China, metals prices ignite stampede in Alaska

What a difference a year makes ... along with a few things like rebounding metals prices, China's voracious appetite for minerals and investors' enduring love affair worldwide with gold.

That's the assessment of Alaska officials after reviewing the state's annual report on mining industry activity in 2003, released in late October.

The cumulative value of Alaska's mining industry in 2003 dipped slightly to $1.067 billion, down about $6 million from the $1.073 billion reported in 2002, according to the report, the 23rd in an annual series compiled by personnel from the divisions of Geological and Geophysical Surveys and Mining, Land and Water in the Alaska Department of Natural Resources and the Office of Economic Development in the state Department of Commerce, Community and Economic Development.

The annual value of Alaska's mineral industry has topped $1 billion for eight consecutive years. Rich Hughes, a state minerals development specialist, said the mining industry's cumulative value could climb nearly 50 percent this year to almost $1.5 billion thanks to a stampede of activity across the state.

China the driving force

The driving force behind the acceleration is China, which is buying metal concentrates around the world, officials say.

Both precious metals and base metals are affected by the higher demand, according to Steve Borell, executive director of the Alaska Miners Association.

Gold, which is selling for nearly $450 per ounce - up from $391 per ounce a year ago - is luring investors wary of paper currencies, especially from India and the Arabic countries as well as China, Borell said in a recent interview.

Silver, copper and zinc also have seen substantial price hikes this year. But lead prices have jumped sharply during the past 12 months, up to nearly 45 cents per pound, compared with 16 cents last year.

"Buyers are paying more for lead now than they did for zinc a year ago," Borell said.

Mining companies responded to the higher prices by rushing to explore, develop and produce more in Alaska this year. Development friendly administrations in Washington, D.C., and Juneau helped the trend.

Borell said U.S. Forest Service lands in Southeast Alaska have seen a lot of new players recently, while mining companies stayed away from Bureau of Land Management and Forest Service lands in the past because of all the "hassles with the Clinton administration."

The Murkowski administration's work on improving permitting, speeding the process to get state title to streambeds and obtaining rights of way under RS2477 has encouraged miners to pursue projects in the state, he added.

Alaska potential compared to Nevada

"Alaska has the potential of being as big as Nevada; it's equally mineralized, Hughes said.

Nevada produced about $3 billion in mineral commodities in 2003 and led the nation in the production of gold, barite, lithium carbonate and mined magnesite, and was second in the production of diatomite.

Alaska, by comparison, produced slightly more than $1 billion in mineral commodities in 2003, including sand and gravel. Metals, with a value of $888 million, accounted for 89 percent of total production; and zinc continued to be the state's most valuable metal.

Industry employment in 2003 totaled 1,906 full-time-equivalent jobs, a drop of about 900 jobs from the 2,824 jobs reported in 2002. Hughes said mining employment likely rebounded with the higher prices in 2004.

Last year, Alaska tallied 2,443 new state mining claims (296,800 acres), 92 new state prospecting sites (14,720 acres), and 676 new federal claims (595 lode, 81 placer, for a total of 13,520 acres). State claim staking increased dramatically from 2002 levels, while the number of new federal mining claims almost tripled from 2002 levels and reached staking levels not seen since 1997.

The amount of land in Alaska under claim increased from 2002 to 2003, with approximately 2.9 million acres of land covered by claims or prospecting sites in 2003. The largest groups of claims (mostly state claims) in Alaska occur in the Fairbanks, Pogo, Tangle Lakes (Denali block), and Pebble areas.

Drilling was conducted during all phases of mining (exploration, development, and production) and drilling totals for 2003 are 270,456 feet of core drilling and 100,178 feet of reverse-circulation drilling. The eastern interior region had the most drilling of all Alaska regions, followed by the southeastern and southwestern regions.

Gold major exploration commodity

Exploration during 2003 occurred across most regions of the state, with the exception of the Alaska Peninsula area, in which there was no known mineral exploration.

Several large projects accounted for most of the exploration expenditures and drill footage: Donlin Creek gold project (Placer Dome Inc.), Pebble copper-gold project (Northern Dynasty Minerals Ltd.), Greens Creek mine exploration (Kennecott Minerals Co./Hecla Mining Co.), Tintina Gold belt projects (Anglo Alaska Gold Corp.), Union Bay platinum-nickel-copper project (Freegold Ventures Ltd./Lonmin PLC) in southeastern Alaska, Nixon Fork gold-copper mine project (St. Andrew Goldfields Ltd.) and Fairbanks mining district gold projects (Kinross Gold Corp.).

About 41 percent and about 26 percent of the 2003 Alaska exploration expenditures were spent in southwestern Alaska and eastern Interior Alaska, respectively.

Gold remained the major exploration commodity, with more than $19 million spent on precious metal exploration in 2003, but polymetallic and platinum-group-element exploration also increased from recent levels.

Platinum-group-element exploration increased to almost four times the 2002 levels.

Base-metal exploration in 2003 was at historic lows, reflecting continued low zinc and lead prices through much of the year.

Higher metal prices during the latter parts of 2003 significantly extended Alaska's field season, with several large projects beginning during the normally waning parts of the exploration season.

Most exploration funds Canadian

As in years past, most exploration funds, more than 68 percent, were derived from Canadian sources.

Reported and estimated 2003 mine development expenditures totaled $39.2 million, a slight increase of $5.7 million from the $33.5 million reported for 2002.

Mining development projects in 2003 included lode projects at the Kensington (gold) project in southeastern Alaska, Rock Creek (gold) project in western Alaska, and Pogo (gold) project in the eastern interior region. Significant development in the placer sector occurred at the Nolan Creek (gold) project in northern Alaska and Nome placer project in the western region. These projects consisted primarily of feasibility studies and permitting but included substantial drilling at Rock Creek and underground development and drilling.

In addition to high-profile projects such as Donlin Creek, Kensington, Pebble and Rock Creek, companies also explored lesser known prospects such as Mystery Creek, Gaines Creek, and Golden Zone near Cantwell, Hughes said. One company, in fact, is looked for diamonds outside Talkeetna, he added.

Illinois Creek, Fort Knox and Greens Creek mines, and more than 60 placer mines produced gold in 2003. Red Dog and Greens Creek produced silver. Greens Creek Mine achieved record production for the second consecutive year, while tons milled at Red Dog and Fort Knox decreased very slightly from robust 2002 levels. Placer gold production increased by about 750 ounces compared to 2002 production, while sand, gravel, rock, and other industrial materials saw a significant decrease.

Usibelli Coal Mine also marked its 60th year of operation last year, producing 1,088,000 tons of coal. The company signed a new two-year 400,000-tons-per-year contract with South Korean power companies.