Another gold rush?

News for the gold bugs:
Alaska Journal of Commerce: Pebble now state's biggest gold mine 02/02/04:

Pebble now state's biggest gold mine

By Tim Bradner
Alaska Journal of Commerce

Alaska has another huge gold prospect. Northern Dynasty Minerals Ltd. announced Jan. 21 that the Pebble gold-copper minerals deposit near Lake Iliamna southwest of Anchorage has estimated gold resources of 26.5 million ounces and an estimated copper resource of 16.5 billion pounds.

The new estimates make Pebble the largest gold resource deposit in North America and the second largest copper deposit on the continent, according to Ronald W. Thiessen, president of the Vancouver-based mineral exploration company.

Pebble now eclipses another large Alaska gold project, Donlin Creek, as North America's largest. Donlin Creek, with 25.2 million ounces of gold resources, is now No. 2.

I notice that the Pebble gold deposits are on state land:

Pebble is on state-owned lands, but the project is being closely watched by Bristol Bay Native Corp., another Native regional corporation which owns mineral lands nearby.

And I notice that the state will be funding the improvements needed to develop these gold resources:

In a related development, the state Department of Transportation and Public Facilities has begun a reconnaissance engineering study of a possible road to the Pebble deposit from the west side of Cook Inlet.

A $500,000 contract has been let to Peratrovich, Nottingham and Drage, an Anchorage engineering consulting firm, to survey possible road routes and port sites, according to Mike McKinnon, manager for DOTPF's rural roads project. The study is to be complete by the end of the year.

And we'll pretend this is a triumph of private enterprise and individual initiative.

And in related news, the volatility of South Africa's currency has reduced earnings for some gold mines:

Though the currency has weakened this month, its overall strength virtually canceled the benefits of high gold prices to miners in the last quarter, and the rand remains volatile. Indeed, the 28 percent appreciation in the rand from 2002 to 2003 actually reduced by 15 percent the price in rand that South African producers received for their gold, said Roger Baxter, chief economist at the Chamber of Mines of South Africa. According to Mr. Baxter, the average dollar price of gold rose 17 percent, from $310 an ounce in 2002 to $364 in 2003. In that period, the rand price for an ounce of gold fell to 2,735 rand from 3,248. "It's not so much a reduction of revenues, but a slashing of margins," says Nick Goodwin, a gold analyst for the South African financial services firm Tradek. "Margins are on par with the lows of the past." Miners of precious metals, who sell their product in dollars but count costs in rand, have been hit by the strength of the currency, but none as hard as the gold miners, whose deep deposits have historically made South Africa a high-cost producer compared with other countries. Profit margins at the gold miners were at their rosiest in the first quarter of 2002, when the industrywide margin was 40 percent, excluding capital spending, Mr. Goodwin said. At that time, the price of gold in dollars was just $290, well below the $406.60 price now, but the rand was trading at an average of 11.53 to the dollar, compared with 7.17 currently. By the third quarter of last year, though, that profit margin had narrowed to 22 percent, a wan figure in the capital-intensive industry.

So, higher cost South African mines will go out of production. Note that the real story is the weakness of the U. S. dollar, but I don't expect anyone to notice that.