By Patricia Liles For the Journal Alaska's gold miners have much to be thankful for, as market prices continue to set new record prices, breaking the $1,200 per ounce mark on Dec. 1. Industry analysts attribute this fall's steady increase in gold prices to a weakening U.S. dollar, the lingering global economic crisis and a decline in mine production. "People are buying gold as a store of value," said Rich Hughes, development specialist in the state's Office of Economic Development/Minerals. "World gold production is also showing some decline or at least there is a decline in mineable gold reserves." The prior record high of $1,030 per ounce of gold, set in March 2008, was surpassed in early October. Gold prices continued to climb throughout October and November, never dipping below $1,000 per ounce. That's more than the 2008 average price of $871.96 per ounce of gold, used to calculate the value of Alaska's gold production. Last year, Alaska's miners produced more than 800,000 ounces of gold, for a total value of $698 million, according to the 2008 Alaska Mineral Industry Report released in November. Despite its higher profile and historic role in jumpstarting Alaska's mining industry, gold has in recent years played second fiddle to zinc, which has provided the bulk of the state's mining industry value for nearly 20 years. In 2008, zinc production contributed more than $1 billion to Alaska's mining industry value, about 43.5 percent of the industry value. In 2007, zinc accounted for just over 60 percent of Alaska's mineral industry value. That ratio of zinc to gold values could be reversed in Alaska if gold prices continue to increase or if additional gold production comes on line with the development of the large-scale Donlin Creek, Pebble or Livengood gold deposits. "A gold price of about $1,625 per ounce at current production levels for gold would make gold value equivalent to that of zinc," said Hughes, who is also co-author of the Alaska Mineral Industry Report. Despite the steadily increasing gold price, spending on gold mine exploration declined in Alaska during 2009. Exploration spending for all minerals in Alaska fell from $347.3 million in 2008 to $160 million estimated for 2009, according to David Szumigala, senior minerals geologist at the Alaska Division of Geological and Geophysical Surveys and co-author of the Alaska Mineral Industry Report. Alaska's mineral exploration spending could continue to decline in 2010, Szumigala said, depending on what happens with large-scale projects such as Pebble. "If they cut back significantly to focus on permitting-type activities, then expenditures will drop some more, even though I believe that a lot more companies will be exploring in Alaska in 2010," he said. He estimated exploration spending at between $100 million to $150 million next year, depending on gold and industrial metal prices, which have rebounded this fall. "Companies should come back to working on base-metal projects that were mostly shelved in 2009," Szumigala said. The anticipated start of gold production at Kensington in 2010, combined with the expected successful conclusion of permitting the Aqqulak deposit at the Red Dog mine may attract more attention to Alaska, he added. Things could be tempered with continued global financial instability, said Curt Freeman, a consulting geologist based in Fairbanks. "The gold prices have resulted in some needed optimism in the mining community but oddly enough, new exploration budgets targeting gold are not very quick in materializing," he said. "There is still a strong belief that we have not seen the last of the economic woes so there is a general reluctance to invest in the higher risk end of the business." His company, Avalon Development, experienced a significant slowdown in 2009 until about mid-summer when business took off. For Alaska's gold producers, increased market prices over the years boosted exploration spending and capital investment. At Fort Knox, a gold mine near Fairbanks, owners Kinross Gold invested about $300 million during the last two years in a heap leach project and pit expansion. "The recent and current growth at Fort Knox is not a reaction to the market, but rather a result of several years of healthy gold prices," said Delbert Parr, environmental manager at Fort Knox. "The expansion at Fort Knox was planned well in advance of the recent spike in price." Ten years ago, Fort Knox was struggling to maintain gold production in the midst of sub-$300 per ounce gold prices, with little to no spending on exploration or capital improvements.

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