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Guest Post: Alaska's New Gold Rush
Submitted by Louis James of Casey Research
Alaska's New Gold Rush
Alaska is one of the most prospective and yet most underexplored
areas in the world. There are good reasons for the neglect, most
notably the long, cold winters and the lack of infrastructure. Whether
the latter is a result of, or a cause of, there being few people in the
state is an open question.
One clear result, however, is a rather small economy: Alaska’s 2009 GDP
was US$47.3 billion, comparable to that of the Dominican Republic or
Bulgaria. The state is ranked 44th by GDP among its U.S. peers.
In terms of metals, Alaska produces gold, silver, copper, lead, and
zinc. Being well endowed with natural resources, Alaska’s mining
history dates back to the early 1800s, when Russian explorers prospected
the region, looking for placer gold. But not until after Russia sold
Alaska to the United States did exploration activities start to develop
rapidly, both on placer and hard rock deposits.
Alaska has undergone not one but a series of gold rushes, the most
famous being the 1890s Klondike Gold Rush, which actually centered on
gold found just over the border in the Yukon Territory. That event drew
many immigrants and spawned numerous settlements on the way to the
Klondike, one of the principal routes having been through Alaska.
Almost 13 million ounces of gold were produced by placer miners in the
area. Since the end of the 19th century, mining has become an integral
part of the state’s economy.
The following chart shows Alaska increased its gold production to
800,000 oz in 2008 (most recent data available), up 10% from 2007.
That’s also about a 10% share of total U.S. gold production. Alaska is
the second largest gold-producing state behind Nevada. It is remarkable
to see production in Alaska rise while total U.S. production has been
in decline for more than a decade.
Yet, most Alaskan gold comes from only a handful of mines – and that
tells you something about the size of the deposits being worked. The
two largest mines, Fort Knox and Pogo, account for more than 80% of
2008 total gold production, or 640,000 ounces. The Kensington project,
which started producing gold just a month ago, is set to become the
third largest. Perhaps. But these mines are small potatoes compared to
some of the current projects being advanced toward production. Given
that a million ounces of contained gold is considered a large gold
mine, Alaska’s major deposits are genuine monsters: Pebble has 107.3
million ounces of gold, Donlin Creek has 42.3 million, and Livengood
has 19.7 million. If these go into production, Alaska will rank as one
of the world’s top gold producers.
Alaskan Moose vs. African Elephant
I like Alaska. I like the fact that many, if not most, Alaskans own
guns – it’s one of the last remnants of American “rugged individualism”
(though sometimes it seems that more Alaskans take pride in the rugged
part than in the individualism part).
Now this is an Alaskan cabin!
But in my professional capacity as Doug Casey’s rock-kicker, it’s not
Alaskan culture that I like the most. It’s the almost unique
combination of being a huge, highly prospective mineral district in a
stable, pro-mining jurisdiction. Many people argue that all the big
deposits in safer jurisdictions have been found – but you don’t have to
go to Africa and put up with corrupt, kleptocratic regimes to hunt big
game.
Alaska is unquestionably elephant country (well, moose country, and
moose are almost as big as elephants and much more foul-tempered) with
work done this cycle identifying genuine monster deposits. And there is
plenty of room in that great empty place to find more.
The Pebble Controversy
What about Pebble – doesn’t that cast doubt on Alaska as a mining jurisdiction?
No.
The fight over Pebble does not stem from a groundswell of anti-mining
sentiment among Alaskans, but from objections by specific interests to
the potential mine’s proximity to salmon spawning grounds. Alaska’s
economy has been dependent on resource extraction from the get-go, and
remains so. Fish are an important resource, but mining has also long
been a part of local culture and is no more horrifying to most Alaskans
than guns are. In contrast to the views of the parasitical class that
inhabits Washington DC, guns are simply necessary and useful things to
most Alaskans. Similarly with mining.
Culture aside, the basic fact of life in Alaska is that the economy has
always been driven by natural resources, and for Alaskans, this is not
just an abstract theory. The State of Alaska cuts a check to each
resident every year, paying them a dividend on the royalties the state
has collected from the oil industry. Most of the money in the state
Permanent Fund that pays these dividends came from the North Slope oil
fields – and those are in decline. The Alaska Pipeline is operating at
half capacity now, and if it drops below 30% or so, they’ll have to
shut it down. That opens up some interesting conjectures about the
future, but the point at the moment is that individual Alaskans get a
substantial check in the mail every year ($1,305 in 2009) that reminds
them of the importance of the resource industry.
I’m not worried about Alaska turning anti-mine; Pebble’s problems are specific to that project.
Real Obstacles
The main problems for resource industries in Alaska boil down to two
things: it’s expensive, and much of the place is remote. Actually, the
fact that everything costs more in Alaska also has a lot to do with how
remote the whole place is from the rest of the U.S., adding substantial
shipping costs for many goods. It’s also more expensive to deal with
winter up there, due to various factors ranging from heavy snow removal
costs to extra insulation costs, etc. For a mining project, a simple
rule of thumb I’ve heard some old-timers use is that everything costs
twice as much in Alaska.
Within Alaska, the remoteness itself is a major hurdle. The place is
huge, twice as large as Texas, four times as large as California or
Montana. The state capital of Juno has only about 30,000 inhabitants –
and you need a boat or a plane to get there. Anchorage, the only larger
city, has only about a quarter of a million (Fairbanks, the next
largest city, has about the same size population as Juno). There are
very few roads connecting this scarce and scattered population, with
small aircraft being a common and critical part of the transportation
and supply web that connects them.
NovaGold’s (T.NG) Donlin Creek project, huge as it is, faces serious
logistical challenges, with neither roads nor power for literally
hundreds of miles in any direction. Normally, you’d ship diesel fuel
into a remote location and run generators. I haven’t done the math
myself, but the amount of fuel needed is so great, I’ve heard that it’s
physically impossible to barge it in. Maybe they could build an
airstrip for some of those C-5 Galaxy cargo whales. What they are
currently working on is a feasibility study to see if they can build a
gas pipeline that would stretch over 300 miles from Anchorage – but for
that to work, Anchorage needs to find a new gas supply itself.
This may be why we seldom hear of small deposits in Alaska; it’s not
that there aren’t any but that a deposit is not worth bothering with
unless it is rich enough to pay for whatever infrastructure needs
building.
Real Opportunities
On the other hand, this very issue of remoteness is also an advantage –
at least for speculators in this metals cycle. Because the place is so
huge and so much of it so far from … well, from everything, there are
vast stretches of land that have seen little exploration. The fact that
everything costs more in Alaska has also kept a lot of exploration
dollars away, in spite of how prospective the ground is – basically the
same geology we love in BC and the Yukon. For well-funded and well-run
companies, this is a true “land of opportunity.”
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whoa!!!!!!!!!!!!
interesting
I figured if things really get bad we could give Alaska to China and call everything even. No more debt, keep the fiat rolling another 20 years ...
*Update- What is it's value..How much could we get??
mineasawell sell it to them before they just take it... no doubt they would invest heavily into solars there
Or allow our fiat to go to it's inevitable end an hyperinflate instead of giving up and extremely resource rich state. Why give up the real for the imaginary??? Fiat is meant to default. You don't protect it with resources!
Heh...I'm not much on giving away something in exchange for someone elses incompetence.
This would be akin to a farmer having a bad corn crop due to the bankers son spraying agent orange on the property next to him on a windy day and the banker then asking the farmer to sell his seed corn for the spring planting next year.
Deal or no deal the farmer is asked. No deal, he says as he reaches for his shotgun ;-)
They invested unwisely...as Munger said, they'll just have to suck it up like the rest of us...ROTFL.
A very nice read, thanks.
Check out Northern Dynasty Minerals (NAK).
Huge upside potential on that one.
And you can see Russia from nearly everywhere -- you betcha!
As Gibson and Palin discussed the conflict between Russia and Georgia, Gibson had asked last year, "What insight into Russian actions particularly in the last couple of weeks, does the proximity of this state give you?"
Palin responded: "They're our next door neighbors. And you can actually see Russia from land here in Alaska."
Read more: http://newsbusters.org/blogs/brad-wilmouth/2009/11/18/abc-brings-i-can-see-russia-my-backyard-palin-interview#ixzz10PIMRiQH
jlee--as long as you give the same deference to the out of context Gore quote regarding the internet.
Palin will put Obama out of his misery... exactly the way Reagan took out Jimmy. It's not about being a Wonk, you hire those by the dozen... it's about understanding how to wield Executive Power.
Oh, and btw... what ever happened to 'ol Charlie?
Palin McMILF as president would make Todd...
First Bitchez...
Yeah, wielding executive power . . . she DID actually finish out her term as Wasilla mayor, before quitting the governorship of a state the size of a few Chicago suburbs.
Say DDT, you're going to admit that Pain's a lot smarter than you, no?
"you can actually see Russia from land here in Alaska"
She's right, you know.
Heh! I forgot what a completely bubbleheaded response to a serious question -- addressed to one who wanted to sit a heartbeat away from the Presidency of the American Empire, no less -- she gave. Thanks for the reminder.
I continue my challenge: I'm looking for a ZHer who will state unequivocally that Palin is smarter than he/she.
She's smarter than me in the sense that she's turned a modest political career into a money/power/influence machine. She gets free clothes (expensive ones), lots of money, book deals, appearance fees, lots of free private jet travel, etc. She even quit her job mid-term and no one cared. She's just a momma-grizzlie, hockey mom from Alaska - takin' it all the way to the bank.
FWIW, I think she would make a miserable president.
Oh yeah. Brilliant in a cunning way. But no education or intellectual curiousity. And a vicious sociopath (ask anyone in Wasilla or state politics). All in all a shame of wasted potential. And an illustration of the way the profound labor shortage in Alaska promotes the underqualified.
I assume you suffer from Palin Derangement Syndrome?
Interesting read - thanks TD.
The Alaska Troopers show is good for a snicker now and then... Friends love fishing up there.
Good article. Huges exploration Group is a leader in discoveries.
I bought several thousand shares of stock in a Hughes Group junior mining company, simply because of his association. Dummy me, I got burned. Live and learn.
Don't know you're story but exploration is a speculative business and should be a long term hold investment. Alot of manipulation if trying to play.with the Gold and silver being sold forward 100 to 1 , these resource stocks will return huge profits.
"exploration is a speculative business and should be a long term hold investment"
is that why Doug Casey describes the junior miners as burning matches?
Biggest bang for the buck.
I'm still holding. I have to since the stock is now one cent per share. All I'm saying is I was dumb enough to jump into a junior miner without doing my homework. Not all stocks will return huge profits. DYODD.
Fate is on you're side.
ummm yeah...Klodike Gold corp didn't workout so good and Hughes is probably hoping to get the venture with Atac off the ground.
If you love the geology of the Yukon and BC, why get second best in Alaska?
Canada is where it is at.
"Canada is where it is at."
Leo told me so...
As soon as the BC housing bubble pops... I'll be there!
Yeah baby; I'm buyin' the miners prior to the LBMA or Comex defaults. Smart shoppers have already alloted capital to CEF for the 75,209,103 oz. high beta silver bullion position.
There's no fever, like gold fever...
http://www.youtube.com/watch?v=3w4B7QxL_n4
The capital of Alaska is Juneau, not Juno. Jeesh.
Everybody knows that. It's right next to Gnome.
Gnome's a great place to go crazy from HAARP and murder your whole family and yourself.
http://en.wikipedia.org/wiki/Nome,_Alaska and a great place to meet aliens
A discussion of when gold miners benefitted from higher average gold prices:
BNN.ca
http://watch.bnn.ca/thursday#clip349046
haha, Thats Jeffery 100 to 1 Christian.
what a tool
Yes, the quintessential pessimist. But the comments on mining equities are cogent, in that they will benefit from higher average gold prices.
Environmental lawyers will be rich rich rich...... the shareholders, not before 2015.
X
I once spent 11 days at a friends placer operation getting a chance to drive his Dozers and escavators around like an idiot. He had the largest placer operation in the state, at the time. Its amazing mucking out a jig machine and seeing pounds of gold fall out at a cycle.
Great read...I have worked in Alaska and been back a few times...everything there is big and everything is remote, hence they have more bush pilots and float planes than any other place.
If we are talking mining stocks, I will throw one out that I have owned and still am adding to. I have been through their mines and have inspected their processing plant. They have large reserves they are in the process of proving, but unlike other junior exploration companies, they are operating and making money. I like their management. Impact Silver.
Welcome others thoughts. It is of course high risk and I might be wrong about my opinion on them and I am not recommending it...just suggesting others might take a look.
Also own HL which is no mystery if you think silver is good.
I like Impact too. I owned them indirectly thru Energold Drilling a while back (Energold owns a good bit). I can't quite bring myself to buy a position there because they are less than 1M oz silver producer with about a $60M MC. For me Great Panther is more attractive at 2.5M growing to 3.5-3.8M at $125M MC. Or consider First Majestic, which is at 6.5-7M oz and doubling in production from here in 3 yrs according to CEOs DenverGold presentation. They have $650M MC. Company has really turned the corner and ramping up production and cash flow.
DenverGold.org has dozens of presentations from this weeks conference - all of the best were there. Great place to start due diligence. I was impressed with Minera Andes too and its been on an absolute tear the last week. Rob McEwan GG founder is CEO and Chair and owns 33%. He just cashed out 190M worth of Rubicon.
I guess since this thread is about Alaska I'll close with this thought: "Damn. It's a good thing we bought Alaska!"
Impact.... got in at 0.20 .... heh heh, heh
Tara Gold... recently sold my shares picked up at 0.03 for 0.56
Been amassing AMC, Alexis minerals, trading at 30% of book value
FRG is also a fav...
Jeremiah Johnson
http://www.youtube.com/watch?v=FerH_4NMJUY
Sometime in the next phase of the global financial collapse the powers that be will nationalize gold mines as well as seizing individual gold holdings as was done in the Thirties "in the interests of national security". Gold's excellence as money hardly guarantees the upholding of property rights by Uncle Scam. With the current crowd of thugs running things (and I'm not talking about their sock puppet Obama, or his party, but the owners of all the Davos Men figureheads) gold's singular excellence as money practically guarantees expropriation. Plan accordingly by purchasing physical gold outside of the United States and Europe, taking delivery and storing it yourself. Get off the USD plantation while you still can.
I mentioned these gold mining developments in Alaska in comment 543183 four weeks ago. I'm loathe to share any further information I have now. I was belittled when I brought it up - probably because the ideologues here are still butthurt that I routinely call them out on their bullshit.
I suppose now that Tyler has taken an interest, it's important - right? Ironic. Why does anyone here claim to want input from outsiders? I'm sure you're all fine on your own. Good luck.
Watch that copper price.
It's 5:37am EST...Gold is $1299.40...Do you know where your gold is?
Where did I put my key to the location of those maps? ;-)
Why so sensitive?
Anyone who has EVER in history proclaimed something the proles cannot see, has been derided, crucified, and otherwise ridiculed.
More folk are observers here and learn while they lurk. Just keep repeating what you know to be true.
If you are being castigated for your views, which are far more informed than those who bait you, be certain that there are more agreeing with you, silently.
The only one in the orchestra who doesn't make a sound is the Maestro.
Rather than mining the gold and smelting it into finished bars and coins, why not just develop the geologic evidence that a deposit contains, let's say, one million ounces. Then, just sell ownership certificates on the gold deposit, let's say face value 1 oz and 1 million certificates.
That way, you own your gold, you know where it is, it's in a safe place buried underground, nobody can steal it, and you save all of the costs of mining, transporting, smelting, storage, etc.
You wanna buy some moon rocks?
Hell...why not manufacture out of thin air geological evidence that something of value is there...we could call it maybe...ummm...fiat metal...and we could print limitless paper tickets that give ownership of the fiat metal.
Why yes...we could even create other pieces of paper challenging the amounts supposedly there...maybe call them...fiat metal derivatives...what could possibly go wrong?
Sir, you have been careful not to offend your echo chamber. Global heating is melting Alaska's permafrost. Trees with roots in the not-so-perma are tilting over, creating 'drunken forests'. Alaska & the north pole are now targets of low-level sabre-rattling over jurisdiction. Check out the town of Churchill on Hudson Bay: it is the end of a railroad going north. Hudson Bay is warming and Churchill is open to shipping more and more of the year.
c.f. Global Temperature Anomaly and The Freezing Winter 2009-10 does not mean that Global Warming is not happening.
Now that I've pissed off the Americans reading this (nobody else in the world denies AG climate change) I'll make a prediction: the country that builds a Far-North University will rule the far north.
What happened to "manmade global warming"?...did I miss yet another nuance shift?...LOL.
Hey they're starting to find dead polar bears washing up everywhere as well...it's a damn travesty;
"Naomi Lloyd, presenter of ITV's West Country breakfast bulletin, told the viewers "a walker in Cornwall has caught an extraordinary sight on camera. A polar bear has washed up on a beach near Bude."
http://www.telegraph.co.uk/earth/wildlife/8014541/ITV-embarrassed-by-rep...
"Now that I've pissed off the Americans reading this..."
Actually you give yourself more credit than you deserve.
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