Some metals investors look north to Alaska

Andrew Leckey

July 02, 1993|By Andrew Leckey | Andrew Leckey,Tribune Media Services

FAIRBANKS, Alaska -- The Discovery III stern-wheeler riverboat was making its way down the Chena River on the longest day of the year here, when the daylight lasts for more than 22 1/2 hours.

This trip is now strictly a tourist event. However, 91 years ago when prospector Felix Pedro first discovered the glimmer of gold near a salt creek a few miles north of the river, the travel goal was business.

Many of the thousands of miners and the tons of supplies were transported by boat on this shallow river. While the Tanana Mining District was to become the richest gold-mining district in Alaska, the gold wasn't easily accessible because it was buried deep beneath frozen silt and gravel. No one got rich quick in Fairbanks.

That rush for gold is long gone, but mining for gold, silver, copper and zinc continues throughout Alaska.

For example, Cominco Alaska Inc.'s Red Dog Mine employs 375 workers and is the largest zinc mine in North America; Green's Creek Mining Co. near Juneau has 310 workers and is the largest silver producer in the U.S.; and Cambior Alaska Inc.'s Valdez Creek Mine employs 170 in a large open pit gold mine.

To avoid political and social problems associated with other parts of the world, many investors choose North American mining companies when buying metals stocks. They're sold on U.S. or Canadian exchanges, as well as through specialized mutual funds.

"Gold has been the historical focus in Alaska, although only about 230,000 ounces of gold was produced in Alaska last year, compared to a Russian mining district I'm visiting next month which produces 1.5 million ounces annually," noted Steven Borell, executive director of the Alaska Miners Association.

"An incredible future opportunity for mining concerns exists here, although there is still the battle with some legislators who want to see the state locked up in wilderness."

In fact, many North American mining companies, facing possible stiffer U.S. environmental regulations and new royalties on public lands, are redirecting their efforts overseas.

In the meantime, silver prices are up dramatically, gold prices have gained better than 10 percent and copper prices have been in a tailspin.

"Mining stocks are good for about 5 percent of an individual's portfolio," advised Bill Martin, portfolio manager for Benham Gold Equities Index Fund, a 100 percent North American fund based in MountainView, Calif., that's up 53.64 percent in total return this year.

Another gold-mining fund, Van Eck Gold/Resources Fund (74 percent North America and 26 percent Australia) of New York, is up 62.68 percent.

Daniel Roling, senior mining analyst with Merrill Lynch & Co., sees good potential in copper "because of low stock prices and the need for that metal in consumer products and infrastructure development in Asia."

"Precious metals and aluminum look like good investments right now," said John Tumazos, metals analyst with Donaldson, Lufkin & Jenrette.

Some North American firms with mining operations in Alaska offer opportunities, Martin said.

There's Cambior, a Canadian-based gold producer that operates the Valdez Creek Mine as a subsidiary and has 80 percent of its production in North America.

Teck Corp. of Vancouver, British Columbia, which mines copper and owns the Cominco Alaska subsidiary, is another selection. So is Placer Dome Inc. of Vancouver, British Columbia, which mines gold, silver and copper.

Tumazos and Martin recommend two large gold producers.

Newmont Mining of Denver and American Barrick Resources of Toronto share the most prolific gold deposit in North America. That deposit in Elko and Eureka counties of Nevada features 44 million ounces of proven and probable gold reserves.

Alcan Aluminum Ltd. of Montreal, which has undergone significant cost-cutting, is another Tumazos choice. He's confident prospects for aluminum are strong despite global oversupply.

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