Barrick's acquisition of Placer Dome bodes well for Alaska

When I heard that Barrick Gold Corp. had made an unsolicited offer on Oct. 31, 2005, to purchase Placer Dome Inc. my first move was to purchase 100 Barrick shares. Although the acquisition was initially rejected, on Dec. 22 a follow-up offer was greeted more favorably.

This appears to be a fortuitous marriage. In the 60 days I have held the stock it has gone from $25.05 per share to $29.48, an increase in value of 17.68 percent (106 percent annualized). I like that kind of investment.

Why has the market treated Barrick so well? Perhaps it is because the price of gold is also going nuts having moved from $464.90 on Oct. 31 to over $565.00 (briefly). But the exciting nature of the gold market and the sharp increase in Barrick's price is not the sole reason for being pleased with the acquisition. Barrick will now become the largest gold producer in the world and one of its new properties, Donlin Creek, is right here in the Great Land. While it is unknown whether Barrick will elect to develop Donlin Creek, this target is thought to contain at least 23 million ounces of gold.

Alaska on edge of great leap

In context, Alaska is on the edge of a great leap forward, not just with regard to increased oil production, if ANWR ever makes the cut, or the gas pipeline, if there ever is an agreement on that proposal, but also in the production of precious minerals.

Already, Fort Knox is in production (approximately 324,000 ounces of gold produced in 2005); the Pogo mine is finishing construction (projected production may be as much as 400,000 ounces per year); the Kensington mine is also in construction (anticipated production is approximately 100,000 ounces annually when the permitting process is final); the Pebble project, though still in exploration, when it commences production, could produce more than 700,000 ounces per year; Greens Creek's yearly production is approximately 80,000 ounces of gold; placer mining operations across the state produce over 28,000 ounces of gold each year; and the mines at Nixon Fork and Rock Creek may also soon be weighing in.

With Donlin, mining industry could hit $4 billion

With Donlin Creek added to the mix, it is projected that the mining industry will be a $4 billion industry within five years. Although mining does not generate the big dollars that are associated with oil and gas, it is a labor intensive industry that creates a cash economy with attractive local multipliers near the property.

Mining in general and gold mining in particular will serve to open up the country by making access feasible and infrastructure possible. Good jobs mean enhanced opportunities of every description for rural Alaskans. From education to health care to essential services, those who live near the mines will benefit.

Mines are unlikely to adversely impact the local environment or traditional activities such as commercial fishing or subsistence hunting and gathering. They will, however, make cash more available in the towns and villages that support the projects. They will create a tax base that will facilitate enhanced law enforcement and sanitation. Miners are traditionally good neighbors, as our existing association with Placer Dome over the years has clearly shown.

Should the merger with Barrick go through as everyone expects, we will welcome the company to Alaska. As the Donlin Creek project advances through the permitting process, Alaska can look forward to a golden future.