Mining executives seeking to dispel myths about their industry and educate Nevada business leaders on the state of mining recently gathered at the Reno offices of Holland and Hart for a roundtable discussion. These executives have numerous projects in the pipeline in Nevada. Many are still in the lengthy permitting process. Their projects will bring job opportunities to Nevadans.
Connie Brennan, publisher of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues pertinent to their industries. Following is a condensed version of the roundtable discussion.
What challenges face the mining industry?
Lou Schack: Getting our major projects planned. We’re trying to sequence our projects so we have the resources to get through permitting and then executing it. We have many projects and not enough people to do them. We’re pushing them through the pipeline as we can. We have 10 to 20 years of projects sitting in front of us.
John Burrows: When people hear the word, cyanide, they think negatively because of what they read in books or saw on TV. It’s ignorance of the industry and how much mining contributes to the standard of living for every person in this country and around the world.
Jeff Thompson: Working with challenges in human resources, engineers, accountants, business people and helping to meet challenges with a good professional staff.
Tim Lukas: Not being the target of opportunity in these economic times, and working well with regulators. The world is changing and we can change with it. The mining industry produces everything we don’t grow. It’s a vital part of our state, and it will be in the future.
Zach Spencer: A big challenge is educating people about modern mining, our environmental stewardship, safety practices, and great jobs and benefits in the industry.
Bruce Hansen: The permitting process is arduous, detailed and takes significant time and resources. We’ve been in the National Environmental Policy Act (NEPA) Environmental Impact Statement (EIS) process through the Bureau of Land Management (BLM) for five years. Our next challenge is building the mine, maintaining costs and scheduling in an environment where construction workers and engineering firms are busy. There are good opportunities to employ people who are coming off unemployment in Nevada’s construction industry. We’ll hire about 450 people.
Tim Crowley: There’s an influx of people in the state and we need to introduce ourselves to them. There is a disconnection between the mining industry and Nevadans. We’re making efforts to be more transparent. The future is bright in the mining industry. We operate in remote areas because that’s where the resources are. Vendors are in Reno and Las Vegas. Nearly every operator is growing now, and with that comes more development and the resources society wants. With the price of gold up, it affords us the opportunity to put valuable resources back into Nevada and do projects.
What projects do you have in the pipeline?
Hansen: The Mt. Hope project is located 22 miles north of Eureka in Eureka County. The capital expenditure will be about $1.2 billion. It’s a joint venture between General Moly and the large Korean steel company, POSCO. We control 80 percent and they control 20 percent. Once developed it will be one of the largest single molybdenum producers in the world, producing 40 million pounds per year. It’s vital to the steel industry, where moly strengthens steels and reduces corrosion. We’ll employ more than 400 permanent employees, but during construction we’ll have a workforce peaking over 600. In Nevada, it’s one of the first big non-gold projects.
Schack: The one we’re most excited about is the Turquoise Ridge property, which is 50 miles north of Winnemucca in Humboldt County. It’s a large underground mine. We’re looking at a surface deposit there or what we hope becomes a deposit as we drill it. It has the potential to become the largest gold pit in Nevada. It will take five to 10 years of studying and permitting to get it started. The property has about 350 employees, but that could double if we pursue this project. If we don’t, the current operations have a 20-year life span. Another one is in Elko County, which makes the local folks happy because most of the mining occurs in Eureka and Lander Counties. The Arturo project is not huge, but it’s sustaining. It will create 100-plus jobs. We’re in the early stages of permitting.
Burrows: Over the last three-year period, we have invested in our facilities at Winnemucca to double the capacity. We’re entering the next phase of expanding capacity. We’re evaluating how much we need and if equipment replacements or modifications are needed to start. Because our Nevada customers are multi-national corporations, we want to do business with them elsewhere. We’re investing in a new plant in Houston, Texas. It’s a backup supply for Nevada customers. Our corporate offices are here, so the project will still benefit Nevada.
Is there enough people going into the industry to support it?
Thompson: We get a lot of people whose parents are not in the industry, but they live in areas where the industry works. It’s hard to bring students in. There are few schools in the U.S. that still have mining programs available. The industry pays well and it’s supportive. Engineers have no problems getting scholarships, full rides and support from the industry during summer internships. Some of our graduates are quickly moving up in these companies because it needs qualified people. If you have skills and are well trained, you will get a lot of responsibility early.
Hansen: There was a downturn in the late 1980s. Business Week published a cover with the headline, “Mining is Dead!” A number of institutions across the country that provided mining engineering education shut its doors for that educational option. There’s limited institutions like Mackay (School of Earth Sciences and Engineering at UNR) around the country that provide talent. There are challenges getting qualified professors and faculty. The industry is adapting in terms of re-education or enhancing education for other engineers. Other needs are in the highly skilled trades such as welders and electricians. They are well paid and valued. We have a small scholarship fund for Eureka High School students to help them get into these trades.
Schack: There is a healthy program at Great Basin College in Elko, which is funded partially by mining companies, that teaches the trades. At the big schools, mining isn’t as visible as the sexier fields. We’re recruiting civil engineers, electrical engineers – fields we didn’t worry about before. Now they have the basic skills, we can teach them mining. I went to UNR. Mining wasn’t on the radar as a career when I was there, unless you were going to be a geologist or something. That was when Mackay was still a healthy entity on campus. It’s been worked into the bigger engineering school.
What is the economic impact of mining, and how big is the industry?
Crowley: It’s a bit of an urban legend that mining is the second largest industry in Nevada. In 2009, we were the 16th largest economic sector, which is based on GDP. We’re still a significant piece of the economy, however we’re ranked. We’re putting people to work when our economy is at its worst. We’re growing, paying more taxes, and putting in more charitable dollars. They’re opening old mines such as Hollister and Hycroft. It seemed Coeur Rochester would close, but its silver mining and thriving. You will see mineral production in newer areas. There’s potential for a huge growth of copper in Yerington. The Elko Daily Free Press published numbers showing the mining specific property tax we paid has doubled in the last two years. In 2009 we paid $100 million in the net proceeds of minerals tax. In 2011 we’re paying $200 million in net proceeds in minerals tax. That doesn’t account for sales tax contributions, which are going up. Modified business payroll taxes and the tax we pay on top of that are doing well. There’s a bright story to be told.
Thompson: You can go to Las Vegas to talk to people whose companies are growing by being a supplier or vendor to mining companies.
Hansen: For every one job we create, there’s another three jobs created somewhere else in terms of supporting mining, but also retail- restaurants and bars that benefit from mining activity. Mining is crucial to rural parts of the state. It’s not crucial to Reno and Las Vegas, but in the northern corridor from Winnemucca to Battle Mountain to Elko to Wendover it’s the key economic driver. We provide high quality, high paying skilled jobs. The total compensation, including wages and benefits, for the average miner is close to $80.000.
Burrows: It goes beyond the taxes paid or the jobs created. The people who are within the communities understand the support they get in other ways. It’s support at the colleges for scholarships and endowments. It’s support for the local athletic teams. Our companies are contributing in ways that aren’t taxation. We have all become members of the communities we live and work. We support everything going on there.
Schack: Just about any positive thing that happens in these communities, we’re involved.
Explain the reclamation process.
Schack: There’s no denying mining has impacts. Before you start a new mining area, you scrape off the topsoil and stockpile it. You do the mining. While you’re mining, you do concurrent reclamation because you end with a better result. The same people who make the disturbance are fixing it. They appreciate that you end with a better product. You save money because the people and equipment are on site. There’s no need to wait until the end to bring in a contractor. When you are ready to close something, you will bring the topsoil back and apply a seed mix. That’s worked out with various agencies so you’re not introducing something nasty, and hopefully introducing healthy native plants. It’s usually three to five years in Nevada to get it up to a standard where they will release your bonding. Then you can apply that money to another reclamation project. We can’t start a new project without a closure plan. The days of walking away from a mining project are long gone.
Hansen: It’s administered through the state with BLM input. It’s a robust program. Somebody from the state mentioned there’s a billion dollars in a state trust in order to close and reclaim every mine that’s currently operating.
Crowley: We did some abandoned mine closures. If you look at historic mines, there are holes people created chasing some visible mineral. They’re dangerous. The industry is paying to secure those through a mine claim fee that goes to the state. The state runs a program to identify, fence and close them. The mining association thought if we got involved with accelerating the process, we could close more. We did well with a pilot project 10 years ago. The BLM and the state have taken the bull by the horns and used the template we placed. Closure is now happening at a more rapid rate than it used to.
Thompson: At every mine site I’ve visited within the last five years, reclamation is not just a part of the business they do. It’s like safety, which is upfront and a part of the corporate culture, and reclamation is too. They are people who are proud of the work they do. They’re enthusiastic and work hard to make the reclamation such that you couldn’t tell a mine was there.
Burrows: The mining companies are competing for who’s doing the best reclamation. Every year at the Nevada Mining Association convention, mines are nominated for their reclamation closure efforts. As we watch the presentations showing the work done, it’s phenomenal. Whoever wins has bragging rights because they did the best job.
What efforts are being made to change public perception?
Crowley: It comes in tours, speakers bureaus, and pictures tell a thousand words. We need to do advertisements, print and potentially get on TV. None of it is as good as having urbanites come and see who we are. A group of Reno business people came to view the Newmont mine. It was amazing to hear their comments of, “Oh, my God, I had no idea.”
Burrows: You have the teacher education workshops. It helps teachers understand so they can explain it to their students. The Mackay School of Mines starts it in elementary school. Good efforts are being made, but people have to be receptive to the message. You have to overcome some preconceived notions.
Schack: It’s tough in the urban areas. As big as we think we are, we’re not that big.