By Tim Bradner
Alaska Journal of Commerce

Alaska's minerals industry is weathering the world's current economic uncertainties surprisingly well, the Alaska Miners Association told state legislators in Juneau Feb. 24.

Exploration spending, a key indicator for the industry, dropped in 2009 but activity has stabilized and it appears now that 2010 spending will be about the same, Steve Borell, executive director of the association, told the House and Senate Resources committees in a combined meeting.

It isn't all smooth sailing for the industry this year, however. The appeal by environmental groups of a major permit for a new pit at the Red Dog mine in Northwest Alaska could cause the mine to shut down later this year if the appeal isn't resolved quickly. That could be an economic disaster for Northwest Alaska, where the mine is a major employer.

Mining payroll and jobs were down somewhat in 2009 compared to 2008, $320 million in direct and indirect payroll in 2009 compared to $350 million in 2008, and 5,200 direct and indirect jobs in 2009 compared to 5,500 direct in indirect jobs in 2008.

Exploration activity is holding steady. About 30 exploration projects involving expenditures of $1 million or more were underway in 2008. That dropped to 17 in 2009, Borell said, but activity at 2009 levels should be sustained in 2010 with a similar number of projects at the $1 million level, Borell said.

Strong gold prices have helped soften declines in prices for base metals like zinc and copper, although prices for those metals are showing some rebound. However, the continued strength in gold has helped producing gold mines in the state, like the Pogo and Fort Knox mines in Interior Alaska, and have helped hasten the development at the Kensington mine, a new project near Juneau set to begin production.

Gold prices have also helped Alaska's small- and medium-sized gold placer mines in operation, offsetting high prices for fuel. About 175 placer mines, most of them family-owned and -operated, produced 54,000 ounces of gold in 2009, Borell told the legislative committees. The number of operating placer mines is expected to be about the same in 2010, he said.

Some good news for Alaska's minerals industry is that after decades of work on exploration, permitting and lawsuits with environmental groups, the Kensington Mine is set to finally begin producing this summer, Borell said. Kensington is in Southeast Alaska on Berner's Bay, north of Juneau.

Prospects for the mine, being developed by Idaho-based Coeur d'Alene Mines, were strengthened recently by the discovery of a new zone of gold mineralization that will add to reserves currently estimated for the project.

Coeur has invested $330 million in the mine through 2009. The company prevailed over lawsuits and an adverse decision by the 9th Circuit Court of Appeals on its mine tailings disposal plan with an appeal, and finally a victory, at the U.S. Supreme Court.

About 350 construction workers are now employed at Kensington as Coeur completes the tailings disposal facility and prepares for the start of production. Once operations begin, 200 will be employed at the mine.

Also on the positive side of the ledger is that Usibelli Mine Inc. enjoyed record coal production and exports of coal from the company's mine in Healy, in Interior Alaska. Usibelli produced 1.9 million tons of coal in 2009, a significant increase over previous production that was typically about 1.5 million tons.

Just over half of Usibelli's coal output was sold to power plants in Interior Alaska with the rest exported to power plants on the Pacific rim.

Progress was reported at two major gold mines in Interior Alaska, the Pogo mine northeast of Delta and the Fort Knox Mine northeast of Fairbanks.

Pogo, now operated by Sumitomo Heavy Metals, a major Japanese-owned mining company, saw an increase in gold production in 2009, a decrease in worker turnover and improvements in safety, all areas where there had been problems in previous years.

At Fork Knox a new heap leach gold recovery system is operating and the operator, Kinross Gold, is also expanding the main pit at the mine and will have an expansion of the tailings dam at the mine, according to Lorna Shaw, a spokeswoman for Fort Knox who participated with Borell in the legislative briefing.

What could be a major setback for the industry, however, is the appeal by environmental groups of the U.S. Environmental Protection Agency's approval of a new discharge permit for the large Red Dog lead and zinc mine in Northwest Alaska.

The EPA had approved the permit as a part of a plan to develop a new mine pit at Red Dog. Zinc and lead ore reserves in the main pit of the mine are approaching exhaustion and Teck Alaska, the operator of the mine, proposes to develop an adjacent ore body that would extend the operating life of the mine until at least 2031.

Without the reserves in the new pit, the mine will shut down in 2011, Teck has said. This would cause a major disruption of the economy of Northwest Alaska because the mine is a major employer in the region and is the major taxpayer of the Northwest Arctic Borough and supporter of schools in the region.

The appeal of EPA's permit is to the Environmental Appeals Board, a group within EPA. Teck faces a timing issue because it must have the appeal resolved quickly to begin construction at the new pit this summer. That would allow ore mining to begin next year, which will sustain production at the mine.