Gold prices dip after nearing historic high

Mining industry in Alaska benefits from high metal prices

Posted: Wednesday, November 14, 2007

Alaska's mining industry could continue to reap benefits from high metal prices as gold traded above $840 per ounce last week, but dropped below $800 by Tuesday.

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That's the highest price fetched for gold since 1980.

Those in the industry believe the rise comes from a weakening dollar, burgeoning demand in China and India, and unease over global economic instability.

"It is often seen as a hedge for the market in times of global unrest, and unfortunately we have a lot of that right now. It's a haven of safety. That's what financial advisers would say," said Vicki Veltkamp, spokeswoman for HECLA, which owns about a 30 percent stake in the Greens Creek mine on Admiralty Island. The mine produces silver, zinc, gold and lead.

Veltkamp said record mining revenues, reported by the state last week, are likely to continue this year.

The value of minerals produced from mining in Alaska doubled from $1.4 billion in 2005 to $2.86 billion in 2006, spurring more than half a billion dollars in spending on development and exploration, the state departments of commerce and economic development announced last week.

Gold was trading a little above $600 per ounce in January of this year, and began a sharp increase in August.

When adjusted for inflation, the price of gold is still less than half of what it was in 1980, when it reached $850 per ounce, said Rich Hughes, a minerals development specialist for the state's Department of Commerce.

Production in the state is actually declining, but the rising prices of gold and other metals is driving up revenues, spurring development and exploration, Hughes said.

"The gold price is a very important barometer of the health of the mining industry," Hughes said. "This is being driven by incredible demand for metals and minerals in developing countries, mainly China and India."

Veltkamp said Greens Creek is using some of its increased revenue for exploration.

"When the miners are making a profit, they finally have resources to invest in exploration. That includes Greens Creek. We are doing exploration to find the metals that we can mine into the future," she said.

Steve Borell, executive director of the Alaska Miners Association, said gold prices are indicative of the lack of confidence in the dollar.

"That's the primary driving factor," Borell said. "Other countries are saying, 'I don't want dollars. I want gold.' It's directly proportional to their lack of confidence in the U.S. dollar."

Gold does well in developing countries because people have not developed faith in government-run financial systems. That leads to small-scale investments in gold, such as a gold chain for a woman's dowry in India, which are seen as a more secure way to ensure future prosperity.

"The detractors of the mining industry like to say it's only jewelry, but for folks in China and India, it's their savings account," Borell said.



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