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Arctic ice melt opens up untapped areas for oil, ore

Houston Chronicle: Global warming spurs new rush

Arctic ice melt opens up untapped areas for oil, ore
By HUGO MILLER
April 19, 2008, 12:47AM
Bloomberg News

The U.S. Air Force used the Fox Three gravel airstrip on Canada’s Baffin Island to monitor Arctic skies for Soviet bombers during the Cold War. Today, Ken Leigh flies ore samples from the site as his company prospects for gold on land that’s freer of ice because of global warming.

“There are parts that haven’t been explored,” says Leigh, chief executive officer of Vancouver-based Commander Resources, referring to the Canadian territory Nunavut, which includes the island. “The frontier is opening up.”

The melting of Arctic ice has increased access to a region that holds as much as a seventh of the world’s untapped oil and gas, according to the U.S. Geological Survey, as well as gold and iron ore deposits. At the same time, record prices for gold and oil and a surge of as much as 71 percent in the value of iron ore this year have made exploring more attractive for companies such as BHP Billiton, Teck Cominco and Royal Dutch Shell.

The new rush for minerals in the far north is reversing an exodus of the early 1990s. Then, metals prices were as little as a quarter of today’s values, and mining companies abandoned Canada to seek higher returns and lower costs in South America and Indonesia.

Global warming, while making increased exploitation possible, also threatens environmental disasters such as drought and flooding. Tapping the resources will require moving heavy machinery and fuel-laden ships into fragile ecosystems. The potential for oil spills, air pollution and damage to animals and plants has already sparked lawsuits and led Royal Dutch Shell to scale back operations that could have harmed wildlife.

“The Arctic is an area of tremendous potential, which is why everybody’s interested in it,” says Brenda Pierce, who manages the energy resources program of the U.S. Geological Survey. “It’s also an area of environmental sensitivity, and there’s great risk in terms of developing it.”

Cashing out will require perseverance and deep pockets, says Donald Coxe, who helps oversee $21 billion at a Chicago-based unit of Bank of Montreal.

“If there is a gold rush and people find oil and other new minerals, more power to them,” says Coxe, a commodities specialist who in 2003 correctly predicted a “multiyear rally” for mining stocks. “My grandfather was the only missionary in the Klondike region, and remember, more people that wound up there went broke than got rich.”

Arctic sea ice shrank to the smallest area on record last year, 1.2 million square kilometers less than the previous minimum in 2005, according to the National Snow and Ice Data Center in Boulder, Colo.

That’s an area roughly the size of Texas and California combined.

Commander Resources is drilling gold samples at its Baffin Island site, 124 miles north of the Arctic Circle, in collaboration with Xstrata and BHP Billiton.

Better access from global warming combined with a 34 percent climb in gold in the past year and a 71 percent surge in uranium over two years make “frontier mining more attractive,” Commander Resources CEO Leigh says.

“Now people are coming back to Canada.”

http://www.chron.com/disp/story.mpl/headline/biz/5713951.html

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