During the Alaskan winter, dawn is late to break. At 10 a.m., when the sky finally brightens, I get on a tractor driven by my guide Paul Gibson and we set off for a gold ore mining site. Moving through a particularly bumpy mineshaft, he tells me that this is the best one.
The temperature outside is minus 30 degrees. Even inside the mine, which has warm air pumped into it, it is minus 10 degrees.
It is late January, and I am visiting the Pogo gold mine, located 150 kilometers east of Fairbanks in the U.S. state of Alaska, and 230 kilometers from the Arctic. The mine is operated by Sumitomo Metal Mining Co. of Japan.
"Hold on tight!" shouts Gibson as we start down a steep slope with a decline of close to 40 degrees. The mineshaft spirals down into the earth and branches off frequently. It feels like an underground city, and there is a palpable feeling of losing your way.
A repetitive thudding noise became audible. A giant excavator, its arm extended with a drill on its end, was boring into the bedrock. It was so loud, everybody had to wear earplugs.
White veins of quartz were visible within the black rock. Therein lies the gold.
The miners drill 70 holes into the rock face, each 4.5 meters deep. The holes, packed with 450 kilograms of explosives, are detonated simultaneously, pulverizing the bedrock into chunks of ore measuring around 50 centimeters square.
Between 250 and 500 tons of ore can be extracted with each blast.
I picked up a piece of ore about the size of a baseball that was lying on the tunnel floor. I shined my headlamp on its quartz, but no golden gleam was visible.
One ton of ore typically contains only 14 grams of gold, making the precious metal invisible to the naked eye.
The ore is carried to the surface where a crusher reduces it to particles of 50 to 60 microns in diameter. The gold is separated through the use of centrifuges and chemicals. It is then conglomerated into nuggets refined to 94 per cent purity that weigh 30 kilograms, which are shipped to the United States for further refinement into pure gold.
Approximately 2,500 tons of ore are extracted from the Pogo mine each day. This equates to around 35 kilograms of pure gold, which at current rates is worth 1.5 billion yen ($18.26 million).
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The Pogo mine began operating in 2006. The price of gold is now three times what it was back then.
Gold is increasingly being bought as jewelry and as an investment, especially in emerging economies.
The global economic downturn triggered by the 2008 collapse of U.S. investment bank Lehman Brothers ignited fears of a slump in the value of the greenback and the euro, resulting in a sharp increase in purchases of gold as a "safe asset."
At the Pogo mine's staff cafeteria, employees are transfixed by economic news playing on a large-screen television. The price of gold, which reflects and fluctuates with global economic trends, has a direct influence on their own income.
The mine has a system where staff are paid a "gold bonus" in line with price of gold. When it exceeds a certain sum, an amount proportional to the excess figure is paid as a bonus.
Regardless of job type or status, it is paid every quarter. Given the current price of gold, each staff member can expect to receive 1 million yen annually in gold bonuses.
"I check the price of gold online everyday, too," says one employee.
The mine currently has a staff of around 310. Nine are Japanese and most are Americans, but there are also Filipinos, Puerto Ricans and Laotians who have green cards allowing them to reside in the United States.
They are only able to return to their families on weekends. Some stay in dormitories on site for close to a month at a time.
Alcohol is banned to avoid altercations among workers. Meal times are about the only source of recreation.
"If we don't pay 25 percent more than what they would receive on the American mainland, they wouldn't come to work here for a start," says personnel manager Tomas Brokaw.
Even after staff are recruited, it is difficult to secure sufficient labor to operate the mine at full capacity. This was the reason for introducing the gold bonus.
Including bonuses, the average employee is paid $160,000 (around 13 million yen) a year. That is almost double what was paid when the mine first opened. Staff turnover rate has also dropped off.
Turf war over ore veins; scramble for helicopters
In conjunction with the extraction of ore at Pogo mine, constant efforts are made to discover new veins.
Obtaining the services of helicopters is a constant headache for exploration manager Jiro Uesugi.
"We examine strata in places where there are no roads. Helicopters are indispensable for transporting boring equipment. However, in summer when we can carry out exploration projects, companies all over Alaska scramble for the available helicopters, so it's very difficult to secure them."
With the rise in the price of gold, gold mine development has heated up around the world.
During the four years from 2007, the total amount of confirmed global gold reserves increased by 20 percent to 51,000 tons.
In Alaska, geological investigations in recent years have pointed to the possible existence of several promising untapped gold veins. This has drawn the attention of mining companies from around the world, and competitors of all sizes are pursuing development.
Even mines that ceased operations in the 1990s when the price of gold fell have become profitable again and roared back to life. With the inclusion of precious metals other than gold, exploration projects are being carried out in at least 60 locations within Alaska.
"Places all over the state are becoming mining zones. It's a turf war," says Toshihito Toyoshima, president of Sumitomo Metal Mining Pogo.
Mines become lucrative when a substantial vein of ore can be exploited. According to a British research firm, the cost of producing gold in 2010 was around half of what it sold for, even when factoring in mine development costs.
In the case of Sumitomo Metal Mining, the costs of its mine development operations, including copper and nickel, are equivalent to 20 percent of its earnings, and the remaining 80 percent is profit.
However, the risks are great. It is an industry where the odds of successfully commercializing a mine are said to be three in one thousand.
Japanese mining companies are small in global terms. The world's top 10 mining firms are from countries with rich mineral deposits: Canada, South Africa, the United States and Australia. There are no Japanese companies among them.
Toronto-based Barrick Gold Corp., the world's largest gold mining company, produces 240 tons annually. This is 12 times that of Sumitomo Metal Mining's output. As a company's financial power grows, it becomes possible for it to finance development costs itself, which gives it a monopoly on the rights to a mine. By adjusting the amount of gold produced, a company's ability to influence the price of gold also increases.
According to an executive with a Japanese mining company, "Promising mines are already being snapped up by foreign companies, and not just gold mines either."
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