My Turn: Alaska mining benefits from political stability

Posted: Sunday, June 30, 2002

The future for Alaska minerals is excellent. Companies focus on states and countries having high geologic potential and a track record of tax and political stability. Alaska's state and Native lands fit these criteria and therefore continue as a focal point for the industry. Alaska has excellent geologic potential and is known both historically and currently for some of the best deposits in the world. Major mines operating today are show-case examples of modern mining.

The recent increase in gold price is a welcome change and investment dollars have begun returning to exploration. The increased price has encouraged major projects in permitting. Kensington and Pogo are now in the final permitting and environment impact statement phase. Kensington, an underground gold project 35 miles north of Juneau, had completed its EIS and permitting but low gold price and land changes resulted in a redesign to lower capital and operating costs. Pogo is an underground gold project near Delta Junction, also in the permitting and EIS stage. If permits are completed in a reasonable timeframe, both projects could be under construction by mid 2003.

Although low prices during the past couple years have forced many placer mines to close, some are operating again. These small family mines are especially hurt when they cannot operate. They are small businesses that do not have fund reserves and must have an annual cash flow to pay their loans and maintain their claims.

Low prices for zinc and silver have resulted in tough times for the Greens Creek Mine, and especially for the Red Dog Mine. Greens Creek has been able to make changes in their mining and backfill methods and mill to lower operating costs. They also continue to find new reserves, thereby ensuring the continued life of the mine for more than 10 years. At Red Dog, mill upgrades have been completed and the mine is operating more efficiently. Yet with a low zinc price of 36 cents per pound, the mine projects losing several million dollars in 2002.

The other major mines in Alaska continue to operate. Fort Knox and True North outside Fairbanks continue to set new production records and in 2001 together they produced 411,000 ounces of gold. Illinois Creek, located southwest of Galena, continues to produce as the mine approaches final reclamation. During 2002 Usibelli Coal at Healy will complete mining at its Poker Flats Mine and move all mining from the new Two-Bull Ridge Mine. Reclamation at Poker Flats will continue for more than a year.

When compared with other states and countries, Alaska is essentially unexplored. This means that the potential for new discoveries is tremendous.

Alaska is also becoming known for political stability. Recent legislatures and governors of both parties have encouraged mineral investment. Also, various small but important changes have been made to several laws to improve the business climate by reducing uncertainty and streamlining the permitting process.

A McDowell Group study of Fort Knox showed that even though it was not making a profit, it was providing 260 of the best jobs in the area. Fort Knox spends over $35 million annually on local goods and services, generates $4.4 million annually in mine-related revenues to the borough (an average of $16,900 per mine employee) and since mine startup, borough residents have enjoyed a 7 percent decrease in their electric bills.

Mining can never provide the level of direct tax and royalty revenues as Prudhoe Bay. Nothing can. But mining can provide quality jobs in all areas of the state, as well as other local economic opportunities. Mining can create new skilled, quality, good-paying jobs. With the downturn the state's economy, Alaska needs these jobs as never before. Entry level positions are important starting jobs but there is a serious need for highly skilled careers that will allow young people to stay in Alaska.

Steven C. Borell is the executive director of the Alaska Miners Association.

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