/T Silver, and 0.49 g/T Gold. (Company press release, 8/08/12)
Graphite One Drills 165.3M of 4.23% Graphite - Graphite One Resources Inc. has released initial drill results from its Graphite Creek Property. Graphite One has verified that the 16km long EM conductor is directly related to wide scale, high grade, graphite mineralization. Drill Hole 1 results include 411 meters of 2.1% including 127.9 meters of 4.1%, and 41.73 meters of 6.7% graphite. Drill Hole 2 includes 353 meters of 2.7% graphite including 165.3 meters of 4.23%, 46.4 meters of 6.6% and 21 meters of 10.1% graphite. The drill holes were drilled at -50 degree dip to test true thickness of mineralization. The graphite bearing rocks dip at approximately 60 degrees and are exposed along the dip slope. (Company press release, 8/07/12)
Corvus Gold JV Partner to Commence Test Production - Corvus Gold Inc. has announced that the Company’s joint venture partner WestMountain has indicated they will complete on-site installation of the bulk sample gold mill and will commence test production this summer. Corvus will receive 49% of the gold production plus a net smelter royalty (NSR) of 0.5% to 5% at no cost until WestMountain completes the require work commitments by the end of 2013. Planned work by WestMountain includes: Complete installation of the bulk sample on-site gold mill and commence gold production; 1,200 meters of core drilling to further extend the Ben Vein Gold structure; complete a complete resource update by Gustavson & Associates in Q4 2012; commence engineering work to support the Scoping Study on a underground mining operation with completion expected in Q2 2013; and initiate a surface work program on the Camp Creek Midway porphyry target. (Company press release, 8/09/12)
Millrock Begins Drilling at Council Gold Project - Millrock Resources Inc. has announced that drilling has commenced at the Council Project on the Seward Peninsula in western Alaska. Exploration the Council Project targets sediment-hosted vein gold deposits. The planned program for this project consists of six holds totaling approximately 1,000 meters. Drill holes will test a seven km long gold-arsenic soil anomaly that overlies a regional structure feature. In places, the soil anomaly is up to 400 meters in width. Millrock crews discovered stock work and vein hosted gold mineralization near the target area in 2011. (Company press release, 7/24/12)
2012 Drilling Begins at Niblack Project - Heatherdale Resources Ltd. reports that drills were mobilized to their Niblack Project site to begin their 2012 drilling program. The 2012 program is designed to further build the resources base and progress the Niblack Project toward the pre-feasibility state. Heatherdale has completed extensive and successful underground drilling over the past three years to expand the Lookout and Trio deposits. The 2012 program will be staged from surface locations, and facilitate stepping out from areas that could not be efficiently tested from existing underground workings. It mainly targets the open extensions of the Lookout and Trio deposits, as well as focusing on several other key targets along the property’s six miles of prospective felsic stratigraphy, which is know to host at least six massive sulphide zones. Approximately 15,000 feet of drilling is planned for 2012, using two rigs. (Company press release, 7/16/12)
Donlin Gold Project Begins Permit Process - Donlin Gold LLC submitted a Plan of Operations and the Wetlands Permit Application under Section 404 of the U.S. Clean Water Act to the federal and state regulators, formally initiating the permitting process. This permit application is the driver for the start of the environmental review process under the National Environmental Policy Act (NEPA) leading to the development of an Environmental Impact Statement (EIS). Over the next few months, the notice of intent for the EIS is expected to be prepared and published by the U.S. Army Corps of Engineers followed by public scoping for the NEPA process. (Company press release 8/07/12)
Pogo Mine Pours Two-Millionth Ounce of Gold
International Tower Hill Mines Ltd. - On August 3, ITH announced the closing of its first tranche of a C$29.6 million non-brokered private placement financing. The first tranche of the offering consists of 9,458,308 common shares of ITH at a price of C$2.60 per common share for gross proceeds of C$24.6 million. The participants in the first tranche of the offering include Paulson & Co., Tocqueville Asset Management, LP, AngloGold Ashanti (USA) Exploration, Inc., ITH management and insiders as well as other institutional funds. The second stage of the offering will involve the issuance of up to C$5 million of common shares, at a price per share equal to a 10% discount from the five day volume weighted average price for the common shares as of September 12, 2012, subject to a maximum issuance of 3,000,000 shares. The single place in the second stage is purchasing C$5 million of common shares in the first stage of the offering and has committed to close the second stage portion of the offering. Closing of the second stage is anticipated on or before September 21, 2012. ITH will pay a 4% cash finders fee in connection with the issuance of up to C$10 million of shares to this investor. Completion of the second stage is subject to ITH obtaining all necessary regulatory approvals, including acceptance for filing by the Toronto Stock Exchange. ITH intends to use the net proceeds of the private placement for completion of its bankable Feasibility Study and continued project advancement at the Livengood Gold Project in Alaska as well as for general working capital purposes. (Company press, 8/3/12)
Endurance Doubles Size of McCord Creek Gold Property - Endurance Gold Corporation has announced that the company has staked 19 additional Alaska State mining claims to increase the size of the McCord Creek Gold Property to 33 claims (4,620 acres). Endurance and Liberty Gold Corporation have also approved proceeding with an exploration program of approximately $190,000. Endurance also reports that crews have been mobilized and have commenced the sampling program. (Company press release 8/01/12)
Fire River Raises $5.7 Million - Fire River Gold Corp. has closed the first tranche of its previously announced brokered private placement financing. Pursuant to the offering, Fire River issued 88,417,458 Units at a price of 0.065 per Unit for aggregate gross proceeds of $5,747,134.77. Each Unit consists of one common share and one common share purchase warrant. Each Warrant entitles the purchaser to subscribe for one additional common share at an exercise price of $0.10 per Warrant Share for a period of five years. BayFront Capital Partners Ltd. acted as agent in connection with the Offering. Fire River paid $137,040.80 and issued 2,108,320 compensation options as commission in connection with the Offering, other than in respect of subscriptions received from certain president’s list subscribers. Each compensation option is exercisable into one Unit at a price of $0.065 for a period of five years. Fire River will use the proceeds for further development of the Nixon Fork Mine, satisfaction of an outstanding debt and for working capital and general working capital. (Company press release, 8/09/12)
WestMountain Continues Operations at Terra Project - WestMountain Gold Corp reports that drill operations and gold mill construction are underway at the Terra Project in Alaska. The planned drill program is a continuation of the company’s efforts to expand the gold resource at the Terra Project. The 2012 drill program plans for over 3,600 feet of core drilling, which should further extend the Ben Vein gold structure over it kilometer and a half surface exposure. Planned work for the 2012 season includes: Drilling 3,600 feet to further extend the Ben Vein gold resources; complete the construction and installation of the bulk sample gold mill on-site and commence gold production; complete a technical report (43-101 compliant) on the Terra project with a resource update from 2011 and 2012 drill results sure out in Q4 2012; engineering work at Terra to support a Scoping Study on an underground mining operation due out in Q2 2013; and aggressive field work program on the Camp Creek Midway porphyry target. (Company press release, 8/08/12)
Full Metal Drilling at Pyramid Project - Full Metal Minerals Ltd. has announced that the 2012 core drilling program with Antofagasta Minerals S.A. is underway at the Pyramid Project, located near tidewater on the Alaska Peninsula. Five holes have been completed to date and drilling is ongoing. The primary objective of the 9,000 feet core drilling program is to test extensions of Cu-Au-Mo mineralization, as well as follow up on high grades encountered during the 2011 drilling program. Portions of the surface expression of stockwork veining and favorable alteration have not yet been drilled at Pyramid. Mineralization is open in several directions and at depth. (Company press release, 8/01/12)
Andover Appoints Gerald Booth to BOD - Jerry Booth was appointed to the Board of Directors of Andover Mining. Mr. Booth has over 40 years mineral experience in mineral and natural gas exploration after graduating with a BSc. in Geology fro Washington State University. He was Manager of Alaska Exploration for Cominco in the 1970’s and 1980’s and spend over 24 years in exploration and development with Cominco. As Manager of Alaska Operations, Mr. Booth led the exploration and pre-development of the Red Dog Mine in Northwest Alaska. Mr. Booth also served as VP Resources for Cook Inlet Region Inc. (Company press release, 8/01/12)
Mining License Tax
Alaska levies a mining license tax on mining net income and royalties received in connection with mining properties and activities in Alaska. The division collects mining license taxes primarily from businesses engaged in coal and hard rock mining in the state.
Tax rates on mining net income are as follows: No tax if net income is $40,000 or less; $1,200 plus 3% over $40,000; $1,500 plus 5% over $50,000; and $4,000 plus 7% over $100,000.
Mining licensees are required to file an annual return that is due before the first day of the fifth month after the close of the business' fiscal year. More information about the mining license tax may be found in the Tax Division Annual Report.
Forms, Licensing & Filing: Placer and Other Mining
Sarah E Wilson
907-269-1017 - Anchorage
By Steve Borell