A conversation with Steve Borell

Steve Borell, longtime executive director of the Alaska Miners Association, sat down to discuss the state of the industry recently. Borell expressed optimism and excitement about the industry's future in Alaska. But he raised several red flags that Alaska officials and others should consider in future policy making discussions.

The following is excerpted from his remarks during an Oct. 3 interview.

Mining News: What do you see as the future of the mining industry in Alaska in the short term and the long term?

Steve Borell: High metal prices give the opportunity for investment in grassroots exploration, and we're seeing that take place all around the state. The industry, and for that matter, the world has known for a long time that Alaska is a huge mineral province. There should be large numbers of mines operating here, but we haven't seen it for various reasons. The uncertainty of the Alaska National Interest Lands Conservation Act, the higher cost of exploration up here because of the lack of roads, all of those things added to the pressures (and) companies would not necessarily come to Alaska to explore.

Right now, they are coming, and those that are working here on exploration projects are proving what everyone thought all along, that Alaska is an excellent mineral province. That's what we're seeing in the short term. Not counting the operating mines, or Donlin Creek and Pebble or the construction projects with NovaGold at Nome or Kensington, my guess is we are going to see 20 or more projects that have at least $1 million or more spent on them this year. That's significant because you typically have to be doing some drilling to spend that much money.

One of the things that happened with ANILCA was that many of the most highly prospective mineralized areas in the state were locked up into parks and preserves. Though that took place, there are still lots of prospective mineral areas that are receiving attention.

I think the companies that are working here are taking a fresh look at Alaska. It's not a "what it could've been" scenario like it was 25 years ago. It's more the glass is still half full.

For the long term, Alaska's opportunities are just tremendous. If you look at the major mines that have actually been developed - Red Dog, Greens Creek and Pogo - are all three unique ore deposits, in that the grades of each of these are very good.

Red Dog we know is the largest producer of zinc concentrate in the world. It's the highest-grade large deposit in the world.

Greens Creek is relatively small, yet it is a major producer of metal - silver plus zinc plus gold plus lead. It's also a higher grade mine than many others in the world.

In Alaska, they have to be higher grade because of the added infrastructure costs.

Pogo is a very good-grade gold mine, basically half an ounce a ton is a high grade for an underground gold mine.

We now have six large operating mines in the state, but it's significant that we only have six, and three of those are high-grade mines. How many more lower-grade properties are there that, given the right circumstances, can be developed, once they are found?

Mining News: Where is the current mining activity?

Borell: Actually, it's spread out all around the state. I've visited projects in the north central Brooks Range all the way across to the west coast and down in Southeast this year.

The activity is where you have primarily state land or Native corporation land. That's the first area of interest. The experience the Native corporations have had with mineral development, in particular, Red Dog and Donlin Creek have shown what an incredible difference a mine can have on local communities.

This is a major piece of the puzzle that the state hasn't really seen and understood as well as we should. Jobs in the Bush are very scarce. Many villages are right on the brink of being closed down. The schools are on the edge of being closed down. You have to mine it where you find the minerals. You can't go someplace else to mine it.

The (cost-of-living) pressures in the Bush are absolutely huge, and minerals can make a huge difference.

I contend that within 50 miles of every village in the state, there should be some kind of a mineral deposit that could be developed and creating jobs in that community. If you're within 50 miles, it doesn't guarantee that you can build a road, but you have a good chance. And there is a chance for these villages. Without some jobs, more of the villages are going to die a slow death.

Mining can make a difference. In the Yukon-Kuskokwim region, I believe there are 23 villages that have at least one person and in many cases, many people working at Donlin Creek. These jobs are really important because there are few good jobs (that pay $70,000 to $100,000 a year) available in the villages. The young people look around and wonder what their future will be in the village. That's why so many of them end up coming to Fairbanks and Anchorage.

The people who go into the mining industry get incredible skills. That's what's happened at Red Dog, at Donlin Creek, at Pogo and down at Pebble. The companies are training the local people right there on the site to fill the jobs.

We're seeing more activity on Forest Service lands than we're seeing on Bureau of Land Management lands. When Mr. Bruce Babbitt was secretary of the Interior, that administration did everything it could to block and stop mining. Part of the result of that is exploration on federal lands slowed down.

But were seeing some increases on Forest Service lands. Several properties in Southeast Alaska are receiving exploration funding now, and I fully believe we will see additional activity on BLM lands.

Mining News: How does current mining activity compare with previous years?

Borell: It's up. In dollar spending, the tremendous amount of work going on at Donlin Creek and at Pebble, skews the numbers. I think the spending this year at Donlin is over $90 million. At Pebble, I think it's over $70 million. A lot of money is going into those two projects. But if you take those aside and look at grassroots projects separately, you'll see a steady increase in exploration funding in Alaska and we've been seeing this for four or five years. That's exciting to see.

On the development side, effectively is construction, spending jumps up one year and goes down the next. In 2007, that number should be up because of the work being done at Kensington and Rock Creek. In 2006, we had the completion of the Pogo Mine, with most of the money actually being spent the year before that in 2005. We also had Nixon Fork, which had a pretty sizable amount of construction money go into it. Their first gold pour was in February 2006. There was a bump there for Pogo, and this year, there was a bump for Rock Creek and Kensington.

Next year, I think the actual construction monies spent will be down.

Mining News: Could the state do more to encourage the mining industry to invest in Alaska?

Borell: One of the major challenges right now facing the industry is people. That same need is facing the state. The state has excellent expertise, but if that gas pipeline goes forward, things will change rapidly.

It's one thing to be offered 15-20 percent to leave a state job to go to industry, but if the gas line goes, people will be offered twice as much as they are getting paid now. And there isn't going to be anyone left in state government to do the permitting. This is a major future problem.

But the industry is getting really aggressive and very creative at finding people. They are going to people who have retired and convincing them to come out of retirement and go back to work.

The state needs to get just as aggressive. It's unfortunate that oftentimes the union agreements make it impossible for the state to change the wage structure for some of the employees.

One thing the state could consider doing is if you came back to the state and worked in industry in Alaska, you could get a reduction in your state education loans. Maybe if you go to work for the state, there could be a higher reduction or maybe even a forgiveness of the loan completely.

We need to get the best people we can working at the state. That would help with the entry-level people. But we already have people who are very experienced at permitting, not just at the Alaska Department of Natural Resources but also at the Alaska Department of Environmental Conservation and Alaska Fish and Game. Anybody involved in permitting major projects in oil and gas and mining. These people are in tremendous demand, and something has to be done to at least alleviate the pressure on these people.

There are people who have retired with those skills. They could be brought back, but in some cases they would lose money. The state needs a clear policy on this. Beyond that, the wage scales for state jobs compared to industry jobs are low.

The industry depends on permits, but we want permits to be done right, and we want them to be legally defensible. That takes quality people. There are so many little nuances within a permit, many little places where someone who wants to block a project can do so if the process isn't just perfect.

Something has to happen. If that gas line goes forward, there will be a huge sucking sound, and there won't be anybody to turn the lights off in state offices.

Mining News: Other major challenges?

Borell: I see the effort to attack and stop the Pebble development as a major challenge for the industry in various ways. Yes, it's more expensive for one company. But beyond that, the amount of misinformation that has been distributed and continues to be bantered about is really discouraging. The mining industry, the oil and gas industry, any industry has an obligation to answer legitimately asked questions. If they don't answer those questions, they are not going to be able to operate. Industry does not have a problem with that. Legitimate questions and looking a