Financial crisis knocks glitter off Alaska mining ventures

ANCHORAGE, Alaska -- Placer miner Jerry Birch watched in disappointment as the price of gold plummeted $150 an ounce in the past 30 days.Meanwhile, costs at his remote Interior gold mine rose this summer. He estimated he'll probably have spent $1 million on fuel this year.When spring comes around, Alaska's placer miners will have to do what they always do: decide whether to roll the dice for another season, he said.With the disarray in financial markets and plunging metal prices, Alaska's mining industry is in penny-pinching mode.Some mineral-exploration projects will likely get shelved and, for now, new mining ventures will have a hard time getting money for development, according to some mining-industry and banking officials."You are a casualty of the finance industry hoarding cash," Joe Beedle, an executive vice president for Northrim Bank, told audience members recently at the Alaska Miners Association annual conference in Anchorage.Mine developers will face higher borrowing costs. And though Alaska banks have $11 billion in assets, they will be loath to lend money unless a project's timeline and costs are certain, Beedle said.The Alaska mining industry had a record-busting haul last year, producing $3.4 billion worth of minerals. This year is another story, and it might take two to three more years for the situation to improve, Beedle said. He predicted exploration could come to a standstill.Mining was a $4 billion industry in the state in 2007 on the strength of rising prices for zinc, gold, silver and other minerals. An estimated $329 million was spent exploring.With prices now sagging and credit tight, small mines and exploration companies appear to be facing hardships.The Nixon Fork gold mine near McGrath has been up for sale since February.This is not a good time to buy a mine. "There's no investment money out there," said Steve Teller, the exploration manager for Mystery Creek Resources Inc., which owns Nixon Fork.At least one Anchorage geology contractor is wondering how long it will take for his company to get paid for some of its summer exploration work. "It's a cash-flow problem," said Rob Retherford, president of Alaska Earth Sciences.One of the companies seeking to develop the massive and controversial Pebble copper and gold mine in Southwest Alaska recently announced that its work on the project has not slowed because of the economy.The crisis unfolded so rapidly that it hasn't affected major mines' long-term plans -- at least not yet, said Karl Hanneman, director of corporate affairs for Teck, which operates the Red Dog zinc and Pogo gold mines.Unlike small exploration companies that rely on investors for funding, large mining companies generate revenue from production that can be plowed into development projects.Next year's large-mine budgets are going to be tighter -- the companies will need to control costs and preserve cash, Hanneman said."Fortunately for Teck, we don't have any major expenditures scheduled in 2009," he said.(E-mail Elizabeth Bluemink of the Anchorage Daily News at ebluemink(at)adn.com.)(Distributed by Scripps Howard News Service, www.scrippsnews.com.)