Feature Stories - June 2010

The Gold Issue

Mining in Nevada

by Doresa Banning

 Opportunities Abound

    The values of both precious and industrial metals and select minerals are up and rising. Previously closed mines are being reopened. Exploration for new untapped ore continues. Geothermal projects are increasing. Investment in the state’s mining is relatively strong. All of these activities indicate a stable industry in the Silver State.

    “By and large, [Nevada] mining is healthy today,” said Tim Crowley, president of the Nevada Mining Association, a 300-member organization that represents the industry.

    This economic sector is a bright spot in Nevada’s otherwise bleak economy that’s punctuated by a double-digit percent unemployment rate and an expected $3 billion budget shortfall over the next biennium.

    Mining is supporting the state in ways other industries can’t right now. It’s providing and creating new, well-paying jobs, Crowley said. Mining also is generating goods and materials that help spur the economy. It’s paying “more taxes than ever before,” Crowley said, and several companies have even prepaid their 2010 taxes to boost state revenue. For example, Barrick Gold prepaid about $40 million in state taxes on estimated 2010 revenue from its Cortez mine operations.

    “We’ve always taken our role in balancing the budget seriously,” Crowley said. “We’ll be at the table looking for solutions in 2011. We fully recognize the budget is going to be short, and we’re not going to shy away from working to fix that problem.”

Not All Good News

    While precious metals are doing well, the demand for many other mining products is down.  

    In the past two years, some exploration firms stopped operating in the state. Other companies closed mines. Recently, Nevada dropped to No. 5 from No. 3 on the Fraser Institute’s annual ranking of the best places in the world to invest in mining, according to the group’s Survey of Mining Companies 2009/2010 data. Out of 72 jurisdictions worldwide, Nevada perennially has been in the top three spots over the past decade.

    Companies mining minerals and metals closely tied to the construction industry, such as copper, gypsum and lime, are hurting, Crowley said. To stay afloat, these businesses are relying on diversity, focusing on other destination markets for their materials. For instance, lime, which is used in asphalt has another function as an acid neutralizer.

    Resources mined in Nevada include gold, silver, copper, geothermal energy, aggregate, barite, cement, clays, diatomite, dimension stone, dolomite, gypsum, lime, limestone, lithium, magnesite, brucite, perlite, kalinite, salt, semiprecious gemstones (opal and turquoise), silica, zeolite and geothermal energy.

    Due to the ongoing depressed economy, a number of mining companies has suffered. General Moly is one. This Elko-based company that explores, develops and mines molybdenum in Nevada, laid off 40 percent of its employees in March of last year and entered a cash conservation mode that it remains in today, said Zach Spencer, manager of external communications. “We had to slow things down, put a few things on hold,” he added.

    Despite the difficulties, earlier this year General Moly secured about $765,000 in financing from the Chinese company, Hanlong Mining Investment, Inc. General Moly anticipates starting construction on Mt. Hope, its first Nevada molybdenum mine (22 miles northwest of Eureka), in about July 2011 once the permitting process is done and, subsequently, begin production in 2013.

    Gold has shifted dramatically, ranging from about $812 per troy ounce in January 2009 to $1,215.21 per troy ounce in December 2009. The price of molybdenum moved between $33 and $7.50 a pound in 2009, then bumped up in 2010. It was $18 per pound in mid-May. The fluctuating prices of gold and other mined materials create an ongoing challenge for the industry. Not knowing what values will be years down the line makes planning, permitting (which typically takes between 5 and 7 years) and investing in expansions or new operations highly risky, said Louis Schack, director of communications and community affairs at Barrick Gold of North America.

    “Obviously, if the gold market goes south, the struggles of the late 1990s and early 2000s could return,” he added. “I don’t think a lot of people realize the market risks—and potential rewards—that come with managing large mining operations.

    “Ours is a very complex and challenging business that requires the focused efforts of thousands of dedicated employees to operate in a safe and socially responsible manner.”

    Exploration of Nevada for additional deposits of minerals and metals is itself challenging for the companies involved in it, especially as ore becomes harder and harder to find. It requires lots of time, money and effort. Newmont Mining, for example, spends tens of millions of dollars a year on it, said John Mudge, vice-president of environmental and social responsibility for the North American region of the Denver-based company that primarily mines gold, but also silver and copper, in Nevada and seven other countries. Once additional ore is found, permits must be obtained and then infrastructure built before actually beginning to mine.

The Golden Ticket

    Because precious metals tend to perform counter-cyclically to the economy, they currently are doing well and, therefore, so are companies involved in their mining, particularly gold.

    “The continuing strong market for gold creates a lot of opportunities throughout the state,” Schack said.

    New companies are emerging in Nevada’s gold industry, as they now can turn a profit because of the metal’s higher values. In mid-May, the base price of gold was valued at about $1,240 per troy ounce, up about 53 percent from January of last year. Silver’s base price in mid-May was about $20 per troy ounce. Gold mines that in the past were closed are being reopened and explored. For example, Firstgold Corp., a Lovelock-based, junior gold mining and exploration company with four properties in Nevada, reopened Relief Canyon, a mine near Lovelock, which was closed in 1989 due to gold’s declining value. Allied Nevada, a gold mining and exploration firm, reopened Hycroft, a gold and silver mine near Winnemucca. Similarly, Great Basin Gold Ltd., an international mining company, reopened the gold and silver Hollister mine in Carlin.

    With the current robust gold industry, Newmont Mining Corp. has several projects in the pipeline.

    “We are able to invest in new projects to provide for the future and to ensure long-term sustainability of our gold mining industry in the state,” Mudge said.

    Newmont recently received permits to explore Sandman, an area northwest of Winnemucca, for gold. It also is in the permitting stage for Genesis, expansion of a previously mined facility in Carlin. Permitting is nearly complete for Immigrant, an open-pit, heap-leach gold operation south of Carlin.

    Barrick Gold is also investing in its operations, including $500 million at its Cortez gold mine in Lander County and $200 million at Bald Mountain mine in White Pine County, which it is expanding, Schack said. Its new Cortez Hills project, an expansion of its Cortez mine, should reach full production this year. Barrick has begun the permit process for its South Arturo project, located north of its Goldstrike operations in Carlin. Additionally, the corporation continues to aggressively explore several locations throughout Nevada for untapped gold.

    “Any time we can grow and create opportunities for people, business is good,” Schack added.

Educating Nevadans

    The Mining Association’s biggest challenge, Crowley said, is educating Nevadans all about the industry, how it’s working to become safer, more efficient and more environmentally effective, Crowley said.

    “We haven’t done a good job of informing the public who we are, what we do and that we’re proud corporate citizens and residents of the state.  We’ve done a great job evolving. We just haven’t let people know it. We’re confident that when people look at what we do, who we are, they’re going to walk away with the impression these are sophisticated operations,” Crowley added.

    The mining industry’s success makes it a target for legislators trying to balance a budget in the worst economy in recent years.  The industry is working with the federal government on ways to meet the requirements of a proposed amendment to the Environmental Protection Agency’s 1990 Clean Air Act. The new draft legislation aims to reduce the mercury that’s released into the air at the nation’s gold mines when the ore is heated during processing. It also aims to increase monitoring. Controls on mercury aren’t new, however, to Nevada companies. Newmont Mining Corp., for instance, already for years has been capturing mercury before it diffuses into the environment, then shipping it to a refiner in the Midwest.

Here to Stay

    Additional mines—from metal and mineral to geothermal—coming online translates into additional direct jobs and a boost to the support services and communities around the state’s various mining locales. The industry also pays much better than other segments of Nevada’s employer base.  

    When General Moly’s Mt. Hope mine opens it Eureka, it will employ about 400 people at the site. Currently, Newmont Mining employs about 3,600 people in Northern Nevada, primarily in the Winnemucca and Elko areas, and forecasts that will remain steady well into the future.

    “To have companies like General Moly operating mines in Nevada will really strengthen the communities that we operate in as well as the state of Nevada,” Spencer said.

    Newmont Mining’s Mudge said he sees a good, long future for his company in Nevada.  “I think these metal prices are going to allow us to explore and develop new properties to sustain our production. We have the resources we can put back into the ground to keep things going for the long term,” he said.

    Barrick Gold’s Schack said his company, too, expects many more years of operation in the state and therefore, ongoing support for the rural communities.

    The industry is here to stay, according to Crowley. “We’ve been around for 150 years, and we plan to be around for another 100, 200, who knows,” he said. “But even as the state’s economy continues to diversify and grow, we still plan on being a significant piece of it.”

Doresa Banning
Doresa Banning is a freelance writer based in Northern Nevada.