Costs have grown but expectations remain high for what developers hope will be the first in a series of hard rock mines in Interior Alaska.

The Arctic copper, zinc and precious metals prospect has a post-tax net present value, or NPV, of approximately $1.3 billion at current metal prices and a value of more than $1.1 billion based on longer-term price forecasts, according to a feasibility study conducted by Trilogy Metals Inc., which owns claims to the deposit.

The study also concluded that the project would have a post-tax payback period of 2.6 years and a final investor return rate of about 27 percent.

Those figures are despite the fact that the total expected capital cost for the remote mine has increased 34 percent to more than $1.2 billion largely due to findings that the project will likely have to treat a lot more water than was once thought.

A 5 percent increase in dilution, or mined waste rock, also slightly lowered the grade of the copper, zinc, gold, silver and lead reserves in the project.

However, with 2.1 billion pounds of probable copper reserves averaging more than 2.2 percent, Arctic is still one of the highest-grade copper prospects going, according to Trilogy leaders.

A pre-feasibility study published in February 2018 pegged Arctic's all-in capital cost at $910 million.

"Overall, we're very happy with the results of this feasibility study considering the capital increases that we've seen in the project and factoring in that there's no new resources that have been included as part of this project," CEO Tony Giardini said in a call with investors.

Located in the middle of the Ambler mining district on the southern edge of the Brooks Range, the Arctic mine project is the most advanced prospect of more than a dozen in the roughly 75-mile long district. It also would likely be the first mine serviced by the state-sponsored Ambler access road, which has drawn the ire of many area residents and conservation groups.

Giardini also said the company has identified opportunities to extend the open pit mine beyond its current 12-year life — as part of the current prospect and processing other deposits through the Arctic facilities — that need to be studied further.

Bob Jacko, the operations director for Vancouver-based Trilogy said a roughly 30 percent increase in annual precipitation at the mine site in recent years will require larger sewage and water treatment systems than previously thought, adding to the capital and operating expenses of the project. The new water will also necessitate a more robust tailings dam; the initial tailings infrastructure cost has gone from $30.3 million in the 2018 study to $69 million currently.

"It gets us in every area of the operation," Jacko said of the additional water, noting the need to treat larger quantities adds to closure costs.

Giardini said the increased capital costs are the primary driver in a reduction of cash flow — from $4.5 billion pre-tax in 2018 to $3.7 billion today.

While Arctic was initially explored by Trilogy, a junior mining firm, Australian-based South32 bought into the project late last year and the company's have since formed Ambler Metals LLC, the operating company for the advanced Arctic and nearby Bornite multi-metal prospects. Trilogy and South32 each hold 50 percent of Ambler Metals.

Even with Arctic's positive — if slightly tempered — financial indicators, a decision to ultimately build the mine will depend primarily on how quickly the Alaska Industrial Development and Export Authority can progress development of the Ambler access road, Giardini said. Trilogy leaders have long said the 211-mile industrial-use road is a prerequisite to constructing any mine in the remote mineral belt.

The toll road concept is modeled after the DeLong Mountain Transportation System owned by AIDEA that feeds the Red Dog zinc mine in Northwest Alaska.

Ambler Metals signed a memorandum of understanding with the state development bank in June in which the company agreed to fund half of the stakeholder outreach and pre-development engineering and study costs up to $35 million.

Estimated in 2017 to cost between $280 million and $380 million for basic gravel construction, the road's final environmental impact statement, or EIS, conducted by the Bureau for Land Management, now pegs the total construction cost at approximately $520 million. BLM issued a record of decision approving the project July 23.

Trilogy Chief Financial Officer Elaine Sanders said there is no firm toll agreement with AIDEA for use of the road, but Trilogy factored a toll of $8.04 per metric ton of material hauled, up from $4.70 per ton in the pre-feasibility study, which reflects the change in the expected cost of the road.

Overall, Trilogy expects the project would pay roughly $20 million per year in road tolls plus another $2.50 per ton in maintenance fees, according to Sanders.

"We all know we're going to be paying some type of toll," she said.

Local governments for villages near the road's planned intersection with the Dalton Highway have formally opposed the road over concerns it will impact migrating caribou and could eventually be opened to the public — thus increasing hunting and recreational pressure — in areas relied upon for subsistence harvests.

Critics have also questioned the economics of the toll road concept given the Arctic prospect is the only one in the region anywhere close to development-ready.

AIDEA spokesman Karsten Rodvik wrote via email that authority and Ambler Metals officials are in continued discussions about funding the next phases of the road.

"Based on preliminary estimates, and assuming a negotiated minimum annual assessment with Ambler Metals similar to the DeLong Mountain Transportation System, one mine could be sufficient to finance the toll road structure, Rodvik wrote. "Given the established access, AIDEA anticipates that over time, other mines within the district will be developed and opened, paying fees to use the road."

Giardini said a decision to break ground at Arctic would likely come shortly after what is expected to be a roughly three-year development period for the road, putting early work at the mine in the 2024-26 timeframe.