Projects on tap vs. GDP

May 20, 2013

Alaska’s Donlin gold project at $6.5 capital cost is the largest project likely in the north in the next 5 years. Yet in comparison to the Alaska GDP it is not that large.

• Alaska’s GDP is approx. $50B so the $6.5 B CAPEX for Donlin comes in at about 13% the size of GDP. Donlin is a joint project between Nova-Gold and Barrick, two Canadian gold producers. The Feasibility Study filed earlier this year demonstrated that, when in operation as envisioned, Donlin Gold would produce well over a million ounces of gold a year, averaging approximately 1.5 million ounces of gold production in the first five years of operation and, assuming no expansion, approximately 1.1 million ounces per year over its initial 27-year life.
• Yukon’s Casino project at a $2.5B Capital cost compares to a $2.7 B GDP, or 93% of GDP. Western Copper and Gold, the promoter, estimates the GDP generated in Yukon by the construction of Casino at $271 million, or 19% of Yukon’s 2009 GDP. The Casino project located near Carmacks could start permitting this year and construction in 2016.
• NWT’s Gahcho Kué Diamond Project is a 49% / 51% joint-venture between Mountain Province Diamonds Inc. and Harry Winston Diamonds. It is a $750 M project planned for construction in the next few years. NWT’s GDP is around $4.8 B to this project amounts to 16% of GDP.
• Nunavut has three large projects on tap: the Izok zinc mining project at a cost of $2.5 B; the Mary River iron ore project is slated to now cost approx. $750 M;  and the Kiggavik Project, a proposed uranium mining and milling operation that could start construction in 2017 would employ 400 – 600 employees during operation and up to 750 people during construction. The construction cost is estimated at $2.1 B by Areva, the proponent. Taken together these projects total $5.35 B in capital expenditures compared to a territorial GDP of $2 B. or 268% of GDP.

Commentary

Alaska has a much larger population, better infrastructure and training capacity than the Canadian territories. Ergo, a $6.5 B gold mine will easily be absorbed by the state economy.

Yukon’s large scale copper mine (compared to GDP) means the project will tend to push up its housing prices and cause labour shortages, if it goes ahead.

Nunavut lacks the local workforce to staff three large-scale projects within its boundaries. The upshot is that most of the workforce will have to be brought in from the south. The potential for rapid cost escalation must be a concern for the proponents.

Sources

• a)http://en.wikipedia.org/wiki/List_of_Canadian_provinces_and_territories_by_gross_domestic_product



• b)http://www.novagold.com/section.asp?pageid=22227



• c)http://kiggavik.ca/the-project/faqs/