Mining in Nevada is one industry that has been thriving in recent economically tumultuous times. Even so, the industry is facing a myriad of issues from taxation to regulatory delays and public perception. Recently, executives representing various companies in the mining industry met at the Reno law offices of Holland & Hart to discuss these issues and what the future of mining looks like.
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 relevant to their industries. Following is a condensed version of the roundtable discussion.
What challenges are facing the mining industry?
Jim Faulds: The biggest challenge is, thanks to the state’s budget crunch, we just took about a 50 percent budget cut. We’re trying to figure out how we can rebuild and essentially fulfill all the aspects of our complex mission with reduced state funding. We have a lot of grants and soft money coming in, but a lot of those require a match. With reduced state funding, it’s a little harder to keep that grant machine going, because we have less to match.
Ben Veach: Our biggest challenge for our company right now is acquiring the right personnel. We struggle every week to keep the right people in front of the clientele that we have.
Corrado De Gasperis: We are about to go into production with our first project and we have at least three that are conceptually laid out. Most of the mines are trying very aggressively to develop more of their projects. The infrastructure in Nevada is fantastic. But, the complexity that comes from laying county regulation with state regulation, federal regulation, historical regulation and environmental regulation makes it very difficult to accelerate the pipeline. The longest lead time items are regulatory and we don’t subordinate as an industry to regulation. It’s so complex that you need a caliber of expertise that goes beyond the network of consultants. You need internal project expertise. I think that it is retarding, dramatically, the pipeline; meaning, good projects are going slower and decent projects are not even coming on the radar screen. It’s overwhelming. It’s not only so complex, there’s not one authority that can drive you through it. The State of Nevada, which would be the third, fourth or fifth largest producer of precious metal if it were a country, could be twice or three times as robust if there was some way to accelerate what I’m talking about. I think the governor believes in that.
Tim Crowley: The State of Nevada’s system is known for being very thorough, very thoughtful. They do move with alacrity. It tends to be that the pieces that hold you up are the federal pieces. There are steps along the federal path that add no value. Nobody argues that you don’t have to take the right steps to ensure that environment is taken care of, that your workers are taken care of. No one wants to shortcut any of that, but you can move with more alacrity and get through that process quicker. In isolation, there isn’t an issue necessarily with the state, but when you couple that with the many other complex processes, then it all becomes very overwhelming. I think there’s appreciation for moving quicker. You feel it from all regulators. Okay, great, we’ve got the appreciation, now what do we do? How do you actually make changes that streamline the system? You’re asking investors, the people building and backing that mine, to put tens of millions of dollars, in some cases, billions of dollars, into a project and then not know when the return is going to be. The farther you push that back, the more that becomes speculative. The risk just goes through the roof.
De Gasperis: I wouldn’t want to be anywhere else than Nevada. In terms of comparing to other states, it’s one of the best states, if not the best state to be in. My comments were drawn towards how much tremendous potential there is in all this complexity. When I say retards it, I mean it sometimes slows it, sometimes halts it. Nevada has professional regulators, expert engineers and environmentalists. I agree concurrently they want you to go into production, they are there to help you go into production. But, there needs to be a higher leadership that somehow accelerates these projects. If you were to lay out [the needs of the industry] and put the regulation that would be required to ensure those needs were met, it would be 8 percent of what we deal with. Instead we have 92 percent more regulation, a lot of it is redundant. I don’t have a solution, but it’s daunting.
Crowley: There’s growth out there. There are people who are going to take the risk. If you canvas the State of Nevada, there’s some really positive projects coming and they’re enduring the delays. The beauty of this industry is it’s across the board, problem solvers. Everywhere you look, problem solvers. We’re solving problems and growing the economy. We’re investing billions of dollars, cumulatively, through projects. The benefit to other companies through the supply chain is profound. You find that there’s benefits in Reno and Las Vegas that people would never assume. You are going to see mining’s presence more and more in your face as the industry grows.
How does UNR play a role in the mining industry?
Jeff Thompson: We fit in a lot of different ways, everything from producing mining engineers, the basis for being able to move the material, metallurgical engineers who extract the materials, geological engineers to design the slopes, exploragion geologists, economic geologists, chemical engineers, civil engineers, all the way across the industry. A lot of our graduates work in the mining industry, whether on the finance side or digging the holes. We have a great relationship with the companies. One of the problems is, we can’t produce enough people. We work very hard to recruit students, to get them through the pipeline and get them out as fast as we can, to make sure they’re qualified to go to work. Anyone who is interested in the mining industry and graduates from UNR, goes to work the next day. We have a tremendous number of scholarships in the Mackay School for Mining and Engineering. We give about $400,000 a year away in scholarships to undergraduate and graduate students. We have faculty members who are supported in mining, metallurgical engineering, economic geology, by the industry to do their work and also research projects. We partner with a number of different companies for specific research projects. Whether it’s an issue they see might be coming or, if they’re looking for more expertise they may not have at the moment. Our faculty or students supply that expertise at times. They’re hiring like crazy. Every student usually has multiple offers from multiple companies.
Crowley: The industry has a role to play in defining these jobs. There aren’t a lot of kids who are growing up saying, “I want to be a miner.” But, they want to be an engineer, they want to build things. We do a poor job of saying, “You’re going to do some of the finest engineering, innovative work you can imagine in the mining industry.” There’s a branding problem. Intuitively, you’re going to say, “I don’t want to be a miner, it’s dirty.” No, it’s innovative, it’s satisfying and it pays extremely well.
Do you think people in Nevada still think that mining is done with a pick and shovel?
Crowley: Absolutely.
Thompson: Absolutely. It is very complex and highly technical and there are many different facets from design, construction, to systems engineering, all the environmental work and reclamation. If you could go into some of these control rooms, it looks like they’re going to launch a satellite. It’s incredible what goes on.
Veach: [Additionally], you may graduate 10 or 12 mining engineers a year, but it takes dozens of other graduates to support that. I imagine almost every degree has some element to play in the mining industry, whether it’s in the approvals or in the closures or if it’s in the actual mining itself. It’s just so ingrained into what the university provides mining, that I think a lot of people overlook that.
Thompson: We are supplying as much as we can and we’re trying to do more. The industry has been very good at working with us, telling us what their needs are and what areas we can have additional training in.
De Gasperis: There is a paradigm of the mine being an old dirty hole in the ground. Even though that is not true and is being revolutionized by technology, it’s also part of a broader economic network. We as an industry don’t do a good job of showing people the entire value chain. I think young people don’t mind where they work initially, as long as they’re getting great experience. We have to present that experience as something that is bigger. We do it to ourselves. We have to make it more exciting and it is more exciting when we define it more broadly.
Does the public understand the reclamation requirements for the mining industry?
Crowley: I don’t think we do a good enough job telling the public what is historical and what is current, and we’re working at that. It takes a lot of effort and its effort well spent. It’s important to know that the costs of closing a mine and reclaiming a mine are paid on the front end of a project. You can’t start a project until you’ve committed the resources to close it. That’s to protect taxpayers from any incidentals that might happen, like a bankruptcy. You can’t leave taxpayers on the hook for fixing the impacts that happen with mining. If you want the resources, you are going to have to impact the environment. You have to. But, it’s our obligation to reclaim it to the best of our ability and put that land back. If it is public land, to put it back into the economy to be used for recreation or other economic opportunities down the road. Then innovations and reclamation have been profound over the years. It’s a difficult story to tell Nevadans. One way we try to tell it is by showing people what we do. There’s no better way than to come to a mine and take a look.
Tom Clark: On the reclamation side, a lot of the mining folks are looking at, not just making it a green pasture or that kind of thing, but actually looking at how they can affect the environment on a positive level. I think that’s a good thing.
Veach: In an effort to be better stewards of public land, when mining companies are making reclamation plans, they’ll reach out beyond the boundaries of their own mines and catch areas that were historically mined and perhaps not treated as well. We see a lot of that in reclamation plans for active mines. We’re even seeing it extend into some of the exploration projects. There are a lot of improvements; the damage that was done historically is being borne now by current mining practices. It’s on almost every project we work on.
De Gasperis: There’s an exciting shift happening right now. There’s a shift from being an old-time miner, obsessed with being profitable, doing the minimum compliance and frankly, being reactionary. Now we have the wherewithal, an inflow of even more intelligent people. Innovation is the key. You have people who care about the territory, who have a different covenant with the territory. They’re focused on it as a priority in advance and thinking about restoration instead of reclamation. You realize with some innovation it’s not expensive. When you factor in the sustainability of where it allows you to keep going and it’s even more profitable. There’s no conflict between sustainability and profitability, they complement each other.
Veach: This is the stewardship that we run into on mine sites. These are people that really care. I don’t know if it’s that they’re just that brilliant that they can see that far into the future and figure these things out, or somewhere along the line they figured it’s better to do it right the first time, or if, perhaps, they can save a year in the permitting process to get something done and be good stewards, it’s a good sustainable project.
De Gasperis: It’s a win/win and it takes innovation. And we haven’t conveyed well enough exactly what we intend to do and how we intend to do it. We say our actions speak louder than our words, so, just follow our actions.
What kind of economic impact does mining have on the state?
Crowley: Taxes are at the top of the list. We pay all of the state and local taxes that any business would pay, the sales taxes, payroll taxes, and property taxes. That’s what a business in the state of Nevada pays. In addition to that, we pay what’s called the net proceeds of minerals tax. And what that comes to is one of the highest per employee contributions of any business. The average business pays about $5,500 a year in state and local taxes. We pay over $18,000 a year. Those tax contributions have grown. Our tax contributions grew by 54 percent in one year. They went from roughly $200 million to $300 million from 2009 to 2010. You say, okay but the value of gold went up by that. No, it went up by about 27 percent. There’s a bit of a disconnect. How could your taxes go up by over 50 percent when the gold went up by about 25-ish percent? It’s because we’re purchasing a lot more goods and services. We’re hiring more people and we pay a very high salary.
De Gasperis: The tragedy is, when you cut funding, one of the first things you cut is exploration because there’s no immediate impact, you’re killing the pipeline. Those are huge dollars. That’s why it’s so critical taxing is fair. We’re investing a lot of money just to get to that point. Nevada is sitting on a statewide bonanza that we’re killing right now. We’re killing it at the front end because we want to retard investment, retard development, all the things that will create an exponential explosion in investment. I would portray us as the eighth or ninth largest disproportionately high taxpayer and as potentially the greatest thing that could happen in the next 10 years.
Will mining still have the same issues a year from now?
Fred Reeder: Without a doubt. It’s interesting to see how, on Corrado [De Gasperis’] level—he’s up here at the regulatory level, I’m down here, but we both have the same issues.
De Gasperis: We’re the most regulated industry. Luckily, there’s entrepreneurs in our industry that fight to survive because they have to and it’s not right. I really would not want to be anywhere else but in Nevada because the infrastructure is also a rule of law and the environment is protected, we have sustainability. But, it can’t be this many layers, this complex. There has to be something better than that. There’s just so much to tackle.
