Mining and exploration boom in 2004: 2005 looks good: exploration spending jumped last year to an estimated $64.4 million, more than double the amount spent on mineral prospecting in Alaska in 2003.

• Author: Liles, Patricia

After several years of dwindling interest, which translated into decreased spending for mineral exploration in Alaska, 2004 proved to be a banner year for prospectors active in the state's mining industry.

Exploration spending jumped last year to an estimated $64.4 million, more than double the amount spent on mineral prospecting in Alaska in 2003, according to preliminary state statistics released in early March.

"Exploration is going on across the state ... with more than 15 projects that received $1 million or more in exploration spending," said Dave Szumigala, a geologist with the state Division of Geological & Geophysical Surveys, during his March 11 presentation to the Fairbanks chapter of the Alaska Miners Association.

Szumigala and Rich Hughes, a mining development specialist in the state Department of Commerce, Community and Economic Development, released in March a summary of the annual Alaska Mineral Industry report, which contains preliminary statistics for 2004 about the mining industry in Alaska.

Especially notable for 2004 is the $64.4 million spent on exploration work, the first stage in a long process of building a metal-producing mine. According to the state report, 1981 is the only year in which exploration spending topped the 2004 total. Back then, gold market prices were nearly double current market prices, and prospectors spent $76.3 million on exploration in Alaska, according to the state reports.

The majority of prospecting work came thanks to Canadian-based companies, amounting to about 75 percent of 2004's total exploration spending, Szumigala said. That factor provides an additional financial hurdle for Canadians to overcome. "They're fighting the lower value of their dollar, plus the tax benefits of exploring in Canada that they don't get here, yet they still keep coming here," he said.

The dramatic increase in Alaska mirrors exploration budget growth worldwide, according to Szumigala and Hughes. Factors driving the increases are a combination of "increased spending by major mining companies, a significant reduction in the negative influence of industry consolidation ... and higher spending by junior mining companies in response to stronger gold and base-metal prices," the two wrote in the state report.

Like prospectors working throughout the world, Alaska miners were plagued by low metal prices during the late 1990s and in the early part of the new century, reflected in declines in exploration spending. Beginning in 2000, annual exploration spending in Alaska topped out at $34.9 million. In 2001, it dropped to $23.8 million, then climbed slightly to $26.5 million in 2002, and $27.6 million in 2003.

In addition to strong exploration spending in 2004, Alaska's mining industry set an industry-wide record last year for its total value, thanks to recent market increases in metal prices for minerals produced.

The estimated value of minerals produced in Alaska topped out at $1.178 billion, according to state statistics. Combined with exploration dollars and $105.6 million spent on development-Alaska's mining industry reported a record $1.348 billion in 2004...