Arctic has great riches, but greater challenges (Reuters)

IQALUIT, Nunavut/BAKER LAKE, Nunavut (Reuters) – At the rim of the Arctic Circle in Canada, gold mining firm Agnico-Eagle is learning how tough it is to operate in a remote region with temptingly large, but frustratingly inaccessible, reserves of oil, gas and minerals.

Commentators rarely mention nightmarish logistics, polar bears and steel-snapping cold when they confidently predict that as the Arctic warms up, melting sea ice and shorter winters will open up the expanse to exploration.

But the rosy words obscure the reality of working in an icy wasteland that stretches across Russia, Scandinavia, Alaska and Canada. And rather than making life easier, the warming of the Arctic and the thawing of its permafrost could make operating here even more complicated.

A closer look at the far northern Canadian territory of Nunavut, one of the most promising areas for exploration, reveals challenges so huge that the Arctic may well turn out to be a niche market where big firms with a serious tolerance for risk and adversity develop a handful of major deposits.

For all the talk of a bonanza there is just one mine working in Nunavut today - Agnico-Eagle's Meadowbank operation, which has cost a total of $1.5 billion so far. The gold mine, literally in the middle of nowhere, is surrounded by dikes that keep a series of shallow lakes at bay. Temperatures plunge to minus 50 degrees centigrade (minus 58 Fahrenheit) in winter, bringing with it the risk of almost instant frostbite and mechanical failures.

Most workers have to be flown in, as long as the often foul weather cooperates. The only land access is a gravel road the company built to Baker Lake, a small town 70 miles to the south. The road - which was supposed to cost $275,000 a km to build - came in at $550,000 per km.

It's no surprise that Agnico-Eagle chief executive Sean Boyd concedes such projects are not for the faint of heart.

"With assets up here in the north, you need big tonnage operations, you can't have a small footprint given the cost structure," he said.

SHORT SHIPPING SEASON

There is virtually no infrastructure in Nunavut, a 810,000 square mile (2 million square km) expanse of rock and ice twice the size of western Europe. Dotted across the territory is a largely unskilled aboriginal Inuit population of just 33,000.

Heavy equipment, spare-parts and diesel fuel all arrive during a short summer shipping window, first by barge and then along that costly road.

"It's hard to believe we are in the geographic center of Canada, because simple things like parts for an emergency breakdown have to be flown in," said Agnico-Eagle's President Ebe Scherkus. "What the last 16 months has taught us is there's long-term planning and then there's very long-term planning on a site like this."

In March, a fire destroyed the kitchen and forced the firm to evacuate over 300 employees and operate the mine with a skeleton crew. A new multimillion dollar kitchen will arrive later this summer.

Such travails help explain why Nunavut was for so long an insignificant player, although there are other problems too.

The harsh climate closes down many exploration sites from October to March. Polar bears prowl and snowstorms slash visibility. There is little or no sunlight for three months a year in the far north and low winter temperatures mean metal starts to snap, oil thickens and helicopters stop flying.

Even in the summer months, the weather can be a challenge for pilots. A First Air Boeing B-737 jet crashed near the Nunavut settlement of Resolute Bay on Aug 20, killing 12 people. Eyewitnesses said the area had been foggy at the time.

And if that was not enough, companies will need to work out how to access their sites in warming weather, and how to cope with the gradual thawing of the permafrost, the frozen layer of soil that sits about two meters under the surface.

"We know how to build on permafrost, we know how to build on non-permafrost. What we don't know how to do is build on permafrost that will thaw," said University of Ottawa professor Antoni Lewkowicz, a leading permafrost expert.

SOFTENING PERMAFROST

In parts of the Canadian and U.S. Arctic, buildings are already starting to collapse and roads crumble as the frozen ground warms up.

Yet for all the challenges, high commodity prices are persuading companies to look again at deposits which were once too expensive to exploit and there is something of an exploration boom. Companies spent C$30 million ($30.6 million) on exploration in Nunavut in 1999, a figure that is set to hit C$325 million this year.

Nunavut has significant advantages over its Arctic rivals such as Russia, Alaska and Norway -- land tenure is secure, the politics are stable, the territory is vast and has a nicely varied geology.

"It is what we like to call in exploration elephant country," said Brooke Clements, president of junior mining firm Peregrine Diamonds. "There's still the potential to find really big world class deposits."

Yet geological mapping is grossly inadequate and prospecting from scratch so costly that it's hard know what riches Nunavut may still be hiding.

Peregrine found a promising series of diamond-bearing kimberlite rock formations near Iqaluit after three summers of collecting up to 30 soil samples a day by helicopter, at the cost of C$1,000 per sample.

The federal government, keen to kick-start development, has launched a project to examine 20 relatively small areas deemed to have potential, and then release the data.

"We find a haystack and industry finds the needle," said Linda Richard, the project coordinator. That said, most of the major deposits now under consideration have been known about for decades.

Along with Peregrine and its joint venture partner BHP Billiton, Xstrata, ArcelorMittal, Areva, Newmont and China's MMG are variously pursuing gold, diamonds, iron ore, lead, zinc and uranium in Nunavut.

STAGGERING SUMS NEEDED TO START PRODUCTION

Still, the amount spent on exploration is tiny compared to the staggering sums needed to start production. Newmont has spent $2 billion so far on its Hope Bay gold deposits in western Nunavut and there is no guarantee a mine will ever be built.

Baffinland, owned 70 percent by ArcelorMittal, is proposing to invest C$4.1 billion on a 149 km railway and two ports - not to mention a special fleet of huge ships - to exploit the huge Mary River iron ore deposit on Baffin Island. This is slated to produce 21 million tons of ore a year for 21 years.

The message is clear: Nunavut is not the place for small fry.

"It is inherently the case that operating in the North ... is more expensive and so it's generally the larger organizations that can take on those green field developments," said Baffinland president Tom Paddon.

Baffinland's proposed railway is in an area of relatively cold permafrost, but that could change.

"They certainly have to be taking climate change into consideration ... It's not a terribly warm place but the potential is that it could become a great deal warmer in the next century," said Lewkowicz.

"There's a real economic question, as well as a science and engineering question, associated with building on permafrost that if not going to thaw, is at least going to warm."

One solution is to drive piles deep into the frozen layers to support roads, buildings and railways. The other is to install a series of costly thermosiphons, giant special coolers that help keep the ground firm.

"The economics of a mine up here are a lot different than the economics of a mine somewhere else down south," said Bernie MacIsaac, head of Nunavut operations for the federal Aboriginal Affairs and Northern Development ministry.

SUMMER SWAMPS

The warming climate will also hit drilling firms, which produce samples that determine if a mine is built. Permafrost is covered in a layer of soil that can quickly turn to swamp in summer, making it hard to operate tracked vehicles or move around without using helicopters.

"The warmer it gets, the tougher it gets ... For every dollar you spend on drilling you spend two on helicopters," said Francis McGuire of Canada-based Major Drilling, one of the world's largest drilling firms.

"We like things for us to be fairly cold because we want things to freeze ... We want a bit of snow, particularly on ice, because a bit of snow will insulate the ice, but we don't want a lot of snow because then we can't move."

Although snowfall could increase as temperatures rise, Nunavut is currently so dry and cold that the average snow cover is only around 2 feet (0.6 meter) in winter, when frozen lakes and rivers can be turned into ice roads for the heavy trucks that supply the mines.

One such road, stretching 370 miles to the Diavik and Ekati diamond mines in the Northwest Territories and then to the abandoned Jericho diamond mine in western Nunavut, costs around C$35 million a year and operates for around eight to 10 weeks.

A warming Arctic could shrink the season and drive up costs. Indeed, one reason given for Jericho's closure in 2008 was the unusually short life of the ice road in 2006, which meant some equipment had to be flown in. The University of California predicts that by 2050, increasing temperatures mean Canada could lose nearly 155,000 square miles (400,000 square km) of land accessible by winter road, an area slightly larger than Germany.

"With the ice melting and thinning and forming fewer months throughout the year, that could cause serious, serious nightmares for exploration in the North," said Benoit Beauchamp, who heads the Arctic Institute of North America at the University of Calgary.

And global warming will not necessarily help shipping. At the top of the world lies a permanent ice cap which is continually trying to force chunks of rock-hard permanent ice down into shipping channels. A large ice plug currently blocks the way but if it were to melt there would be nothing to stop icebergs from moving south and tearing holes into ships.

A more immediate threat is the almost total lack of infrastructure in Nunavut, which has no major ports and only one public road of any length. The departure lounge at Iqaluit's tiny airport is basically a large room and when three flights leave at the same time, as they do most afternoons, the result is mildly chaotic.

Other crucial services are also lacking. Some survivors from the recent crash in Resolute Bay had to be flown to a hospital in the federal capital Ottawa, some 2,100 miles to the south.

WANTED: PORTS, ROADS AND AIRPORTS

"It's ludicrous when you really look at the lack of resources or infrastructure that we have," grumbled Nunavut Premier Eva Aariak. She wants more help from the federal government, which in turn cites financial constraints as well as the lack of a formal land use plan for Nunavut.

After 17 years of negotiations, a draft might be ready later this year. Things move slowly in the North.

Companies gripe about a complex regulatory regime that means it can take years to get approval for projects. The Inuit, torn between the urgent need for jobs and a desire to protect the environment and wildlife they rely on for food, have an effective veto over most development.

Firms wanting to open a mine often have to strike special agreements with the Inuit, typically to cover compensation for environmental disturbances and offer guarantees of employment.

"The upfront capital costs of working in Nunavut for a mining company are very, very high," said Chris Hanks of Newmont. "Are those agreements going to make or break projects? Probably not. But do they figure into the bigger range of economics that do make or break projects? Yes."

Nunavut would not start making real money from royalties until it struck oil. That day seems decades away, even though the U.S. Geological Survey estimates the Arctic as a whole contains 22 percent of the world's undiscovered, technically recoverable resources of oil and gas.

The one area of Nunavut known to contain energy reserves is in and around the ice-clogged waters of Ellef Rignes island - a slab of rock in the far north with the worst weather in Canada.

"It's a terrible place to get to ... It's a bad location; it's just a really difficult place to work," said Keith Dewing, who leads a team of government scientists studying where the most promising energy reserves might be.

"Our level of understanding up there is just not all that great in so many areas ... If someone came to you and said 'Hey, is there a resource there?,' it's embarrassing but you have to say 'You know what? I'm really not sure.'"

Even if oil were discovered in large quantities, it might never be extracted. A spill the size of the Gulf of Mexico disaster would be far tougher to handle, given the lack of infrastructure, the weather and the impact on wildlife which the Inuit rely on.

The Nunavut government, which is keen to develop the economy to help ease serious social problems among the Inuit, seems almost bemused by commentators linking climate change to a surge in mining activity.

"Most of the word that's out there is from (people) who have never visited Canada, (they) say that 'The ice is melting, the ice is gone'. Nothing is going to happen for many years yet ... I've got to say we're quite happy with what's happening now," said Peter Taptuna, minister for economic development.

(All figures U.S. dollars unless otherwise indicated)

(Writing by David Ljunggren; Editing by Cynthia Osterman and Claudia Parsons)

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Black economic gains reversed in Great Recession (AP)

BALTIMORE – Growing up black in the segregated 1960s, Deborah Goldring slept two to a bed, got evicted from apartment after apartment, and watched her stepfather climb utility poles to turn their disconnected lights back on. Yet Goldring pulled herself out of poverty and earned a middle-class life — until the Great Recession.

First, Goldring's husband fell ill, and they drained savings to pay for nursing homes before he died. Then Goldring lost her executive assistant job in the Baltimore hospital where she had worked for 17 years. The cruelest blow was a letter from the bank, intending to foreclose on her home of almost three decades.

Millions of Americans endured similar financial calamities in the recession. But for Goldring and many others in the black community, where unemployment is still rising, job loss has knocked them out of the middle class and back into poverty. Some even see a historic reversal of hard-won economic gains that took black people decades to achieve.

Goldring remembers her mother taping the blinds to the wall so no one could see them stealing electricity. She remembers each time she sat on the curb with her three brothers, surrounded by her family's belongings, waiting for a new place to live. Sitting on those curbs, she promised to always pay her bills on time.

Now, after finding herself poor again, "the only word I can say is devastated," says Goldring, 58.

"For me to live that life we were so comfortable in, we never had to worry about finances, we always had money where I can help my kids and my grandchildren — to go to calling my daughter to borrow $100 because I can't pay a bill ..." Goldring's voice trails off as she struggles to hold back tears.

Economists say the Great Recession lasted from 2007 to 2009. In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households, according to an analysis of Federal Reserve data by the Economic Policy Institute. By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median black net worth had fallen 83 percent to $2,170, according to the EPI.

Algernon Austin, director of the EPI's Program on Race, Ethnicity and the Economy, described the current wealth gap this way: "In 2009, for every dollar of wealth the average white household had, black households only had two cents."

Since the end of the recession, the overall unemployment rate has fallen from 9.4 to 9.1 percent, while the black unemployment rate has risen from 14.7 to 16.2 percent, according to the Department of Labor.

"I would say the recession is not over for black folks," Austin says. He believes more black people than ever before could fall out of the middle class, because the unemployment rate for college-educated blacks recently peaked and blacks are overrepresented in state and local government jobs that are being eliminated due to massive budget shortfalls.

Maya Wiley, director of the Center for Social Inclusion, says the anti-discrimination laws passed in the 1960s took decades to translate into an increase in black economic security — and that was before the recession.

"History is going to say that the black middle class was decimated" over the past few years, Wiley says. "But we're not done writing history."

___

Goldring was born and raised in Baltimore, and her mother was single for much of Goldring's childhood. At 16, she dropped out of school and went to work cleaning hotel rooms.

"That's when I first met white people. Some of them would stay a month at the hotel. They would have all their children with them," she remembers. "I thought, one day I'd like to hang out at a hotel."

She didn't know any middle-class people in her all-black neighborhood. "Where we lived, everyone struggled. We just struggled a little harder," she says. "If the lights stayed on for a whole year, if we didn't get put out, I thought we were doing really, really well."

At 21, pregnant with her second child, Goldring decided to get her GED. Then she went to community college, got a degree in secretarial work, and began a career.

She met her husband in 1983. He had a steady job as a heating and air-conditioning installer, and owned a brick two-bedroom home in Morgan Park, a leafy, integrated neighborhood.

With two incomes, money was not a problem. He liked to travel. She had never been out of Maryland.

"I thought, `Is this how rich people live?'" Goldring remembers. "From where I was to where I ended up, it was way different."

Her husband had been married before. As a condition of the divorce, his daughter's name was added to the deed of the house. After Goldring's husband died in 2007, Goldring took out a 30-year fixed-rate mortgage, with a 6.5 percent interest rate, to purchase the house outright.

Everything was fine until her hospital "restructured" in 2009. Her boss, a senior vice president, was transferred to the corporate office. Executives were now sharing secretaries. A few months later, they let Goldring go.

No more family vacations. No more trips to the mall. No more filling the grocery cart.

But what Goldring misses the most is her checkbook. Her unemployment payments arrive on a debit card.

"Just being able to pull out my checkbook and pay a bill, even though there might not be much left in there," she says. "I really miss that checkbook with my name on it."

___

Last April, black male unemployment hit the highest rate since the government began keeping track in 1972. Only 56.9 percent of black men over age 20 were working, compared with 68.1 percent of white men.

Chris Wilder, a Philadelphia journalist, lost his job in 2008 as the media industry suffered huge losses. Unemployment benefits amounted to about one-third of his salary. Ever since they ran out, his income has been near zero, other than sporadic freelance work.

If not for a policy in his apartment co-op to assist people who lose their jobs, "I might be living with my mother," he says.

He has felt depression and anxiety. He's gone from a six-figure salary to having to check his balance before using his bank card. "I miss being able to go into a store and go off budget," he says. "Now, when I go to shop for something, I have to stick to exactly what I came to get. I never have money to buy anything else."

Wilder, 43, grew up solidly middle class, the son of a newspaper editor and a college administrator. Now the single parent of a 15-year-old, he has managed to keep his son in cleats and baseball camps, but thoughts of dying poor have crept into his mind. All of his savings are gone.

"It's definitely harder for black people to get jobs," Wilder says. "With the economy as bad as it is, people are hiring nephews and family friends and friends of friends. It's hard for black people to break that cycle. We don't own or even run the big companies."

"It's hard to keep jobs as well, because they're gonna `last hired/first fired' you," he adds.

Wilder isn't giving up on finding a job in his field, "but I should."

"I call everyone. I send resumes. It is extremely rare that I get a call back," he says. "When I was growing up, I never imagined there would be a time when I was out of work for three years."

College-educated blacks fared worse than their white counterparts in the recession. In 2007, unemployment for college-educated whites was 1.8 percent; for college-educated blacks it was 2.7 percent. Now, the college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks.

"I've definitely played by the rules," Wilder says.

He's not desperate enough to break the law, but "I see why people become drug dealers."

___

Horace Davis did become a drug dealer. He illustrates another dimension of the recession's impact on blacks: While law-abiding folks are falling out of the middle class, those who got in trouble with the law are further than ever from a second chance.

After serving four years for drug trafficking, Davis walked out of prison into the middle of the recession in 2008. "I thought to myself, I'm older, I need to get a job, move on. The dope game was dead to me," Davis says, sitting on a concrete porch in an Asheville, N.C., housing project.

In the past few decades of the "War on Drugs," harsh drug sentencing laws have sent a disproportionate number of black people to prison, even though blacks are not more likely than whites to sell or use drugs, according to a 2008 report by the Sentencing Project. Today, about 280,000 African-Americans exit prison each year. They are often the last of the last to be hired.

After Davis got out, he spent months applying for dozens of jobs mopping floors or flipping burgers. He carried a letter from the state offering a $2,500 tax credit for hiring ex-offenders. He got one call back, from a chicken restaurant. "We'll be in touch," Davis remembers them saying. They weren't.

"Nobody wants black felons in their businesses," says Davis, 26.

A 2003 University of Chicago study by Devah Pager sent young white and black "testers" to apply for real low-wage jobs. Some of the testers were randomly assigned felony convictions. The study found that whites with felonies were slightly more likely to get callbacks than black applicants without criminal records.

"The penalty of a criminal record is more disabling for black job seekers than whites," Pager and other researchers wrote in a follow-up study in 2009.

Davis says he learned skills in prison: "How to cook, clean, horticulture, janitorial. I can do it. I've been trained. Tile, carpentry, mortar, edging and trimming, all that. I can operate a backhoe, a roller. Any opportunity to do something that would show my talents, I'd do it. It would be my ticket out the streets.

"I just need someone to give me that chance. A nice construction job, anything. I would hold onto that until I die."

Some economists say the real black unemployment rate is as high as 25 or 30 percent, because government figures don't count "discouraged" workers who have stopped looking for jobs and dropped out of the labor force.

Davis now falls into that category — partly due to societal forces and partly, he knows, because of his own bad decisions.

Recently, police said they caught Davis with a half-ounce of marijuana. His trial date is approaching. As a habitual felon, he could get a 10-year sentence.

___

Some see a bitter irony in soaring black unemployment and the decline of the black middle class on the watch of the first black president.

"I thought Barack Obama could have provided some way out. But he lacks backbone," Princeton professor Cornel West told truthdig.com recently.

He said Obama had sold out the poor and become "a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats ... I don't think in good conscience I could tell anybody to vote for Obama."

Yet many jobless blacks do not blame their plight on the president.

"I have no problem with Obama when I look at what the alternatives are," Wilder says.

Goldring doesn't think Obama is doing a bad job either. "The unemployment situation is not the best, but I don't think it has a lot to do with him," she says. "Fixing this economy, it's going to take time.

Wiley, the Center for Social Inclusion director, says Obama should be applauded for several initiatives that have helped the black middle class, such as programs to modify certain mortgages and forestall foreclosure due to job loss.

She would have liked Obama to aggressively counter the suggestion that first black president would be showing favoritism if he specifically helped black people.

"It's the right thing to do for the nation," she says. "Black people are a huge segment of the population, they're especially hard-hit, and the country cannot recover if the black community — as well as the white community and others — does not recover."

___

Black homeownership hit an all-time high in 2004, with 50 percent of African-Americans owning their homes, according to census data.

Today, the black homeownership rate is 45 percent, compared with 74 percent for whites. Nearly 8 percent of African-Americans who bought homes from 2005-2008 have lost them to foreclosure, compared with 4.5 percent of whites, according to an estimate by the Center for Responsible Lending.

Goldring remembers that when she got a foreclosure notice from the bank, "I bawled."

Her son, Chris Fredericks, says she was "vulnerable, more than I have ever seen her, but she still kept moving."

He was incredulous that his mother was in such a position. "At any point, you can slip back. It's just the way the economy is going," he says. "Once you get into a spiral, there's no telling how far down you could go."

One day, at a counseling session on how to prevent foreclosure, Goldring learned about a new Maryland program that offered help to people who were behind on their mortgages due to layoffs or medical bills.

She thought it was too good to be true. It wasn't.

The Emergency Mortgage Assistance program, financed by federal money, offered a zero-interest loan of up to $50,000. The money would pay off up to a year of back mortgage payments, plus up to two years of regular payments. All Goldring had to do was pay 31 percent of her current gross income, or the full mortgage payment if she got a new job close to her original salary.

And so on a sweltering June day, Goldring stood before a podium in her freshly mulched back yard, flanked by a congressman, the mayor, the lieutenant governor, and other officials. The sound of chirping birds filled the air. Cameras rolled as the dignitaries told Goldring's story, using her as an example to spread word of the Emergency Mortgage Program to other struggling homeowners.

"I want to thank you for your courage," said the lieutenant governor, Anthony Brown.

"I know you did everything right," Brown said. "You worked hard, you saved diligently, but challenges never overtaking our will sometimes overtake our wallets."

Goldring stood in front of the microphone and exhaled.

"After this," she said, "the only good thing would be to be employed, once again."

___

Jesse Washington covers race and ethnicity for The Associated Press. He is reachable at www.twitter.com/jessewashington or jwashington(at)ap.org.

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