The price of gold: mines are hard hit by low gold prices, but brighter days may be just around the corner.

• Author: Stricker, Julie
• Position: Alaska's mining industry

Imagine finally buying the house of your dreams, the one with the great view and the high mortgage. Then, right after you sign yourself into debt for 30 years, imagine your boss telling you that your salary has been cut by a third. Ouch.

That's what Alaska gold miners are feeling in the face of sagging gold prices. In the past two years, the precious metal has lost nearly a third of its value on the market, dipping from $350 an ounce to less than $270.

In late September, the price of gold was hovering around $290, hitting miners all across Alaska. Some have just tightened their belts; others are continuing to mine despite extremely tight margins; still others have idled their operations until the market cycles upward. At least one major mining company has filed Chapter 11 bankruptcy.

According to Steve Borell, executive director of the Alaska Miners Association, the state's gold miners can be divided into three groups: small, generally family owned placer mines; junior mining companies that specialize in exploration and mine development; and large, self-contained corporations. Each has felt the pinch of low prices, but some are better able to weather the downturn.

The large mining companies such as Kinross Gold Corp., which owns the huge Fort Knox hard-rock mine near Fairbanks, have deeper pockets and more flexibility to deal with reduced prices.

"They may cut costs, but the majors will typically continue to explore at a reduced level," Borell says. "The major companies will be funding their explorations off revenues that will be made at other mines."

In fact, Fort Knox is still spending millions to explore reserves near the current mine site 15 miles northeast of Fairbanks. Nine months into 1998, Fort Knox had generated 259,000 ounces of gold at a cash cost of $175 an ounce, according to Steve Lang, general manager. Adding outstanding loans and depreciation bumps the overall operating cost to about $320 an ounce. In the short-term, keeping cash costs low is the most important business aspect, he says.

"When you're in the resources business you have to realize there are going to be ups and downs," says Lang. "We hope this is the low. We're looking to expand our reserves so we can enjoy the ups."

Many mid-size operations are having a tougher time. The Illinois Creek gold and silver mine, located in the Kuskokwim Mountains south of Galena, didn't move any dirt this summer. The mine is owned by USMX of Alaska, a wholly owned subsidiary of...