Industry Focus: Mining

Mining in Nevada is an industry that has been thriving despite the economic instability of the past several years.
Jim Faulds, Nevada Bureau of Mines & GeologyMary Korpi, Newmont Mining;
Dan Rockwell, Soil-TechTim Crowley, Nevada Mining AssociationMark McVeigh, City National Bank

Mining in Nevada is an industry that has been thriving despite the economic instability of the past several years. Nevertheless, the industry still faces many challenges ranging from public perception and workforce outlook to restoration and regulatory delays. Mining executives representing companies from the industry recently met at the Reno offices of City National Bank to discuss these issues and what the future of mining holds.
Connie Brennan, publisher and CEO of Nevada Business Magazine served as moderator for the event. These monthly roundtables are designed to bring together leaders to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.

What mining projects are in the pipeline?

Tim Crowley: There’s a lot of exciting things out there. There’s always development in the precious medals market, even when there’s a fluctuation in the value like we’re seeing now. Gold is down roughly 20 percent this year, yet for a mining company to survive they’ve got to keep on developing. We still have some great projects in the precious medals industry, but in addition to that there’s molybdenum being developed in Eureka County and vanadium in Eureka County. Vanadium’s used as an energy storage metal that can store massive amounts of energy. There’s copper being developed in Yerington and lithium being developed in Humboldt County. Big producers are expanding in various directions and have developments that they’re still proving out. Allied Gold is an old historic mine that’s been redeveloped. They’re looking very bright for the future. The list goes on and on. We’re moving forward and have a bright future.

Mary Korpi: Long Canyon [in northeastern Nevada] is a totally new deposit that was discovered by another company a couple years ago. We are optimistic that by 2015 we’ll be in construction, some gold out the door by 2016, and be in full production in 2017. It’s an area that has not had any historic mining at all. We continue to do a lot of exploration to find the extent of what that deposit will look like. You develop, you explore, you build it and it’s probably $2.5 billion before you get one ounce of gold out the door. You have to start paying that back and then continue to grow the business plan. That’s really the part of the business itself that is very capital intensive, there’s a risk associated.

How big of an issue is staffing?

Crowley: We have attrition issues right now. I think we lost a couple decades of appropriate recruitment of engineers into the industry. High school students that say, “I want to be an engineer,” were more inclined to go civil and less inclined to go into the mining industry. That’s starting to change and I think young Nevadans are starting to appreciate what a versatile, attractive industry this is. There’s nothing static about the mining business. Every day it’s a new challenge. We’re creating the types of jobs that Nevada needs, but we’ve always had a hard time convincing young people that it’s a great career path.

Korpi: Electricians, mechanics and diesel mechanics - these trades are always in demand. Scholarships are offered by all the mining companies. They go into the program and they come out and are almost guaranteed a job. You’ve got that ongoing need and, as a skill, that can carry over to just about any field. UNR has been really good about working with the various levels of professional staff and engineers that we need. Many of the different mining companies actually sponsor chairs within the university. They’ve been able to expand their mining programs and their metallurgy programs. That’s been a great partnership and it’s helped to fill a lot of the gap that we’ve seen as far as the technical end of it. A good relationship between the university systems has really been beneficial for the industry. The other area [that we’ve recruited from] is veterans. Many veterans come back with skills that apply to what we can utilize in our industry. They’re used to a 24-hour work environment, and they’re used to working in rural communities. That’s been a real good fit, hiring some of our local vets back into the system and we’re all proud of that. You’ve got to look at that total package but it’s a consideration because we want someone who is going to come in and fit since there’s a cost incurred with bringing people into the organization. You want people to enjoy where they live and take some ownership and involvement.

What economic impact does mining have on the state?

Mark McVeigh: Mining is a giant piece of this economy. Once you hit Lovelock, you can see there wasn’t a giant recession. It’s something that we would like to get more involved in.

Crowley: We’re about the seventh largest economic sector in the state right now. We’re about five percent of the state’s GDP. Hospitality is number one. Real estate is number two. There are others that are bigger than us. Financial services, banking is bigger. If you look at what we do in rural Nevada we’re definitely major players, keeping unemployment super low. Unemployment has been lowest in mining counties throughout this entire recession by a long shot and there are also the indirect economic contributions. There are 2,200 businesses in the state of Nevada that do some level of business with mining companies, like Soil-Tech, or different environment labs and equipment vendors. That number to me is a bit shocking because many will say that there’s no mining footprint in Clark County. There absolutely is. Not only are there mines in Clark County, there are vendors in Clark County.

McVeigh: Everyone was looking to expand their horizons, diversify and include mining.

Jim Faulds: Mining produced $11.2 billion last year in Nevada, and 85 percent of that was gold. Nevada produced more gold last year than any other country except China and Australia. Put another way, if Nevada was a country we’d be the third largest gold producer, at least as of last year. It’s 23 or 25 years straight that Nevada’s been the largest gold producer in the U.S. Mining is big in Nevada and we’re world renowned for the kinds of deposits we have. We just did the first detailed survey last year of the impact of exploration on the economy, how much is spent on mineral, including geothermal, exploration as well in the state. It was a measly $675 million. For various reasons some companies don’t want to report so that’s the minimum amount. That’s a big impact on the economy as well that’s not measured in the gross or the GDP. The biggest impact is on rural counties and communities in the state.

Does mining pay its fair share?

Crowley: There’s a lack of information on what we do. We need to start a discussion with the public, give them the data and let them decide what’s fair and what’s not. Most opinion polls are taken without any data attached to it.. We have been working very hard to inform our fellow Nevadans about who we are and what we do. What’s surprising to most is that we pay the same taxes that they do, plus we pay an additional tax called the Net Proceeds of Minerals Tax. It’s not a small increment; it’s more than doubling our tax contributions. In 2012, we paid about $170 million in the taxes that everybody pays: sales tax, property taxes and payroll taxes. On top of that, we paid another $250 million in mining taxes. That $250 million partially represents the notion that we are unique and take a non-renewable resource. That provision was originally put in place in the 1860s but has been amended in 1989 when we doubled it. Even as recently as the last legislative session there have been adjustments to that tax to yield even more money. It’s constantly been amended and evolved and is a reflection to some extent of our being a non-renewable industry.

How important restoration and reclamation?

Dan Rockwell: Restoration right now is pretty critical. It’s a really hot topic in the industry. What we bring to the table is trying to come up with innovative solutions to mining to help them become more sustainable and to help shift the whole perception that mining is a bad thing. Reclamation has come a long way and is continuing to improve. We just want to be a part of that movement of saying, “Hey, it’s not just about doing the very bare minimum out there.” It’s actually restoring to create some habitat. Taking a step beyond what regulation is requiring. That’s what mining needs: leaders like that to be able to change things.

What’s the regulation environment like for mining?

Korpi: Depending if you’re on public or private lands, you’re dealing with different agencies. Most of Nevada has public mining operations so you’re dealing with either the Bureau of Mines or U.S. Forest Service. If you’re on private lands it’s the Nevada Division of Environmental Protection. Nevada’s got one of the best established regulatory environments out of any state in the country. Yes, it takes time. From start to actual operations, it can be seven to 10 years and a portion of that involves the permitting process. There’s a frustration about the timeline that’s involved but at the same time, as an operator we all try to do what we can to speed the process along. It’s a factor that goes into the business.

Crowley: We’ve had some challenges over the last several legislatures but we completely understand why. The economy has tanked at the same time the population has grown tremendously. As a reaction, the legislature has had to cut services time and time again and there are huge frustrations. We’re fortunate to have some good leaders in the legislature that are open to dialogue. Those aren’t the stories that necessarily hit all the headlines but by and large we work very well with the legislature and they’re receptive to open dialogue.

What does the future of mining look like?

Crowley: The value of gold has to be put into perspective. Not only has the value gone up over the last several years, so have the costs it takes to get that gold out of the ground and into a product. It makes it exceptionally difficult because we don’t know what the value is going to be tomorrow. We did a survey and asked our companies what they see in the future. Sixty-nine percent of our respondents say that they’re going to hire next year, so growth in employment is going to continue. Eighty-four percent say there will be no reduction in workforce. Those are signs that we’re optimistic about the future.

Faulds: We’re in the biggest gold boom that Nevada has ever had. We peaked two years ago but profit in the past couple of years has been up because of the higher price of gold. The actual gold production is on a slight decline but you can see we’re in the biggest gold boom in Nevada’s history. The deposits are getting more difficult to find and discover. One thing about Nevada is, you have a lot of younger rocks that cover these mineralized deposits so one of the approaches, secrets, to develop techniques to see under those rocks in various ways. As proven by Long Canyon, there are certainly big deposits out there to be found that are exposed. There are probably many others that are just barely under the surface.