All That’s Gold Doesn’t Glitter The gold mining industry in Nevada is booming – but paradoxically, that doesn’t mean mining companies are seeing everything through gold-colored glasses. With gold selling at $646 an ounce, and mineral-hungry industries in the U.S. and around the world prospering, the state’s mining industry is in one of its periodic upturns. That’s great news for Nevada, where mining is an integral part of the state’s history and future. In 2004, the mining industry produced $5.89 billion in both direct and indirect economic impact on the state. Nevada ranks third in world gold production, behind South Africa and Australia. Nevada mines employ nearly 12,000 people, with an average salary of $67,652. In Nevada, mining is second in importance to the state’s economy only to tourism. When you factor in that the state’s average salary is far below that of mining’s – $36,088 – it’s easy to see how important mining is. And although no one’s crying the blues for the huge companies that own gold mines, they are nevertheless facing challenges that come with prosperity following a downturn in gold prices in the late 1990s. According to the Nevada Mining Association, when prices rise, mine operators process lower-grade ore, some of which may have been stockpiled during periods of low prices. This raises their production costs and cuts into their net incomes. At the same time, companies generally increase their exploration budgets, as many have since 2002. This also cuts into their net income. When prices fell a few years ago, many operators delayed development expenditures to conserve cash and maintain net incomes. When prices rose, companies tried to bring those delayed projects and expansions into production as soon as possible to take advantage of higher prices, but that also reduced net incomes. One large open pit gold mine operation near Elko is planning to tunnel into unexplored land near its current operation, to determine the quality of gold ore. If prices fall in the next year or two – or if the geologists missed their guess – this company could be left with huge expenditures from this exploration and lower income. Finding qualified staffing in boom times also is troublesome. All the Barrick Gold North America mines in northeast Nevada report they are running below optimum staffing levels. There are plenty of drills available, but not enough qualified drillers to run them. Even tires are hard to come by. Worldwide demand for heavy construction equipment, such as haul trucks and their giant tires, is outpacing supply. Mining companies report waiting up to 12 months for new tires. Many are more closely monitoring use of their current tires to maximize wear life, including removing rocks from roadways and maintaining correct tire pressure. Despite these problems, no one has yet proposed turning any mining operations into that other Nevada gold mine – gambling casinos. |  |