Gambling at its finest.

Junior mining companies search Alaska's hills and hollows in hopes of finding heaps of gold. When they do, a hook is set that is sure to snag major mining companies and financial backing.

The little guys are making big discoveries in Alaska's gold fields. True North, Pogo and the Bonnifield District are three of the most promising mineral prospects in Interior Alaska today, with millions of ounces of provable gold reserves. They weren't discovered by one of the big mining firms currently working in Alaska, but by a different category of prospector: a junior mining company.

According to Steve Borell, executive director of the Alaska Miners Association, Alaska's juniors are relatively new firms with incredible depths of experience despite their lean staffs. About three dozen companies are currently doing business in Alaska, the largest of which are Grayd Resource Corp., Golden Phoenix Minerals Inc., La Teko Resources Inc., Ventures Resource, and North Star Explorations. All together, junior mining companies are adding a new dimension to the state's resources industry, Borell says.

It's All About Stock

The juniors are typically listed on the Canada's Vancouver and Toronto stock exchanges and finance their explorations through stock sales. The companies take proceeds from the share sales and seek out properties with known mineralization with the hope of expanding the deposits to the point that one of the larger companies will come in and develop it, thus increasing the value of the company so stockholders will make money. The juniors typically retain a percentage of the operations through joint ventures.

"They're not mining themselves, but are trying to bootstrap themselves onto the bigger operations so they can raise more money for exploration," Borell says.

A textbook example of this process is La Teko Resources' exploration of the True North site, about 15 miles northeast of Fairbanks. The Vancouver, British Columbia-based firm operated the Ryan Lode mine on the western edge of Fairbanks through the 1980s, producing 20,000 ounces of gold. But the company ran out of ready gold reserves and cash, and started looking for another property that would complement its holdings, says Gerry Carlson, La Teko president and CEO.

"Part of the difference is in the way they operate," Borell says. "They need to make public what they're finding. They tell the world about it because they need to raise money. This is opposed to the major companies who would just as soon keep quiet."

La Teko's Right Move

The juniors' "we find it, you mine it" process provides an edge in the competitive resources exploration field, according to Carlson.

"The juniors can often react more quickly to opportunities (than the larger companies)," Carlson says. "They tend to be greater risk-takers. It's quite a competitive business."

Steven Craig, an exploration geologist for Golden Phoenix explains further: "A big company is like a big ship," says Craig, who is also vice president of corporate development for the Reno, Nev.-based company. "It takes a long time to turn it and load it and unload it, whereas a small company is quicker to respond.

"One benefit the juniors have is a lean, experienced management," he adds. "They have gained a lot of experience by working with very large and middle-sized mining companies who essentially left for greener frontiers."

In the case of La Teko, quick response and experienced management paid off. One of the major mining companies did initial exploration work on True North, but decided reserves were too small and sold their property interest. La Teko geologists looked at the area and realized the deposit was more significant than previously believed, so they acquired the rights to the property in 1993. Within a year, La Teko realized they were on top of a potentially major find.

In 1994, La Teko entered a joint venture to develop True North with Newmont Gold, the world's second largest gold mining company. Newmont controls 65 percent of the project, which covers nearly 17 square miles, and is working on a $6.3 million feasibility study.

Further exploration uncovered a recoverable resource of 1.3 million ounces of gold with an average grade of .072 ounces of gold per ton, although some areas were graded as high as 0.314 ounces of gold per ton. In comparison, the average grade of gold ore at Fort Knox, five road miles from True North, is .025 ounces of gold per ton.

"La Teko's been very fortunate," Carlson says. "The odds against successful exploration are staggering and when you do have a win, it's something you enjoy very much because they don't come along that often."

Is that changing?

Alaska's Golden Frontiers

Companies are taking a closer look at Alaska in the 1990s. In 1995, three world-class, hard-rock mines were commissioned: Fort Knox by Amax Gold near Fairbanks; the Nixon Fork gold/copper mine near McGrath; and the Illinois Creek gold/silver mine, also near McGrath.

Dubbed as the "new frontier" for mining exploration, Alaska is making headway as a leader in the industry. The reason: like in real estate, successful mining exploration relies on three things: location, location, location.

"Until recently, Alaska has been ignored," Craig says. In Alaska, things are still sticking out of the ground waiting to be discovered. You still have to get out there and break a lot of rocks."

Golden Phoenix and Grayd Resource have each staked claims to thousands of acres of property in a known mineralized area on the north edge of the Alaska Range in the Bonnifield District. The region has been worked by placer miners since 1903. Both juniors are conducting extensive drilling operations and believe the area shows great potential.

Ventures Resource recently completed its second year of mineral exploration in Alaska with promising results. The Morristown, N.J.-based company's holdings include land near two of Alaska's newest gold discoveries: Placer Dome's Donlin Creek north of Crooked Creek near the Kuskokwim River, and Sumitomo-Teck's Pogo deposit northeast of Delta Junction.

Samples from the Carrie Creek project on the western edge of the property (which is nearest to Pogo) have returned assays greater than 1 ounce of gold per ton, according to Ventures Resource's most recent exploration update to shareholders. In addition, several soil, stream sediment and rock samples assay greater than 0.03 ounces per ton. Work is just beginning on these parcels, however.

Every prospect requires drilling 100 or 900 holes, Craig says. Then, every drill hole must be studied and analyzed. Once the drilling is done, engineering and feasibility studies get under way.

Although satellites and computers make the process faster and more efficient, finding the "mother lode" still boils down to precise, painstaking work.

"Usually the time frame from actually finding mineralized outcrops through drilling, analyzing and feasibility studies, then through permitting, can take from three to four to eight to 10 years before there's any economic value returned from the deposit," Craig explains. "In other words, it's 'can you make money from this prospect?' and if so, 'how much money?'"

The low price of gold and a corresponding slump in resources stock have also hit the juniors. La Teko closed its nine-person office in Fairbanks in 1998 because of a lack of cash flow. But as a whole, the juniors are weathering the downturn.

"There's always someone who wants to invest in companies that have a future," says Golden Phoenix's Craig. "These groups of investors literally fund the start up of a company, and if the company is good enough they can develop a small mine and generate cash flow and make a profit. The they find another prospect and develop it and make money for the company and its shareholders.

"It's gambling at its finest."