"Exploration activity is definitely down from last year. Early in the year it seemed that only gold projects would get financing," said David Szumigala, senior minerals geologist at the Alaska Division of Geological and Geophysical Surveys and co-author of the Alaska Mineral Industry report. "In my view, metal prices at the beginning of the year set the tone for what projects would be worked on."

Sustained strong market prices for gold, which has traded publicly at more than $900 per ounce since early May, has helped and continues to support junior exploration companies working to raise money to pour into gold projects in Alaska.

"Exploration activity is good in the gold sector, but dwindling almost everywhere else," said Rich Hughes, development specialist in the state's Office of Economic Development/Minerals and co-author of the state's annual mineral industry report. "Financing is limited and activity is not robust."

One exception to the slow down is the Livengood gold project, being developed by International Tower Hill Mines, which has increased its spending this year over 2008 budgets.

"ITH's Livengood gold project is hot and returning tremendous results. This seems to be a winner and will eventually become a mine," Hughes said.

Still, base metal prices have not held as strong as gold prices, and has affected exploration projects searching for zinc, lead and copper.

"If you have a base metal project, other than a large copper project like Pebble, the markets are dead as a doornail," said Curt Freeman, a Fairbanks-based geological consultant and owner of Avalon Development. "Demand has slowed, supplies are still up and although lead, zinc, copper, nickel, etc., are all up from their lows in the fall of last year, they are still well below the highs we saw in 2007 and early 2008. So projects like Niblack, Palmer, 40-Mile, etc., are all flat, despite being high-quality projects."

Lower base metal prices will also impact this year's total value of Alaska's mining industry.

Last year, the total value of Alaska's mining industry was nearly $3.12 billion, $895 million off the all-time record set by the industry in 2007, due in large part to lower metal prices. Increased operating costs and a worldwide economic slowdown also contributed to the 22 percent decline in 2008, according to the 2008 summary Alaska Mineral Industry report, released earlier this year.

Alaska's mining industry is expected to continue to decline in cumulative value this year, by about $500 million off of 2008, Hughes said.

"This reflects lack of funding for exploration, curtailment of development projects (Kensington, Rock Creek), and reduced metal prices. The gold price is holding firmly, but does not replace the declines for zinc," he said.

Zinc fell below 50 cents per pound last fall and again early this spring, although in recent days, has been trading at about 80 cents per pound. Still, the current recovery in price doesn't match recent market highs of more than $2 per pound, achieved in late 2006 and early 2007.

Market prices for zinc play a big role in Alaska's mining industry, due mostly to the Red Dog mine in Northwest Alaska. It is operated by Teck Cominco and NANA Regional Corp.

Despite its remote location and seasonal shipping limitations, Red Dog is the world's largest zinc mine, both in terms of reserves and annual zinc production. Red Dog dominates Alaska's mineral production value, accounting for nearly 55 percent of the total value of Alaska's mineral production in 2008, according to the Alaska Mineral Industry report.

Red Dog also produces significant amounts of lead and some silver as a by-product.

Last year, the value of zinc produced in Alaska fell by half compared to 2007, based on the average price of 84 cents per pound for 2008, and a slight decrease in volume. Zinc production contributed $1 billion to Alaska's mining industry value in 2008, compared to $2 billion in 2007.

Lead also contributes significantly to Alaska's mining industry, with $287 million mined in 2008.

Greens Creek, a polymetallic mine in Southeast Alaska, also produces zinc and lead, and contributes to those statewide industry values. The underground mine is one of the world's largest producers of silver, a metal that contributed $219 million to Alaska's mineral industry in 2008.

Gold production was the only metal to increase in Alaska's mineral production value during 2008, compared to the prior year. Gold miners produced $695 million in 2008, compared to $511 million in 2007, an increase that reflects both higher metal prices and increased volume, according to the state report.

Value and volume for coal produced in Alaska also increased in 2008, according to the report, contributing $53.8 million in value to the state's mining industry.

While overall mineral production levels are expected to remain stable this year compared to last, the search for minerals to produce has dropped off substantially this year.

"Early stage exploration is at a virtual standstill with only small amounts being expended, sometimes at the minimum levels required to maintain the claims or an existing contractual obligation," Freeman said "Advanced stage projects, like Donlin and Pebble, are also cut way back, partly due to the fact that they don't have the big drill programs going on due to the need to work on other aspects of the projects."

Last year, exploration spending in Alaska totaled $328.6 million, down slightly from the state's all-time record of $329.1 million in exploration spending reported in 2007.

This year, that declines to about $125 million, Szumigala said.

"That sounds low, but it is the fourth largest cumulative spending year over 30 years of record keeping by DGGS," he said.

Pebble developers announced plans earlier this year to spend some $59 million, with the possibility of increasing the 2009 budget to $70 million, both well below last year's $140 million.

Donlin Creek spending has also decreased substantially this year from last year's $48.7 million budget, as developers prepare to begin the permitting project with state and federal regulatory agencies.

"Donlin Creek is a guess at this time. This is a major gold project, but hammered by logistical problems, lack of commercial energy (electricity), and a resulting formidable capital cost estimate," Hughes said. "A positive move of the gold price might get this project moving."

Donlin Creek likely will be developed as an open-pit mine, processing up to 60,000 metric tons of ore per day and producing more than 1 million ounces of gold annually over an estimated 20-year mine-life.

In addition to advanced exploration projects like Donlin and Pebble, a number of other mineral prospecting projects continue to advance this year, albeit at a slower rate than past years.

The real hit appears to be in early-stage exploration, Szumigala said.

"I expect grass-roots exploration to be way down and possibly claim staking will drop quite a bit compared to the last several years," Szumigala said.

While activity in that sector of Alaska's mineral industry has declined, it can create opportunity for new players looking for "organic growth," Freeman said.

"That is, acquisition and discovery of new deposits under your own steam. And the best time to do this is when prices are low and acquisition costs have come down from the ludicrous levels of 2006-2008."

His company is fielding more interest in new project acquisitions, he said, "particularly on projects where there has been a little drilling or something more than a concept. That sort of thing is good for us since that is where our primary expertise lies."