Big projects keep exploration spending strong in 2008: handful of juniors continue to work multiple properties throughout Alaska.

AuthorLiles, Patricia
PositionMINING

[ILLUSTRATION OMITTED]

While large-scale exploration projects like Pebble and Donlin Creek continued to dominate mineral exploration spending in Alaska during 2008, a handful of junior exploration companies have weathered tough economic markets and elevated operational costs in their efforts to advance several promising projects throughout the Last Frontier.

Exploration spending on mineral-related activities in Alaska during 2007 was more than $318 million, an all-time record, according to the Alaska Mineral Industry 2007 report. That level of funding should continue through this year, if not exceeding 2007's exploration spending, said Rich Hughes, development specialist in the State's Office of Economic Development/Minerals.

"Our analysis is that Alaska still has a healthy exploration industry that carried over from 2007," Hughes said. "It looks pretty healthy for 2008 before it starts dropping off in 2009."

For junior exploration companies that rely heavily on money raised in the venture capital markets, financing has become a critical issue. "It's very difficult to get funding for the juniors--it has virtually dried up," Hughes said. "As metal prices have taken a nosedive, those commodity prices lead to a lack of funding."

Increases in drilling costs, air-access expenses and fuel prices also has dampened exploration activity this year by the juniors exploration companies, according to Curt Freeman, a Fairbanks-based consulting geologist.

With money tight and expenses rising, some companies "... went into the 1997-2002 'bunker mentality' operating mode: if you have capital, rein in spending and harbor capital to allow the company to survive or, if the deal is right, acquire good assets at fire sale prices," he said.

His firm, Avalon Development, works for a number of junior exploration and major mining companies on mineral projects throughout Alaska. Funding for that work comes mostly from venture capital, which began drying up in late 2007 and at the beginning of this year, he said.

"The year started strong but quickly slowed down and by mid-July, companies who had hoped to work into November were pulling the plug and packing it in. For most companies, if you did not raise new venture capital in late 2007 or early 2008, you were simply out of luck," Freeman said. "Seems straight forward--as the big markets turned down, venture capital is the first pool to dry up. The upshot of this was a number of companies shortened their field...

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