Mining Explorers 2009: A bright future awaits mineral exploration in Alaska
Last updated 11/1/2009 at Noon
The financial meltdown of late 2008 and early 2009 was nearly the undoing of some junior exploration companies as well as some major companies. Many of the major mining companies had to drop prospects, lay off employees, institute serious cost-cutting measures, and sell assets to keep their companies viable. A key factor was company size and continued cash flow from operations. Junior exploration companies typically do not have operating cash flows and these companies are just now seeing investments return as metal prices increase.
There are several factors that promise a strong future for exploration and mineral development in Alaska. First and foremost is the tremendous mineral endowment of the state. This endowment has been recognized since before the Klondike Gold rush. By 1886, 13 years before the Klondike, the Treadwell Mines in Juneau were the largest underground gold mines in the world.
The importance of Alaska's mineral endowment can be seen as it relates to the size of mines that have been developed in the past.
The Kennecott Copper mines were the richest in the world.
As noted, the Treadwell Mines, and later the A-J, were the largest underground gold mines.
More recently, for nearly a decade the Valdez Creek Mine was the largest placer gold mine in North America.
Greens Creek Mine is the largest silver mine in the United States and Canada.
And Red Dog Mine is the largest producer of zinc concentrate in the world.
The common thread here is the size and or grade of the deposits, and more of these are likely to be found.
There are many other known deposits in Alaska with lower grades, which will become economic as improvements in transportation, power and technology occur.
However, international metal prices are the driving force for exploration.
As demand for base metals (copper, zinc, lead, iron) returns, especially from China and India, base metal prices will continue to improve.
Precious metal prices will continue to increase due to global political turmoil, inability to rapidly increase production, and continued growth of the U.S. national debt.
After dropping to nearly US$700 an ounce in November 2008, gold prices recovered rapidly, have continued above US$900 an ounce since mid-April and in October went over US$1,000 an ounce.
Silver prices dropped below $10 an ounce in late 2008 and are now above US$16 an ounce.
The junior exploration companies that have good properties are now beginning to see investments return.
Alaska is particularly well-positioned to benefit from all of these prices. With many dozens of exploration companies now active in the state, Alaska is clearly on the "radar" screen for the investment funds, banks and common investors that provide the exploration investment capital.
Another factor is that Alaska is effectively un-explored. Yes, there has been detailed exploration in some areas, but most of the state has not been evaluated with modern technology or for new mineral deposit types that have been identified over the past couple of decades. Even in places like Fairbanks and Nome, which have had significant mining historically, some of the lode sources for the placers are just now being found. Another little-known fact is that Alaska has seen placer gold production in 61 mining districts but lode gold production has occurred in only 21 districts. That means the lode sources have not yet been found.
Other important factors are that Alaska has a stable tax and regulatory structure and that Alaskans support environmentally responsible development. And with nearly half of Alaska already in some form of park, preserve, refuge or congressionally designated wilderness, Alaskans recognize that the land not so designated needs to support the economy.
Today, Alaska has five large mines operating; but only five. That compares with Nevada, which is one fifth the size of Alaska and has 55 large mines. A major benefit to Alaska is that it contains a significant amount of private Native lands that are open to leasing with the owners, and Alaska has a large amount of state land that is open to mineral development.
The obvious conclusion based on these factors is that Alaska offers tremendous opportunity for future mineral development. This development will create high-quality, skilled, year-round jobs and economic opportunity throughout the state. For much of Alaska, there are no other options.