Though gold discoveries in Latin America and other far-flung
locations have been lighting up the stock markets lately, Alaska is
now earning back some of the limelight.
The latest development to illustrate how their world class
discoveries rival the best on offer anywhere else in the world
involves a new high-grade discovery zone at the emerging 10.9
million ounce Livengood gold deposit in politically stable,
pro-mining central Alaska. Wholly owned by International Tower Hill
Mines, the deposit is located 70 miles north of Fairbanks,
Last week, the company announced its best drill results to date.
This new development could lead to a significant expansion of what
by global standards is already an unusually large asset, according
to company CEO Jeff Pontius.
With drilling highlights that include 112 meters of 2.63 grams
per tonne of gold, he adds that ITH is now tapping into previously
unexplored deeper gold mineralization, which is still shallow
enough to be amenable to cost-efficient open pit mining.
"This all bodes well for what could evolve into a major
resource expansion of the deposit," he says
Several mining analysts who have studied ITH's recent drill
results concur with Pontius, at least in terms of acknowledging
their potential to enrich the overall value of the deposit. They
include Toronto-basedAlex Terentiew of the global investment bank
"The high grades lead us to suspect there is good
potential for the average grade of the deposit to be
enhanced," Terentiew says. "As the deposit is designed as a
bulk tonnage, low grade mine, an increase in the average
life-of-mine grade can have a substantial impact on the
A pre-feasibility study (an initial blueprint for a mine) is
underway at Livengood and is expected to be completed by the fall
of 2011, by which time ITH hopes to have outlined considerably more
gold, Pontius says.
He adds that the prolific size of the deposit has already
attracted potential takeover candidates. They include some of the
world's largest gold miners, all of which are scrambling to
replenish dwindling gold inventories. This is proving to be a
daunting challenge against a backdrop of a global, decade-long
trend of falling output numbers, which have been consistently
dropping at around 5% per annum.
Hence, the world's well-established gold producers - emboldened
by strong balance sheets - are all focused on ramping-up their
production figures to continue to cash in on a secular bull market
in bullion prices. So says Michael Jalonen, a Toronto-based mining
analyst for theU.S. investment bank Bank of America Merrill
In a recent research report entitled"Global Gold M&A Heats
Up," he says that these gold miners cannot rely on organic growth
alone, and that they stand to grow much faster by making
We expect the reserve-hungry senior and mid-tier producers to
continue focusing their attention on resource-rich junior
producers and developers," Jalonen adds.
"By our count, the top 10 gold producers under coverage will
need to replace 38 million ounces of gold reserves mined in
2010," he says. "We estimate the biggest gold companies could
generate $80 billion of free cash flow over the 2010-2015
period that could be deployed for acquisitions."
Pontius is remaining tight-lipped as to who ITH's suitors
actually are. However the 5.4 million ounce Fort Knox Mine, which
is owned by mining powerhouse Kinross Gold Corp. (
), lies just 60 miles southeast of the Livengood project.
The Fort Knox mine is expected to wind down by the time
Livengood may be ready for commercialization. And Kinross has
extensive gold processing infrastructure already in place that
could be of value to ITH, assuming the project gets the go-ahead to
become a mine in 2016 or the following year.
Such a scenario makes Kinross an obvious strong contender to
gobble up ITH, according to Wendell Zerb, a Vancouver-based mining
analyst for the stock brokerage firm Canaccord Genuity.
"Kinross is a very logical potential candidate for being
interested in Livengood," he says. "But given the size of the
deposit, there could be a fit with a number of different
major gold mining companies."
The overall size of Livengood's growing asset base is already a
strong selling point as major mining companies are known to prefer
deposits that can yield significant amounts of gold year after
year. Ones that can have a meaningful impact on their bottom
And 10-million-ounce-plus deposits are becoming increasing rare
worldwide, according to Zerb, who adds that Livengood is "one of
only a few very large gold assets with considerable upside leverage
in a strong gold environment (greater than US $1,100/oz)."
This view is shared by Michael Curran, a Toronto-based mining
analyst for the major Canadian investment bank RBC Capital
"In our view, International Tower Hill has been one of the
better exploration success stories over the past few years,"
he says. "With potential for resource increases ... we see
above average potential for the deposit to ultimately be
developed as a large open pit mine capable of producing
Meanwhile, Novagold and Northern Dynasty have already
demonstrated how big Alaska's world-class gold discoveries can
actually get. Their giant assets are located in western Alaska and
weigh-in at 37.9 million ounces and 66.9 million ounces,
Novagold is an equal partner with the world's largest gold
miner, Barrick Gold Corp. (
), in the development of the Donlin Creek deposit, which promises
to becomeone of just a handful of operations worldwide that can
yield more than one million ounces of gold annually. The partners
are aiming to bring the mine on-stream by 2017 or 2018.
Northern Dynasty is also in a 50/50 partnership with another big
league mining multinational, Anglo American plc (AAUKY.PK),to
develop the Pebble project, which is by far the largest gold
deposit in the Americas. The deposit's owners hope to commission a
mine by 2016.
By comparison, the Cerro Casale mine-in-the-making in Chile,
which is jointly owned by Barrick Gold and Kinross Gold, is Latin
America's biggest in-development gold project. It hosts 26.4
million ounces. And only six other deposits of around 10 million
ounces in size or better are being developed in South America, with
three of them located in politically problematic Venezuela.
2011 Outlook: Economy Should Do Better Than Market