Economist: Mining pays its way in Alaska

Hard rock mining's contribution to the Alaska economy is larger than it appears at first sight, when the "multiplier effect" is taken into account - the additional spending and services triggered by the mining activities. Anchorage-based consultancy Northern Economics has measured the wealth created by Alaska's three hard rock mines, Fort Knox, Greens Creek and Red Dog, and come up with some impressive figures.

The consultancy compiled the data for 2004 using information provided by the companies, state agencies, and previous research studies by Northern Economics and others. The total number of employees at the three mines is 1,100.

The average mine employee's wage amounted to $71,000, which is almost double the $38,615 average wage in Alaska. "That has a significant effect on the local economy due to the spending of these employees," Northern Economics' president, Pat Burden, told the Alaska Miners Association convention Nov. 3. The estimated wealth created by these mines per employee was $106,000, compared with around $62,000 per employee generated by the construction sector and $46,000 by the trade sector.

For Knox employs 480

Fort Knox is estimated to have employed about 480 local people from the Fairbanks North Star Borough in 2004. Greens Creek employed about 200 people from the City and Borough of Juneau and Red Dog about 150 from the Northwest Arctic Borough. Indirect jobs - employment with other businesses - created locally because of the mines totaled about 700 for Fort Knox, 350 for Greens Creek and 180 for Red Dog. The remaining employees of the three mines come from outside the local regions.

The Northwest Arctic Borough has few of the goods and services needed by Red Dog. As a result, the mine only spends about $1 million or so in the borough. A small local economy also produces a small multiplier effect, with only a few hundred thousand dollars in additional sales. Conversely, Fort Knox spends about $45 million in the Fairbanks North Star Borough, generating an additional $21 million in sales. Greens Creek spends about $23 million in the Juneau economy, generating an additional $8 million in sales.

In Alaska as a whole, the three mines spent an estimated $102 million on goods and services or fees and charges paid to state and local governments. The additional expenditures generated by this reached $157 million. The state mining license tax and many other state fees are based on royalties that depend on the price of metals, so higher prices means higher government revenues. These totaled about $16 million in 2004. Local government taxes are more consistent, as they don't respond to changes in profits.

"We economists use the term 'value-added' when we talk among ourselves … but what we're really talking about is the amount of wealth that is created," Burden said. This wealth consists of wages and salaries paid to the mine workers, profits and other income to the self-employed, dividends to shareholders, rents and royalties received by the landowners and interest received by the banks and bond-holders. In 2004 the total "value-added" or wealth created by the three mines was about $95 million. With the multiplier effect it came to $150 million.