Rising gold prices spur increase in prospecting activities across state

Picks and pans are flying off the shelves and helicopters are in short supply as prospectors - from mom-and-pops to multi-national corporations - try to cash in on record-high gold prices.


It is certainly a good time to open a gold mine in Alaska. Nixon Fork mine restarted operations in July and expects to be cash flow positive by the fourth quarter of 2011 with sales contracts lined up for gold and silver bars and for copper concentrate.

Production at the mine, now owned by Fire River Gold of Vancouver, was suspended in 2007. Fire River Gold bought Nixon Fork from Pacific North West Capital in August 2009 for $3 million in cash and shares.

In Juneau, Kensington mine is in its first full year of production after producing 43,143 ounces of gold in the last few months of 2010. Owner Couer Alaska projects an average annual production of 125,000 ounces from Kensington.

Kensington is the second major production operation in Southeast, joining Greens Creek. Greens Creek, owned by Hecla Mining Co., produced about 68,000 ounces of gold in 2009 and in 2010.

During 2010, Greens Creek also produced 7.2 million ounces of silver, 74,496 tons of zinc and 25,336 tons of lead.

Permits issued by the state Department of Natural Resources for small placer mines have tripled, with 321 permits issued for the 2011 fiscal year that ended June 30 compared to 107 for the 2010 fiscal year.

Since Jan. 1, DNR has issued a combined 573 hard rock, placer and suction dredge permits. That's up 14.3 percent from the 501 the department issued during all of calendar year 2010 and 29.6 percent from 442 in 2009.

About 200 placer mines around the state produced about 60,000 ounces of gold in 2010.

"I wouldn't be at all surprised to see it 10 or 15 percent higher amount of gold produced this year," said Steve Borell of the Alaska Miners Association, "and that's just from the smaller companies. From a statewide standpoint, it should have a fairly significant increase."

Nothing can compare to the revenue the state receives from oil taxes, but both state and local coffers should enjoy a nice boost from the run-up in prices. The mining industry paid an estimated $13 million to local governments in 2010 and about $59 million to the state in royalties, fees, rents and taxes. The state revenue was up 40 percent from 2009.

Fire River Gold projects Nixon Fork will produce 50,000 ounces of gold per year, and holds additional promise owing to its location in the Tintina Gold Belt stretching across Interior Alaska that also includes deposits at Donlin Creek, Fort Knox and Pogo.

While Donlin Creek is still in the development stage, Fort Knox and Pogo are major gold producers.

Fort Knox owner Kinross Gold Corp. reported about 350,000 ounces of gold equivalent production in 2010; Pogo owner Sumitomo Metal Mining of Tokyo is now producing about 385,000 ounces per year, general manager Todd Roth told Business Excellence magazine in September 2010.

Fort Knox produced its 5 millionth ounce earlier this year; Pogo produced its 1 millionth ounce in October 2009, according to Roth, and the company announced a major gold and silver vein discovery in a claim it owns near Pogo June 9.

Between Pogo, Fort Knox, Kensington, Greens Creek and placer mining, the state produced about 907,000 ounces of gold in 2010.

With Nixon Fork and Kensington at full production in 2012, Alaska could begin to average more than 1 million ounces of gold production per year if it doesn't cross that milestone this year.

At current prices (crossing $1,900 per ounce Aug. 23), that level of production would be worth nearly $2 billion.

While gold is in the headlines now, mineral exploration and development is under way for coal, copper, zinc and lead prospects as well. Borell said at least 25 projects around the state attracted at least $1 million or more in capital expenditures during 2010 and he expects that number to be even higher once 2011 is over.

The level of activity has put critical labor and equipment in short supply.

"It has been extremely difficult to get drills, drilling crews and to get helicopter support this year," Borell said. "Companies that didn't have helicopters and drills lined up early, they may get some drilling in at the end of the season and they may not."

Hundreds of new jobs at producing operations will provide wage increases and benefit local economies, Borell said. In Southeast, the opening of Kensington and other prospects in the exploration stage are attracting support sector businesses with good-paying jobs in Juneau and Ketchikan.

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.


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