Exploration off 38%, producing mines strong

  • By Tim Bradner
  • Sunday, February 16, 2014 9:55pm
  • News

JUNEAU — Mining is good for Alaska’s economy, but while the state’s six producing mines are holding up well, and some even expanding, a sharp 38 percent drop in exploration spending last year is having ripple effects.

Overall, mining employed 4,600 Alaskans directly last year and the overall employment impact totaled 9,100 including indirect jobs created by the spending. Direct payrolls of mining companies totaled $630 million in 2013.

The 2013 total employment and payroll numbers are down a bit from employment in 2012, however, which is likely due to the falloff in exploration. Minerals companies spent about $180 million in exploration in 2013 compared with $275 million in 2012.

The data was gathered by McDowell Group, a Juneau-based consulting firm, for the Alaska Miners Association and the Council of Alaska Producers, two minerals industry trade associations.

The information was presented to the House and Senate Resources committees in Juneau Feb. 5, by Karen Matthias, director of the producers’ council, and Deantha Crockett, executive director of the Alaska Miners Association.

McDowell Group’s 2013 figures were released that day.

On an upbeat note, one of Alaska’s producing mines, the Fort Knox Mine near Fairbanks, achieved another milestone in December 2013, when the mine produced its six millionth ounce of gold, Matthias said.

Fort Knox is a large surface mine northwest of Fairbanks that began production in 1996.

In another development, the Greens Creek Mine in Southeast Alaska secured federal approval for an expansion of the mine tailings storage facility, Matthias said. It will be in construction this year and, when completed, will give the mine the capacity to store tailings if new resources are added to the mine, she said.

Greens Creek is an underground silver mine on Admiralty Island near Juneau.

Some more sobering news for the industry, however, was the decision by Anglo American, a large mining company, to withdraw as a partner in the large Pebble copper/gold project near Iliamna, southwest of Anchorage.

Pebble’s owner, Northern Dynasty Minerals, is now looking for another partner to develop the mine.

As for exploration, lower gold prices explain most of the drop, Matthias said. Prices for that metal have dropped from almost $1,800 per ounce in September 2012 to about $1,200 a year later, she said, and haven’t changed much since. Silver has also declined.

Base metals like copper, zinc and lead have been more stable, at least in recent months, but it is gold that drives much of the Alaska exploration.

Alaska isn’t alone in experiencing the drop in exploration. The trend is global, Matthias said, with world exploration spending at $15.2 billion in 2013 compared with $21.5 billion in 2012, a 29 percent decline.

While metals prices are weak, costs for mining and mining equipment continue to climb. Crockett cited some examples: A 40-ton underground haul truck, of the type used in Alaska underground mines, climbed in cost from $560,000 in 2003 to $1.3 million in 2013, she said. The price for a 6-yard underground loader went from $570,000 in 2003 to $1.1 million in 2013.

Labor costs are climbing also. In 2003, the average Alaska mining wage was $70,750 per year. In 2013 it was $100,000 per year, Crockett said.

Fuel and other energy prices are high. Fort Knox spent about $4 million per month to purchase electricity from Golden Valley Electric Association, the Interior regional utility, and about an equal amount on fuel for equipment used in the mine, Matthias said.

The Red Dog Mine, in northwest Alaska, has a hefty fuel bill, too. Teck Alaska, the mine operator, uses about 20 million gallons of fuel per year that must all be shipped in by barge during the summer and then trucked inland to the mine.

The Kensington gold mine near Juneau is powered by diesel also, and has a huge fuel bill. Greens Creek has the benefit of being able to tap into Juneau’s electric grid with its inexpensive hydro power, but the mine must switch to diesel during periods when the hydro projects have low water and produce less power.

Meanwhile, mines continue to be good taxpayers for local governments. In 2013, producing mines paid $16.8 million to municipal governments in Fairbanks, Juneau, Nome, the Northwest Arctic Borough and the Denali Borough, according to the McDowell Group data.

About $100.2 million was paid to the state of Alaska in mining royalties, taxes, fees and rents, according to data from the consulting firm. This includes $21.1 million paid to the Alaska Industrial Development and Export Authority, the state development corporation, in fees for use of the Red Dog Mine road and port and the Skagway Ore Terminal, facilities which are owned by AIDEA.

About $23.8 million was also paid to the state-owned Alaska Railroad for the movement of coal, sand and gravel.

On final note, Mathias and Crockett noted the royalties paid by the Red Dog Mine continues to NANA Regional Corp., the landowner, which are shared with other Alaska Native regional and village corporations under terms of the 1971 Alaska Native Claims Settlement Act.

From 1989, when its production started, through 2013, Red Dog has paid a total of $1.04 billion in royalties to NANA. About $609 million of this was shared with other Alaska Native corporations.

Also, 56 percent of the employees at Red Dog are shareholders of NANA, and other NANA shareholders work for joint-venture companies that provide support and services to the mine.

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