Poised for growth.

• Author: Richardson, Jeffrey
• Position: Alaska's mining industry - Special Section: Slow Bore: A Tale of Obstacle Courses, Bright Prospects & High Hopes - Cover Story

Potential dangles unfulfilled before Alaska's minerals industry.

Metal prices are down, and proposed regulations continue to darken the horizon, but Alaska's mineral industry has been humming with activity in recent months. At least five major projects -- four gold mines and a new coal mine -- are poised to move into the development stage, and aggressive exploration continues in many areas throughout the state.

Mining has produced some pretty favorable statistics in the last year, and some eyebrow-raising developments as well. Placer miners got a boost when the state started handing out permits to dredge a creek bed within Denali National Park, upping the ante in a brewing conflict with the federal government over navigable waters. Then, upon his return from the environmental summit in Rio de Janiero, Gov. Walter Hickel in June abruptly called a halt to further permits, at least for the time being.

Another interesting twist came when miners made common cause with environmentalists to resolve Alaska's most paralyzing land status dilemma, the mental health lands trust issue. Despite their efforts, that issue remains mired in legal and legislative limbo.

But while land tenure remains a major political concern for the state's mining industry and a practical impediment to new development, statistical indicators note a continuing high level of interest in Alaska's hard-rock and coal resources. According to preliminary data published by the state Division of Geological and Geophysical Surveys in the Department of Natural Resources, exploration expenditures declined by $25.4 million between 1990 and 1991, but both development expenditures and production values increased by healthy margins.

Development expenditures grew by 72 percent in 1991, to $24.6 million. Total value of the state's mineral industry rose from $610.6 million in 1990 to $617 million last year.

Spending Shift. The drop in exploration expenditures reflects both a softening in metal prices worldwide and the movement of projects from the exploratory to the development stage. An increase in gold and other metal prices would be especially welcomed by those companies working remote areas far from the established transportation infrastructure. Among those holdings are the Illinois Creek gold and silver deposit being developed by North Pacific Mining Co. in western Interior Alaska and the Pebble Copper gold/copper deposit being analyzed by Cominco near Lake Iliamna.

Development and production costs are substantially higher at such sites than at tidewater mines or prospects accessible by road or rail. Experts say transportation costs alone -- transporting construction supplies and equipment and hauling out ore -- can run to 20 percent of operating costs in the production phase at some remote mines in Alaska, compared with 4 percent or 5 percent elsewhere. As a result, development of distant sites is much more sensitive to metal price fluctuations.

According to Jerry Booth, vice president of minerals and coal for Cook Inlet Region Inc. and president of subsidiary North Pacific Mining Corp., gold prices have been sliding for the last three...