The mining industry in the Silver State has undoubtedly faced its share of challenges over the last few years. Commodity prices and strict federal regulations have hindered organizations as they seek to gain forward momentum. However, leaders in the industry nonetheless expressed continued optimism for mining in Nevada. They recently met at the Reno offices of City National Bank to discuss the biggest factors affecting mining in the state.
Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
How have commodity prices affected the industry?
SCOTT JOLCOVER: A challenge in mining for the state of Nevada is the commodity price because you have virtually no control over what you’re going to receive for your metals. You can do different types of spreads and maybe get a little more than the spot price, but generally speaking, you have no control over the marketing of your final product if it’s just a straight sale.
ANDY COLE: Barrick has gone through some tough times and definitely rode the gold price up and down. There’s a lot of discussion about commodity prices and Barrick’s focus right now is not on the commodity price. Our focus is providing margins to our shareholders. Right now we’re using $1,000 [per ounce] for gold. Despite the fact that we’ve had a run up in the price of gold, from the operation perspective, we’re not looking at that. We want to drive our margin so we’re focused on getting more increase in our productivity and becoming more efficient.
JIM BUTLER: I know we’ve seen a bump in gold prices. I do some work in the copper industry and they’re struggling. If there’s some upside on the price, it’s that it drives a lot of investment. The gold price drives the people out there putting money in exploration. What we’ve seen drop off is what we were doing two or three years ago: a lot of small exploration companies acquiring properties, investing and getting permits for exploration. That part of the business has really slowed down.
GREG ROBINSON: When gold prices start out the year at $1,100 or $1,200 an ounce (in silver the ratio is even worse), we’re very hesitant to put money into anything, let alone exploration. Now that it’s climbing a little bit, we’re starting to talk about exploration. We’re still hesitant to sink millions of dollars into something that we don’t absolutely need to have. In addition to exploration, it’s just infrastructure in general. Investment companies see that as well.
What regulations have impacted the industry the most?
ROBINSON: The biggest challenge is the ability to plan long term with the regulatory environment and the changes with the sage grouse culminating into things that change a lot faster than we have the ability to change our mine and reserve plans and permit something. It’s a very dynamic landscape and we have to somehow navigate our way through with a plan where we end up making money in the end. That’a a difficult thing to do.
COLE: Barrick signed a relatively innovative agreement with the Bureau of Land Management (BLM) and US Fish and Wildlife for the Bank Enabling Agreement to address sage grouse issues, specifically around one of our mine sites. We’re very focused on that. We’re also working within the state banking system to try to develop sage grouse credits there as well. We’re working with the system.
GREGG JONES: When those [regulations] were put into place, there’s a small square sitting on top of one of our mine sites that hasn’t had sage grouse in 40 years, but it’s designated as a habitat area. Everybody agrees, including the BLM and the Governor’s Office, that the maps are wrong. The BLM is stuck and we’re sitting in the middle of a gray area with an inaccurate map that wasn’t designed for the purpose for which it’s used and nobody knows how to fix it. That’s a challenge. The amount of effort you have to put into fixing this stuff is very frustrating for an organization.
ROBINSON: We had the same thing with our environmental impact statement (EIS). We started it when the sage grouse was a back burner issue. The recent decision that came last year about not placing it on the endangered species list threw a monkey wrench into everything. We had done all this work and all this planning and addressed the sage grouse survey. Trying to get information out of anybody as to what’s holding it up specifically and what we can do about it… we just had to wait as patiently as we could until somebody decided to make a decision and move it forward despite the risk of lawsuit.
BUTLER: We’ve never seen the scale of the sage grouse land management restrictions. It’s unprecedented. We’ve been dealing with sage grouse issues in Nevada for a number of years on a site-specific basis. We can probably come up with a list of ten different kinds of wildlife habitats that companies, over the years, have been mitigating. But, with the scope and scale of sage grouse plans, we’ve never seen this before.
SHELDON MUDD: During the scoping period for the BLM, the Governor’s Office, coupled with the Division of Minerals, came up with a proposed map that was backed by surveys and it released 99 percent of the mineral claims and then added a net of value to the amount of sage grouse leks. Then that was submitted to the BLM. The last I heard was that they were asking for a little more information in regards to it. I was up in Canada in March and I had a Japanese drill bit-making company asking me about sage grouse in Nevada. It’s on the radar out there and people hear about this.
How important is reclamation?
COLE: We recognize that reclamation and restoration are key pillars in our business so we take it very seriously. You develop reclamation and closure plans that are very well-documented and well-regulated. The state of Nevada, very specifically, has recognized how important reclamation is to our business. We try to do as much concurrent reclamation as we can.
JOLCOVER: It’s important to keep it in perspective. Back in the 1970s, there weren’t even regulations for reclamation. I believe that mining has grown up by being responsible both environmentally and reclamation-wise. I know that we operate in a national historic district so we’ve gone a step beyond and created a foundation for preservation of history, restored falling down head frames and shoots and buildings that are collapsing. Economically, the best thing you can do is concurrent reclamation because it’s the least expensive cost of reclaiming and you get credit.
MUDD: Driving down Nevada and seeing the scarred areas from days gone by, people don’t realize that many times they see hills and landscapes that have been reclaimed but they have no idea because it fits in so well. I don’t know what the number would be, but I would say that for one scarred area you see, there may be a dozen that have been reclaimed but you don’t even know it because they do such a good job.
What is mining’s economic role in Nevada?
DANA BENNETT: We pay all of the same taxes that every other business pays. We pay property taxes, we pay sales taxes, we pay a payroll tax. We also pay a specific tax that no other industry pays. That essentially doubles a mine’s tax burden with the proceeds and minerals tax. Up until last session, there were really four industries that were taxed specifically. That was gaming, mining, banking and insurance, and adding another pillar to the state’s revenue system is critical for the state’s economic sustainability.
MUDD: Going back to the net proceeds of minerals, 98 percent of that went to rural counties last year. That is one of the positive aspects of mining because where the money is made is where it stays to some degree. I live in Battle Mountain and we got a new school, sports facility and courthouse and none of that would’ve been possible without the mines.
How big of an issue is workforce for this indusTry?
BENNETT: Having an educated workforce is incredibly important for the industry. We are Nevada’s oldest and most enduring STEM industry. With all of this discussion about a STEM workforce, that’s exactly what we do every single day. It’s critical that we have people who are well trained and well educated in our workforce. It’s also important that our employees have good schools for their kids.
JONES: Coeur and EP are the two large employers in Lovelock. We have a revolving door. It’s very difficult to get people that want to come in for a career and want to stay. It’s a difficult environment in Lovelock. The workforce is very transient, coming and moving, and we just have a very high turnover rate. It’s a constant battle.
ROBINSON: The craft labor group is a little easier for us than professionals like mining engineers or instrumentation technicians and electrical engineers. The majority of those people do not want to graduate from college and move to Lovelock and live there for the rest of their lives. We’ve had to get really creative on how we recruit for those [positions], who we recruit and how we structure the jobs, pay, benefits and the whole spectrum that it takes to attract people to a rural Nevada community. It’s cyclical, a lot like the industry is. When things are good and there’s money flowing, people are excited about it. When it’s not so good and the wallet’s closed, the people are not so excited.
COLE: We see the challenges on the skill trades, specifically in some of the electrical and instrumentation, especially as you introduce new technology within the mine site. We continue to work specifically with Great Basin College. Over the last several years, we’ve had a lot more success with mining professionals. Some of the other areas that we’re seeing challenges are some of the supply chain and purchasing areas.
Is safety an issue?
BUTLER: My perception is that [safety] is the number one issue. Every time I go to a new mine, I get safety training. It is integral to the operation of every company that I have worked for. Literally, you open every meeting with a discussion of safety issues. You don’t let people on your site who are not trained and who don’t have protective equipment. Because I’m a non-miner, I get trained a lot. I see a lot of safety videos and have been given a lot of hard hats and glasses. I think it is stressed a lot. Sometimes things happen and every one of those is then examined in great detail to figure out what went wrong and what could have been done to prevent this accident from occurring.
BENNETT: Mining is a hazardous industry, but we focus on mitigating those hazards and training people to work around those hazards in order to keep it from being a dangerous industry. There’s a difference between hazard and danger. All of the companies that are involved in mining have safety as their number one priority because really, at the end of the day, that’s what makes the company productive. The people who are doing the work.
COLE: Safety is the core of everything we do. We recognize that our people are our number one asset. Any injury is unacceptable. We do everything we can to mitigate that. We’ve introduced technology trying to make our equipment safer for our employees. We try to provide the best training possible. [Employees that] truly understanding the key and core elements of every task and job they’re doing make the best decision possible so they can go home safely.
How do Nevadans perceive the mining industry?
BENNETT: There is a perception among policy makers and everyday Nevadans that mining is not a 21st century enterprise and that it is somehow a relic of the past. I’m a historian by training and we like to celebrate the old miner with the borough and the pick ax and we like to talk about the frontier of Nevada. That perpetuates the misunderstanding that mining has not adapted over time. There isn’t an understanding that mining is fundamental to everything that Nevada does. In order for our new sectors, advanced manufacturing and advanced energy production, to be successful, the mining industry must be helping. We provide the metals and the minerals that make all of those things happen. Mining is a modern industry and it has adapted to meet changing economies and requirements.
MUDD: The biggest challenge is in relation to some of our permitting processes and the perceptions that are associated with that, how they perceive mining in Nevada and the constraints that exist. A lot of times, these are the voters and these are the people who are deciding what’s going to be done in their backyard. Education in regards to all of that is going to be a big player in how we move forward in the future.
BENNETT: One of the primary responsibilities of the Association is to help with that education effort. Whether it’s talking to school kids or talking to adults, it’s our responsibility to explain to the rest of the state what this industry does and what our contribution is to the state. We’re finding that a lot of folks, especially coming from the advanced technology sector, misunderstand where the elements in a smart phone or a hybrid car come from. We find that we have a lot of education to do in this area as well.
What is the outlook for mining?
BENNETT: A year ago, I was hearing from exploration companies that times were the worst they’ve ever seen. They were not doing anything. A lot of that comes back to having investment capital in order to do the activity. Those companies need investment as much as the operators need investment. In the last month or two, there have been some glimmers of hope. They said that some things are starting to happen.
COLE: I think we’re going to be a lot smarter in what we do. All of us are focusing on getting better with what we have. That’s how I think we’re getting smarter.
JOLCOVER: You know you can’t be a miner and not be optimistic. It’s just not in our DNA.
BUTLER: That’s one of the reasons I like to work for the mining industry. They are optimistic people and they’re problem solvers. There’s no problem that can’t be engineered around or that you can’t find a solution to if you work at it long enough. I think it’s been that way for 100 years and will be that way for the next 100 years.