As Gold Prices Rise, so Do Miners’ Hopes
By Paula Dobbyn, Anchorage Daily News, Alaska
Apr. 7–Gold is reaching its highest value in 25 years, a boon for Alaska miners and explorers.
The price hit $600 an ounce on Thursday for gold to be delivered in June. The last time gold futures rose that high was in 1981.
The rally is spurred by rising demand in China and India, growing concerns about the U.S. economy, sustained high oil prices, speculative buying and more options for people to purchase gold, such as new mutual funds tied exclusively to metal prices, experts said Thursday.
The high prices are boosting a small but growing Alaska gold mining industry that produced $185 million worth of gold in 2004, mostly from two mines. A third big mine has since started and a few others are at various stages of exploration and development.
Rick Van Nieuwenhuyse, president of Nova Gold Resources, is developing two gold mines in Alaska, Donlin Creek near Bethel and Rock Creek close to Nome.
Investor concern over the economy and the value of the dollar are probably the strongest drivers of gold’s bull market, he said.
“People are getting concerned about the U.S. debt, the trade deficit and the deficit spending that Bush is doing. The printing presses are printing more dollars and the more you produce the less it’s worth,” said Van Nieuwenhuyse.
Steve Borell, head of the Alaska Miners Association, said economic worries are a huge factor.
“People are very concerned about what will happen,” Borell said. “Will the bubble pop? Will the economy implode? People don’t know, but at the same time they’re not willing to stand by and not plan. One of the ways to plan is to put some of your assets in gold.”
Investors often consider gold a safe harbor during economic uncertainty.
As prices rise, more people are speculating on gold and it’s becoming easier to purchase, Borell said.
New mutual and exchange-traded funds have cropped up that are tied exclusively to gold and silver. They save people from buying gold bullion themselves and incurring the hassle and expense of moving and storing it. The public now has more options for investing in funds that focus on gold or other precious metals, Borell said.
As gold prices soar, the mood of Alaska miners elevates in tandem. It generally means higher profits for producing mines and more money to reinvest in exploration, he said.
“Everybody’s spirits are up,” said Karl Hanneman, an executive with Teck Pogo, a company that’s operating Alaska newest gold mine, located near Delta Junction. Pogo started producing this year and is expected to be one of the state’s largest gold mines.
High gold prices also mean it’s easier to attract investment dollars, crucial for junior mining companies focused on exploration.
“For a company on the cusp of being a gold producer, we’re in a tremendously good position,” Van Nieuwenhuyse said.
Nova Gold’s stock hit $16.50 a share Thursday, an all-time high, and the company recently raised $175 million in new financing, he said.
He expects the Rock Creek project to get its government permits this summer. If things go according to plan, Rock Creek will be built and start producing gold by next year, Van Nieuwenhuyse said.
Whether gold prices will continue to climb is unknown but some experts say there’s little indication of a retreat anytime soon.
“The factors that are driving it now don’t seem to be changing,” Borell said.
That’s good news for miners but worrisome for environmentalists.
“What this frenzy of speculation means is that Bristol Bay could become a giant mining district. And if you’re concerned about the long-term health of salmon runs, it scares the hell out of you,” said Tim Bristol, head of Trout Unlimited in Alaska.
A huge mining prospect called Pebble, at the headwaters of Bristol Bay, has generated a flurry of claim-staking activity in the region. Miners are hoping to turn the salmon-rich region into a new mining district. They say mining and fishing can be compatible if engineered and managed correctly.
“It could change be a complete change of how the land is used. It could go from being a world-class wild salmon factory into a mining district,” Bristol said.
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