Funding

How Would This Project Be Funded?

AIDEA, as a development finance authority, would develop the access route as a Public-Private Partnership in which AIDEA funds and bonds would be used in conjunction with private capital for the construction and operation of the AMDIAP. This is based on the successful funding model used to construct the DMTS to the Red Dog Mine, which has provided hundreds of high-paying jobs to the region.

How is This Like Red Dog Mine?

As with the DeLong Mountain Transportation System (DMTS), mines using the road to haul ore to market would pay a user fee that would pay back the financing used for the development and construction of AMDIAP. Construction of the DMTS facilities was executed via an initial $180 million in AIDEA cash and bonding; the 1999 expansion involved approximately $87 million of additional bonding. Repayment of these bonds is achieved through a "toll" structure for use of the system by mine company customers. Presently, the Red Dog Mine, operated by Teck and owned by NANA, is the only user. The toll mechanism provides for a minimum annual assessment (aka payment) and additional payments based on escalated zinc prices and higher throughputs. The additional throughput payments are deposited to a reserve account that is used for any potential unpaid operation costs or future capital improvements.

Funding Model: Red Dog Mine and DMTS

As one of AIDEA's original projects, the DeLong Mountain Transportation System (DMTS) was opened in 1989 to support the development of the Red Dog Mine in northwest Alaska. The Red Dog Mine, operated by Teck Alaska, Inc. in conjunction with the local native regional corporation (NANA Regional Corporation, Inc.), is one of the world's largest producing zinc mines. The DMTS provides the necessary infrastructure for the transport of the ore from the mine site to the ore export barges. Expansion of the DMTS port facilities in 1999 enabled Teck to increase mine and port throughput, improving the overall project economics. The Ambler Mining District Industrial Access Project would be funded and operated just like DMTS and Red Dog Mine. It would provide access to the Ambler Mining District as Congress wisely provided for in ANILCA.

Based on "Ambler Mining Region Economic Impacts Analysis" by Cardno


5.1.10 Alaska Industrial Development and Export Authority Payments

AIDEA, a state-owned private corporation, receives payments for the transportation of ore from the Red Dog Mine along the DeLong Mountain Transportation System (DMTS). The DMTS is a 52-mile haul road connecting the Red Dog Mine to a port along the Chukchi Sea. AIDEA financed the construction of DMTS and receives payments from the mine’s operator (Teck Alaska) for its use. Construction of the DMTS cost $180 million and then an additional $85 million for improvements, for a total cost of $265 million. As of June 2011, the state has received more than $342 million in user fees from the Red Dog Mine. AIDEA also receives lease payments from Minto Exploration Limited for the use of the Skagway Ore Terminal in Southeast Alaska. In 2013, AIDEA was paid approximately $12 million for the use of the DMTS and the Skagway Ore Terminal.


7.6.6 AIDEA Toll Payments

It is necessary for AIDEA to collect sufficient toll payments to recover the cost of AMDIAR construction, operation, and maintenance and the cost of their debt financing. Total AMDIAR construction costs are estimated to be between $304.9 and $346.5 million (see Table 6-1), while total operating and maintenance costs are estimated to be $270 million over the life of AMDIAR, or a total of between $574.9 and $616.5 million (in 2014 dollars). Assuming the current municipal bond yield of 2.75 percent on 30- year municipal bonds, the total cost of these funds to AIDEA would be $270.0 to $289.5 million. Therefore, the total cost of construction, operation, and maintenance, and the cost of funds for AIDEA, would be between $844.9 and $906.0 million over the 30-year life of AMDIAR. It is anticipated that a 4.0 percent loan on the project’s construction would be sufficient to account for the yield on a 30-year municipal bond. Assuming a 4.0 percent loan with a 30-year term, AIDEA would receive between $413.2 and $443.0 million in interest from road users over a 30-year period. In addition to this interest, road users would also repay AIDEA for the construction, operation, and maintenance of AMDIAR as described above ($574.9 to $616.5 million). Consequently, this analysis estimates that AIDEA would collect between $988.1 million and $1.1 billion of toll payments over the 30-year life of AMDIAR. In consideration of AIDEA’s expenditures and gross revenue from expected tolls, the total net revenue of AMDIAR is between $143.2 and $153.5 million over the 30-year life of AMDIAR and the project exhibits a net present value of $84.3 to $90.4 million assuming a discount rate of 3.9 percent.


7.6 State and Local Revenue Impacts

This section provides the estimated government revenues related to the development of the District mining projects. Given the uncertainty regarding the timing of each mine’s development, the timings of state and local payments are not estimated. Rather, results are generally presented in terms of the Life of Mine (LOM), with the exception of mineral rent payments and PILT payments. Table 7-16 below provides a summary of state and local tax revenue estimated to be generated occur as a result of District mine development. For those payments in which a LOM estimate is provided (mining license, corporate income taxes, production royalty, and fuel taxes), the total LOM payments to the state over the life of the four major District mining projects are estimated to be $698.6 million. This does not include the annual estimated payments for claim rental ($637,000) on state lands. PILT to the NWAB is estimated to be $6.5 million (2014 dollars) in the first year these payments would be made by each of the prospective mines. Furthermore, it is estimated that AIDEA will receive approximately $1.0 billion in toll payments for the use of the AMDIAR over the 30-year life of the road. This remainder of this section has additional mine- and road-specific details related to each of these payments.


Revenue Summary

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