Alaska gold production highest since 1916's rush

HIGH PRICE: The 2 largest mines produce 84% of 800,000 ounces.

November 8, 2009 

Miners are digging gold out of the ground in Alaska at a faster clip than they have in almost a century.

Last year's gold production tipped the scales at 800,000 ounces.

The last time that much gold was mined in Alaska was 1916.

Recent record gold prices -- hitting $1,095 an ounce Friday -- have boosted fervor for chasing the yellow metal.

Investors, mainly outside Alaska, are bankrolling drill projects all over the state, hoping to build modern mines out of some of the state's historic gold fields.

The increased profit from high gold prices also is enabling mines such as Fairbanks' Fort Knox, which opened in 1997 and employs about 480 people, to invest large sums to extend their lifespans.

Today, most of Alaska's gold is extracted from a handful of big mines rather than from stream beds and the old-fashioned underground mine shafts of the past.

"We now have two large gold mines operating. We've never had that before," said Steve Borell, executive director of the Alaska Miners Association. He was referring to the open-pit Fort Knox mine and the underground Pogo mine near Delta Junction.

Together, those two mines were responsible for 84 percent of the gold produced in Alaska last year. Overall, gold production from Alaska's major mines rose nearly 11 percent last year.

Alaska's smaller placer gold mines -- which excavate gold-bearing rock from ancient stream beds -- also showed a mild upswing. Placer gold production increased last year to 53,849 ounces: a rise of about 5 percent.

A big gold mine near Juneau -- the Kensington mine, set to be the state's third largest -- is scheduled to begin production late next year. It would produce roughly 120,000 ounces of gold per year for about 12 years. Two even smaller gold mines -- the Rock Creek mine in Nome, and the Nixon Fork mine in McGrath -- hope to reopen sometime soon after some major setbacks in recent years.

But even Alaska's biggest mines are tiny compared to two mega-projects being studied in Southwest Alaska: the Donlin and Pebble projects.

If built -- and that's a big if -- those two mines would catapult Alaska into the ranks of the world's largest gold producers. Donlin sits on about 30 million ounces of gold and could produce more than 1 million ounces of gold per year during its lifetime, according to its backers. Pebble, a copper-gold project controversial due to its location near world-class salmon streams, is estimated to contain 94 million ounces of gold. The companies behind the two projects have not yet sought permits to build them.

The increase in mining activity in Alaska has raised concern among environmentalists and some rural communities. For example, two lawsuits have been filed in state court recently seeking to block the Pebble project. One claims that the state's system for permitting mineral exploration is too lax.

On Friday, Gov. Sean Parnell shot back at the mining industry's critics. He said the state will "vigorously defend" the permits it grants and its mine-permit process.

For now, Alaska remains a minor participant in U.S. gold mine production, accounting for slightly less than 10 percent of the output.

GOLD FEVER

So will the fervor for Alaska gold continue?

Gold prices tend to fluctuate a lot -- often rising dramatically when the economy is weak and tumbling when it improves. Borell said gold prices are also boosted by the weakness of the U.S. dollar. "The dollar isn't worth what it used to be. Right now, that's the greatest single factor affecting gold," he said.

He said he thinks gold prices will remain high as the nation goes more into debt and if global investors continue to turn away from the weakened dollar.

The price fluctuations, clearly, affect Alaska's mines.

The Fort Knox gold mine opened 12 years ago when gold prices were less than one-third of their current level.

The mine recently spent millions of dollars to build a so-called heap-leach pad, which will use cyanide to extract gold from lower-grade rock. The mine is also getting ready to increase the depth of its open pit. With the new leach pad, which is beginning production this week, the mine could keep running past its previous closure date of 2019, said Delbert Parr, the mine's environmental manager.

"You wouldn't be seeing these (expansions) if not for high prices," Parr said.

The Pogo mine, which opened in 2006, recently poured its 1 millionth ounce of gold.

The mine's general manager, Larry Davey, recently told a roomful of mining-industry people gathered in Anchorage that reaching that milestone was difficult. During its first full year, Pogo struggled to survive, he said. That year, Pogo didn't meet its production targets, harming its credibility, he said. Among other things, Pogo faced a high turnover rate among its employees.

A miner's life might not be as difficult as it was in Alaska's pioneer days, but it still isn't easy.

Davey said that Pogo miners have quit to find work closer to their homes or because of difficult working conditions.

Losing a miner can have an immediate financial impact on a mine's bottom line. For that reason, Pogo is working hard to be a better place to work. That means attention to mundane things like the meals served at its remote camp.

"There's nothing that challenges us more than when the ice-cream machine breaks down in camp," Davey said.

"We have a back-up ice cream machine," he deadpanned.

When its previous owner, Teck Resources, put its gold properties up for sale, this year, Pogo got a new owner, Japan-based Sumitomo Metal Mining Co., which previously had a 40 percent stake in the mine. Pogo now employs just fewer than 300 people, about 65 percent of them Alaska residents. Davies said Pogo will close in 2015 unless new reserves are added. Like Fort Knox, Kensington and other Alaska hardrock mines, Pogo is still exploring nearby rock deposits to extend the mine's life.

Davies said he's optimistic about the mine's future but he struck a cautionary note about the recent high gold prices.

"Guess what? One of these days, it's going to go down. We have got to be prepared for that," he said.


Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

Anchorage Daily News is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service