Providing coverage of Alaska and northern Canada's oil and gas industry
September 2012

Vol. 17, No. 36 Week of September 02, 2012

AK-WA Connection 2012: Mining makes a difference in Alaska

Industry provides thousands of high-wage jobs, millions in local spending to make substantial impact on 120 Alaska communities

By Rose Ragsdale

For Alaska-Washington Connection

Alaska’s producing mines and mineral exploration and development projects are making substantial and growing contributions to the state economy and the welfare of many communities. Mining, in fact, remains a bright spot in an uncertain economy.

Like a stone tossed into a pond, the mining industry’s presence is generating a ripple effect that is making a dramatic impact on the lives and livelihoods of growing numbers of Alaskans, especially residents of rural communities located near mines and mine projects.

Mining impact

The direct effect of mining on the state is impressive. In 2011, the industry provided 4,500 direct mining jobs and another 4,500 indirect jobs in Alaska, with total spending of $620 million on direct and indirect payroll. Most were year-round jobs for residents of more than 120 communities located in 26 out of 29 Alaska boroughs or census areas throughout Alaska, half of which are located in rural Alaska where few other jobs are available. Mining paid some of Alaska’s highest wages, with annual averages of about $100,000, which was more than twice the state average for all sectors of the economy.

The sector also generated $148 million in state government revenue through rents, royalties, fees, and taxes - up 170 percent from 2010; $17 million in local government revenue through property taxes and payments in lieu of taxes; and $172 million in payments to Alaska Native corporations.

The mining industry also paid $70.1 million in other state government-related revenues, including $28 million to the Alaska Railroad Corp. – $21 million for moving coal and $7 million for moving sand and gravel; $41.1 million to the Alaska Industrial Development & Export Authority for the use of state-owned facilities (DeLong Mountain Regional Transportation System and Skagway Ore Terminal); and $1.0 million to the Alaska Mental Health Trust for rents and royalty payments, and construction material sales.

Mining companies spent $300 million in 2011 on exploration in Alaska, up 13 percent from 2010, with 30 projects spent more than $1 million and another 30 projects spending more than $100,000. The value of gross mineral production totaled $3.8 billion from Red Dog, Greens Creek, Fort Knox, Pogo, Kensington, and Usibelli Coal mines, placer mines, and rock, sand, and gravel operations. That’s an increase of 16 percent from 2010. During the year, more than 200 placer mines also produced 70,000 ounces of gold, as well as platinum.

All of Alaska’s Native corporations benefited from mining industry activity in the state through 7(i) and (j) royalty-sharing payments as well as jobs for shareholders and business partnerships.

For example, $169.9 million in net proceeds from Red Dog Mine operations went to NANA, the Alaska Native regional corporation for Northwest Alaska where the mine is located, while another $82.0 million was distributed to other Alaska Native regional and village corporations. In addition, 56 percent of the 550 year-round jobs at the mine are filled by NANA shareholders. Calista Corp. – the Alaska Native regional corporation for the Yukon-Kuskokwim Region in western Alaska – received about $2 million in 2011 in royalties and other revenue for mineral agreements including lode exploration, placer gold production, and construction material sales. Calista shareholders, descendants and spouses predominantly fill the exploration camp jobs at the Donlin Creek Gold Project.

Beyond impact

The impact of mining in Alaska goes beyond money spent and wages earned. Mines and mine projects make an importance difference, especially in the many communities where they represent the only significant private-sector presence. Thus, the mining industry and its workers meet many of the civic and philanthropic needs of their communities.

Greens Creek Mine, for example, is the largest private employer in Juneau, Alaska’s state capital, and plays a significant role in the exceptional quality of life in the Juneau area. Located about 18 miles southwest of the city, the Greens Creek operation on Admiralty Island has been a staple of the Juneau and Angoon communities for 22 years. Greens Creek’s 340 employees make a significant impact on their local community, not only as residents, but also through a variety of activities and events where they volunteer. Employees paid some $430,000 in local property taxes in 2010. The Juneau school district received about $664,000 in school funding due to the 192 children of Greens Creek employees who attend local schools. In addition, Greens Creek employees donated about $15,000 in personal donations to charity. The employees also volunteer about 4,000 hours of their time annually to local charity groups, schools and community organizations. During 2010, the mine, itself, contributed more than $29,000 to local philanthropic efforts and provided $20,000 for local civic and youth programs including the high school science fair, local opera and musical productions, city museums and exhibits, youth sports, and scholarships to the University of Alaska-Southeast, among others.

Alaska’s other five producing mines and at least one mine project, the Pebble Project, in Southwest Alaska play equally important roles in their respective communities.

Mining support

Many Alaska Native corporations also have taken the opportunity to develop businesses that serve the mining sector, including: NANA Regional Corp., Calista Corp., The Kuskokwim Corp., Central Council Tlinglit & Haida Indian Tribes of Alaska, Goldbelt, Inc., Kake Tribal Corp., Klukwan, Inc., Prince of Wales Tribal Enterprise Consortium, Iliamna Development Corporation, Pedro Bay Corp., Alaska Peninsula Corp., Kijik Corp., Igiugig Native Corp., Tenalian Inc., and Tyonek Native Corp.

Pedro Bay, for example, formed a 51/49 percent partnership with Fairweather, LLC to create Clear Stream LLC, a venture that has provided medical support services to the Pebble Limited Partnership in February 2009. Pedro Bay is located on the Alaska Peninsula at the head of Pedro Bay and the east end of Iliamna Lake, some 176 air miles southwest of Anchorage. Clear Stream hopes to expand its medical services in the future as well as add expediting, equipment rentals, and warehouse management and procurement to the roster of services that it offers the mining sector.

Mining also plays a critical role in sustaining Alaska-Washington commerce. Service companies, including most of Alaska’s major transportation businesses, depend on the mining sector for both direct and indirect trade. Whether it’s trucking ore concentrate from a mine or delivering fresh eggs and produce to a project site, the carriers that serve Alaska supply mines and mine projects with the transportation services they need.

Some businesses provide specialty products and services on which many companies in the mining sector have come to rely. They include Taiga Ventures of Fairbanks, which specializes in logistical support for remote projects, and Modular Transportable Housing Inc. of Yakima, Wash., which constructs modern work camps in remote locations.

Other businesses such as Seekins Ford of Fairbanks, Kenworth Alaska and NC Machinery provide mining companies, their vendors and employees with the automobiles, tractors and heavy equipment that they need to work in Alaska.

Mining outlook

Mining has the potential to make a tremendous contribution to the future of Alaska. Every region of the state has some form of mining potential, ranging from gravel operations to gold, silver, copper, nickel, lead, zinc, platinum, tungsten, manganese, rare earth minerals, jade, limestone, and coal deposits.

But the future also holds uncertainty that could dim prospects for mining development. Challenges related to high costs and environmental concerns must be overcome for the industry to deliver on its amazing promise.

Further development of Alaska’s mineral resources would bring additional benefits in the form of more high-wage jobs and increased spending with local vendors as well as government and Alaska Native revenue from taxes and royalties. The presence of responsible mining organizations also would dramatically improve the quality of life for many Alaskans who will never see the inside of a mine.

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