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ANCHORAGE - Alaska mines produced $3.4 billion worth of minerals last year, an 18 percent increase over 2006 and a record in gross value for the state.

Also, exploration firms spent $329 million to drill and study undeveloped mineral prospects - 84 percent more than 2006. Roughly half was spent on the Pebble copper and gold prospect in southwest Alaska.

The figures were released in a report, "Alaska's Mineral Industry 2007," published by the state Division of Geological & Geophysical Services.

State officials do not expect the mining industry to break financial records in 2008.

The price of zinc, gold and other minerals soared in 2007 amid strong demand from China and India. However, with the U.S. economy slumping and China growth slowing, the price of many metals has plunged.

Lower metal prices also are expected to curtail exploration and reduce state and local tax revenue from mines.

High metal prices and increased production drove up the gross value of state output.

The value of zinc, the state's most valuable mineral commodity, has been worth $2 billion for two years running. However, gold production was up.

Gold production more than doubled at the new Pogo mine 52 miles east of Delta Junction.

Overall, the value of the gold produced at Alaska mines last year was $511 million, compared to $344 million in 2006.

Mining became costlier last year, mostly because of high fuel prices, said David Szumigala, a state geologist. Many of Alaska's remote mines are powered by diesel generators. The cost of running the generators rose significantly, biting into profits, he said.

As a result, the mining industry ended up paying less in state and federal taxes in 2007 than 2006, when fuel was cheaper, Szumigala said.

In 2006, the mining industry paid $172 million in state and local taxes. In 2007, it paid $142 million, according to the report.