Feature Stories - June 2008

Modern Mining

Golden Future in Nevada

by Jeanne Lauf Walpole

For a business that has known its share of booms and busts over the years, the Nevada mining industry is basking in a somewhat infrequent, but well-earned uptick in its financial fortunes. When the price of gold was hovering between $200 and $300 an ounce not too many years ago, mining companies were facing mine closures and employee layoffs because the bottom line just didn’t pencil out. “We were really sweating in 2000 and 2001,” said Mark Amodei, president of the Nevada Mining Association. However, as the price of commodities has risen steadily since then (with gold breaking $1,000 an ounce a few months ago), the industry is appreciating a welcome period of expansion and prosperity. “We’re enjoying a nice gold climate. It’s a good time to be a gold miner,” explained Robert Taylor, vice president of operations North America for Kinross Gold Corporation.

Although gaming and tourism receive indisputable accolades as the state’s chief revenue producers, mining continues to play a crucial role in Nevada’s economy. “We view mining as a key industry in Northern Nevada. In 2007, it represented 20 percent of our total system sales,” said John Owens, director of resource planning for Sierra Pacific Power Company. “It’s the foundation for the economies in the rural counties where at least one-half of the jobs are related to mining.” More than 13,000 Nevada jobs are directly related to mining with the major players such as Barrick Gold of North America claiming 3,000; Newmont Mining Corporation, 3,500 and Kinross, 700. Unlike many service jobs which are entry level positions, most mining jobs provide fully-benefitted, full-time employment that pays well above the minimum wage. The average income for mining employees is around $70,000 a year, well above the overall state average of about $40,000.

Mining operations are sprinkled throughout the state, but Northern Nevada counties such as Humboldt, Elko, Eureka, Lander, Pershing, Churchill and White Pine claim the lion’s share of the major producers. With Nevada accounting for around 80 percent of the country’s annual production of gold and about 8 percent of the world’s total, it’s easy to see that gold and its by-product, silver, continue to shape the welfare of the state long after the demise of the Comstock Lode which gave rise to Virginia City in the 1850s in Storey County. While gold production (at around $3 billion annually) gets a lot of attention, copper and construction aggregate also contribute hundreds of millions of dollars to the overall value of mineral and energy ($3.98 billion in 2006) which is produced each year in Nevada. The full roster of production is diverse and also includes gypsum, barite, clays, molybdenum, magnesite and lithium along with geothermal energy.

Industry Challenges

In spite of record highs in commodity prices, however, it’s not all clear sailing for miners. “The industry is doing well, but we still we have our challenges,” said Lou Schack, manager of communications and community affairs for Barrick. At the top of the list is a shortage of qualified employees pretty much across the board. “The biggest challenge is labor because we’re competing in rural Nevada,” said John Burrows, general manager of Cyanco, which supplies sodium cyanide to the mining industry. “Everybody is looking to hire the same people, especially those with technical skills.” Recognizing that it’s sometimes difficult to attract trained personnel to remote locations, mining companies work closely with local colleges to support training and internship programs that will encourage students to choose mining as a future career. Barrick takes it one step further with its 12-week gratis program in underground mining that can result in full-time employment upon completion. “We’re doing creative things to bring in people. We established a miners’ academy at the Turquoise Ridge Mine (in Humboldt County) in 2004,” Schack explained. What further complicates the worker shortage is the degree of training that is required for most positions. “You don’t turn a multi-million dollar piece of equipment over to somebody who is untrained,” Amodei emphasized.

Along with the continued effort to maintain their workforces, mining companies also struggle with rising production costs. “We’ve seen a huge inflation in costs, especially anything energy related,” said John Mudge, vice president of environmental and social responsibility for the North American region of Newmont. As heavy users of steel and diesel fuel, miners struggle when costs increase just between the quote and delivery of those products. “The margin isn’t as dramatic as you’d think because we depend heavily on fuel,” Taylor explained. Also adding to the production costs is the continued need to keep wages and benefits competitive to retain and attract qualified employees.

Regulations Take a Bite

Another challenge facing miners is the increase in federal and state regulations regarding the environment and reclamation. Although the mining industry has embraced the regulatory controls for the most part, it must factor in higher costs and more time for the permitting process. “Permitting new projects is a huge issue. We’re heavily regulated,” Schack said. The permit process can take anywhere from one to five years, with proposed mining on federal land taking the most time. The cost can range from a half billion dollars to more than a billion, especially if the proposal is a green field or totally new site. “The risk is pretty huge,” Schack said. Newmont has two projects in Carlin and one near Battle Mountain that are winding their way through the permitting queue. Barrick reports that its Cortez Hills project is in the final permitting stages and will be entering production in 2009.

Mining executives acknowledge, however, that higher commodity prices make these challenges more palatable. “Nine hundred plus dollars gold makes some of the challenges easier,” Taylor admits. Higher prices have also given miners the luxury of extending the lives of many mining operations by making it financially feasible to mine lower grade ores. “The reserves become more profitable,” Owens said. The overall sustainability of most companies has also been extended because exploration has become more affordable. “As we mine, we need to continue to find,” Mudge said. Exploration has been ramped up with an increase of 18 percent in claim filings in the state from 2006 to 2007, according to the State of Nevada Division of Minerals. Mining companies that are well-established are most likely to continue exploration in and around their existing mine sites. “The best places to drill are where we’ve already found it,” Schack explained. Even so, exploration remains a somewhat risky venture. “The vast majority of holes we drill don’t result in a mine,” Schack said. Considering some level of success, however, Amodei said that if prices continue to be stable at current levels, that many mining operations can look towards a comfortable future of at least 15 to 25 years.

The Advent of Modern Mining

While riding the ups and downs of the industry in recent years, miners say they developed and ushered in the era of what they call “modern mining.” With increased responsibility for protection of the environment and site reclamation along with more reliance on technology and a continued focus on safety, modern mining will provide a more efficient and sustainable future for the industry. “The biggest change is toward companies trying to join ranks in corporate responsibility. They are thinking about their carbon footprint and being responsible,” Taylor said. Schack emphasizes the need to be good corporate citizens. “Things have changed a lot in the last decade. Companies recognize they have to be active members of the community and include people in decision making,” he explained. Because the mining companies have such a large impact on local economies, they feel an even larger responsibility to help sustain a high quality of life in their communities. “The degrees we go to protect the environment are extraordinary,” Mudge said.

Modern mining dictates that stewardship of the land during the mining process is temporary and that the land should be restored and even enhanced when that use has been terminated. As they give awards to outstanding reclamation and environmental work each year, miners emphasize their commitment to facilitating the future use of the land. Reclamation and protection has added and improved a number of recreation and nature areas in the state. Notable projects include the following:

• Maggie Creek – 80 miles of riparian, natural watercourse, and in-stream habitat restored for cutthroat trout.

• Jerritt Canyon – 90 plant species planted at the H-Pit Wetlands Mitigation Site.

• Ruby Hill Mine – artificial nesting structures installed to encourage mating of ferrunginous hawks.

• Big Springs Riparian Enhancement – river channel successfully reclaimed.

• Copper Basin Mountain Bike Trail – system of trails through reclaimed land near Battle Mountain.

As they continue to seek ways to make mining more efficient, miners have embraced new technologies in many phases of their overall operations. Moving thousands of tons of ore in open pit mines was optimized in recent years by using a computerized traffic control system that routes the huge 240-ton haul trucks in a more effective manner. On the processing side, separating the gold from its ore became more efficient through the use of autoclaves (giant pressure cookers) and huge roasters. Analyzing hundreds of samples in mining labs has become virtually error-free and paperless with robots programmed to do the job.

Efficiency has also been increased by consolidation, such as Barrick’s purchase of Placer Dome for $10.4 billion, which resulted in significant cost savings in the operation of the company. “Bigger in general is better. You can be more efficient in support services,” Schack said. Owens agrees that consolidation has been positive in many cases. “There’s been a lot of consolidation that has improved efficiency within the industry. It’s down to a handful of operators,” he said.

The Future of Nevada Mining

Because mining is literally the bedrock of civilization, its future has a critical impact on the survival of the quality of life. Material needs are satisfied by digging in the ground, growing in the soil and harvesting from the sea, with around 40,000 pounds of minerals needed annually for every person living in this country. Almost everything that people consume and use is a mineral product or relies upon them for production, according to the State of Nevada Division of Minerals. To maintain lifestyle and security as a society, the mining industry needs to continue on a course of healthy production and exploration into the future.

The tenets of modern mining will undoubtedly serve the industry well as it practices responsible conservation and good communication along with increased efficiencies in operation. The price of commodities, however, is the unknown factor which companies have little or no control over. “Nobody knows where prices are going, but it appears they are sustainable at present high levels. This can help Nevada out of the doldrums,” Burrows said. Amodei said he expects prices to fluctuate. “Everybody expects a range. I think about 25 percent one way or the other,” he said.

With Nevada leading the way in developing regulations and good practices, miners say that it’s a great place to do business. “The biggest proof of the pudding is a best jurisdictions survey that showed Nevada is number two world wide,” Amodei said. Industry leaders say they look forward to a continued bright future in the state that has apparently treated them very well for years. “Nevada is still a good place to mine and we think there are still opportunities,” Taylor said. Schack agrees that Barrick will be in Nevada for some time yet. “Nevada is very fortunate to have a long history in mining. There’s a lot of gold in the ground,” he said. Amodei said the Nevada Mining Association will do its best to make sure the industry stays healthy in the future. “The mission of the association is to make sure Nevada remains the best state in the nation and one of the best places in the world to be in the mining business,” he said.

Jeanne Lauf Walpole
Jeanne Lauf Walpole is a freelance writer based in Northern Nevada.