The Silver State & So Much More: Mining in Nevada

 
Nevada has been known as “The Silver State” since it entered the Union in 1864, but these days, it’s equally famous for gold, lithium, molybdenum and a host of other minerals. Nevada has 119 mines, located in every county except Douglas, and even has six producing oil fields. Mining represents a vital component of the state’s economy. Its total economic output in 2015 was approximately $10.3 billion, and it provided more than 18,600 direct and indirect jobs, mainly in rural communities with few other opportunities for employment. The average annual earnings for employees in metal ore mining was $96,668 in 2015, as compared to statewide average earnings of $45,760.

In 2015, Nevada produced 9.5 million ounces of silver, 5.34 million ounces of gold (5.5 percent of the world’s total production), and 178 million pounds of copper. Dana Bennett, president of the Nevada Mining Association (NMA), noted that Nevada mines produce many other elements that have become essential for our daily lives in the 21st century such as gypsum for wallboard, molybdenum for construction equipment and tungsten for electrical equipment.

“As the Silver State’s original and most enduring STEM industry, mining has positioned Nevada as a global leader in the production of strategic minerals and the development of new technologies,” she said.

The elements that Nevada produces are needed in advanced manufacturing processes and renewable energy production. Silver is used in solar panels, copper and cobalt in energy storage devices and lithium in batteries like those used in electric cars. The only lithium mine in North America is located near Tonopah. As these sectors of the economy heat up, the demand for Nevada’s metals and minerals increases.

On the Upswing

“Mining tends to be counter-cyclical with the rest of the economy, so during the recession, mining was the one industry in Nevada that was doing well,” said Bennett. “Now that the economy is recovering, mining has slowed from its high of a few years ago. Demand is growing, but prices are not at the height they were a few years ago.” She pointed out that the industry does not move in lock-step. Gold mining picked up during the recession, as many people looked to gold as a safety net, but industrial minerals declined because construction was down. Now that the overall economy is improving and construction is up, materials like gypsum and limestone are doing well again.

Barrick Gold Corporation, the largest gold mining company in the world, operates three mines in Northern Nevada. In the first quarter of 2017, Barrick’s Nevada properties produced around 600,000 ounces of gold. Nigel Bain, executive director of Barrick USA, said, “The gold mining industry does not fluctuate with boom-and-bust cycles like it did in the past. Modern mining is very capital intensive. If we were to build a new mine today, it would cost more than a billion dollars. To get into such a venture, you’ve got to be pretty sure of the investment. You can’t put your capital at such risk that if the gold price went down, you’d have to close the mine. The mining industry in Nevada is very stable, but it does seem like we’re on a slowly improving cycle.”

The other gold mining giant in Nevada is Newmont North America, whose Nevada operations produced about 1.6 million ounces of gold in 2016. Chris Howson, regional chief financial officer for Newmont North America, said his company has begun to see increased investor interest in gold, particularly from India and China.

“Uncertainty around US policy, along with global geopolitical uncertainties, is driving interest in gold as a safe haven investment,” he said. “Those factors have led to a fairly stable gold price environment, and Newmont expects the price to increase in the coming years.”

Mining’s Impact on Tax Revenues

Mining is the largest industry in rural Nevada, providing not only employment, but also vitally needed tax revenues.

The Net Proceeds of Mines (NPOM) Tax, which has existed for decades, is currently 5 percent. More than half of NPOM tax revenue goes to the Nevada General Fund and the remainder goes to the county in which the minerals were produced. In 2015, mining companies paid $91.8 million in NPOM taxes.

Property taxes paid on property, plants and facilities stay almost exclusively in the rural counties and special tax districts where mines are located. In 2015, property taxes for mining companies totaled $31.7 million.

Sales and use taxes are primarily distributed throughout the state on a per capita basis, while a small amount goes to the state’s General Fund and to school districts statewide. In 2015, mining companies paid $90.5 million in sales and use taxes.

Modified business taxes, based on total gross wages, totaled $11.7 million in 2015.

On average, Nevada businesses pay roughly $5,500 per employee in state and local taxes. Mining pays three times that – more than $18,000 per employee.

Working Through Challenges

“The number one challenge facing Nevada’s mining industry is regulatory uncertainty,” said Bennett. “The vast majority of land in Nevada is managed by the U.S. government. The EPA (Environmental Protection Agency) is looking at a proposed rule that would have devastating financial consequences, and we’re not sure which direction they’ll go. They may implement a law that would require additional bonding to be in place during mine operations to protect against damage caused by spills or adverse impact to the environment or to human health. They don’t realize that for 30 years, Nevada has had a system in place for permitting, oversight, inspection and bonding. To require additional bonding would make things very difficult,” she explained. “The regulatory system in Nevada is both effective and responsive. Other states and countries come to Nevada to look at what we do. Our system is considered a role model.”

Getting supplies and technology to remote rural areas can also be a challenge. According to Sheldon Mudd, mining industry specialist at the Governor’s Office of Economic Development (GOED). One of his duties is to identify supply chain gaps and help fill them. For example, mines moving liquids through pipes may need instruments to monitor pipes in real time. Underground mines require wireless communication devices that work over long distances underground.

“We identify the services and supplies that are needed to make sure the mines are producing at maximum efficiency,” said Mudd. “Then, we help bring them closer to where they’re needed.”

“One of the many challenges facing Newmont is stemming rising costs as we explore and develop new ore deposits that are more costly to mine,” said Howson. “Since 2014, Newmont’s North America region has made significant progress in reducing its costs, with all-in-sustaining costs lower by approximately $140 per ounce, a reduction of approximately 14 percent. Looking forward as costs trend higher, Newmont is focused on driving efficiencies to further reduce unit costs while maintaining Newmont’s high safety and environmental standards.”

Bain said one of Barrick’s main challenges is the time it takes to permit mines. “The biggest slowdown is the time it takes the Department of the Interior to publish administrative notices and public comments. The actual fieldwork goes pretty quickly through the efforts of the BLM,” he said. “It can take up to 10 years to go from an exploration project to an operating mine and that’s a long time to have money tied up. We typically spend tens to hundreds of millions of dollars before we even get to the stage of doing an environmental impact study. It’s a challenge for mining investors. There may not be a defined timetable for the return on their investment because someone could challenge the permit and make it drag out even longer.”

He stated that another major challenge is attracting more skilled people. Barrick partners with GOED and Great Basin College in a program helping recently separated veterans get into courses that help build the workforce for the mining industry. GOED also works with the University of Nevada, Reno (UNR), University of Nevada, Las Vegas (UNLV) and the community college system to enhance their programs for welders, electricians, fabricators and other skilled workers in high demand.

Environmental Issues

“Newmont’s presence in a community can span decades, from early exploration to constructing a mine, extracting and processing minerals and ultimately closing the mine and reclaiming the land,” said Howson. “Throughout the mine lifecycle, we strive to be responsible stewards of the environment. All of our mines operate under ISO 14001 accredited environmental management systems, and many of our employees are involved in regional environmental and resource conservation programs.”

Bennett added, “Our members take environmental issues very seriously. Nevada was one of the first states to enact a comprehensive reclamation law in the 1980s that addressed what would happen when a mine closed. The state of Nevada holds between $2.1 billion and $2.2 billion in bonding that can be used in case the mine operator can’t or won’t implement the reclamation plan when a mine closes. Happily, the state has not had to step in with these bonds since the program was put in place.”

Mudd added that most mines today are zero-discharge facilities, and don’t see a single drop of water leave. “They do such a great job of reclamation that if you see a scar left by mining, it’s most likely from pre-1960 activities,” he said.

Mining companies have formed partnerships with groups like the Nature Conservancy, Trout Unlimited and Bighorn Unlimited to help reclaim streams and do other habitat enhancements and many mining employees are members of these groups. “The people who work in the mines also live in our rural communities and enjoy the rural lifestyle: hunting, fishing, riding ATVs,” said Bennett. “They’re very concerned about preserving the land for multiple uses.”

Helping Local Communities

Mining companies play an important part in supporting the communities in which they operate. In 2015, the mining industry donated $15.1 million to non-profits and charities in Nevada, chiefly in the rural communities where mines operate. For example, the Newmont Legacy Fund, a charitable organization formed by Newmont’s Nevada employees, distributed $2.44 million to non-profits in 2016. The employees pledged $1.22 million, which was matched dollar-for-dollar by the company. Mining companies also donated $2.7 million to education-related projects, including scholarships, and their employees donated 930 volunteer hours to local charitable groups.

Mining Goes High-Tech

“When people think of mining, most of them have the stereotype of a grizzled miner with a canary and a candle, but nothing could be further from the truth,” said Bain. “Mining has become a high-tech world. We now have autonomous vehicles running at our mines, both underground and open-pit, with the operators watching at a safe distance. We have a vast array of methods to gather data from our operations – everything from the speed of digging rock in our open-pit mines, to the number of support structures in our underground mines, to the performance of our grinding mills,” he explained. To help analyze all this data, Barrick opened an office in Henderson to house its IT department and also serve as headquarters for its global purchasing division.

Mining’s Future

“Looking toward the future, our number one priority is to maintain our strong focus on safety,” said Howson. “Newmont continues to focus on making investments in profitable growth and developing the next generation of projects to maintain long-term sustainable operations in Nevada.

In Northern Nevada we are continuing to explore and develop near our existing operations, with a specific focus on our Carlin, Twin Creeks (outside of Winnemucca) and Long Canyon (between Wendover and Wells) sites.”

At Barrick’s Cortez operations, the company is expanding the underground mining area and going deeper, and Bain said they are pursuing other areas of discovery at all their Nevada mines. “The corporation wants us to keep a hundred-year view of mines in Nevada,” he said. “It looks promising in Northern Nevada and it’s exciting that we have the kind of mine life where generations of families can prosper with Barrick in Nevada.”

Despite its long history in mining, Nevada still possesses considerable mineral reserves and mining companies spent more than $15 million exploring for more resources in 2015.

“Nevada mining is drawing attention on a global scale,” said Mudd. “More and more people are learning about our diverse mineral portfolio, with diatomaceous earth, limestone, barite and industrial metals. I have people calling me from all over the world interested in coming here to mine or to support the mining industry. That tells me we’re looking good.”

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