Native corporations to see cash infusion from Alaska zinc mine

Posted: Tuesday, November 27, 2007

ANCHORAGE - Profits from the Red Dog Mine are expected to provide an infusion of $200 million to Native corporations around the state in the coming year.

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Red Dog, the world's largest zinc mine, is situated on Native land in the Brooks Range foothills.

The zinc is used to galvanize steel, with the auto industry being Red Dog's biggest customer.

Low zinc prices have hampered the mine since its opening in 1989.

But zinc prices have been rising the past few years, and the mine's owner, Teck Cominco of Canada, said this fall it recouped its cost of building the mine about 60 miles inland from the Chukchi Sea.

That, along with the higher zinc prices, is increasing royalties being paid to Alaska Natives.

Teck pays the royalties to the land owner, the Kotzebue-based NANA Regional Corp. Under the Alaska Native Claims Settlement Act of 1971, NANA keeps 38 percent of the royalties and shares the rest with Alaska's other Native corporations.

Boosted by higher zinc prices and other minerals like lead and silver, the value of Red Dog's production was more than $2 billion last year, more than all the state's other mines combined, according to state figures.

NANA officials say the mine also is important for the jobs it provides. It's the largest employer in the Northwest Arctic borough.

"The reason for (building) Red Dog was jobs," said Helvi Sandvik, president of NANA Development Corp., the business arm of NANA Regional.

Royalties are less important to NANA, she told the Anchorage Daily News.

Before the mine opened, NANA and Teck agreed that once development costs were paid off, NANA would receive a larger royalty, beginning at 25 percent.

It increases 5 percent every five years, until it reaches 50 percent.

NANA's royalty was set at 4.5 percent until the mine was paid off this fall. Teck officials say they are satisfied that the agreement is moving to the next stage.

"It strengthens the partnership (with NANA)," said Jim Kulas, the mine's environmental superintendent.

NANA expects to receive its first 25 percent royalty in January on Teck's net proceeds from Red Dog. The other regional corporations will get their share a little less than a year later, after NANA completes its fiscal year.

Then, the other regional corporations in Alaska must pass along half of what they receive to village corporations and "at-large" shareholders who don't own stock in a village corporation.

It's up to the regionals and the village companies to decide how to divvy up the rest, either giving shareholders dividends or putting the money to other uses.

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