Nevada gold mines helped rural economies survive the financial crisis

Despite soaring gold prices, a Nevada Mining Association report says mines are facing high state and local taxes, and lengthy permitting delays making it tough to retain a mining workforce.

RENO, NV - 

The richness of Nevada gold mines, coupled with soaring record gold prices, have placed international gold companies firmly in the crosshairs of social service advocates seeking additional revenue to staunch the hemorrhaging of deficit government spending.

For the past few years, the Nevada Mining Association has produced an annual economic overview aimed at educating state and local government officials on the world's fourth largest gold producer in order to show how important a role gold production plays in the Nevada economy.

The latest version of the report highlights increasing production costs, higher state and local taxes paid by the industry, and the impact of permitting delays in retaining a viable Nevada mining workforce.

Report author Dr. John Dobra, an economics professor at the University of Nevada Reno, estimated the state's gold reserves at year end 2008 were an estimated 70.4 million, almost identical to the previous year. The state continues to have enough reserves to maintain production at current levels for an additional 12 years.

Nevada gold production declined to 5.7 million ounces of gold last year, down from 6.04 million in 2007. It was the eighth straight year of production decline. "While lower production levels may seem like bad news in the short term, in the longer run it extends the life of ore bodies and enhances the sustainability of the industry," Dobra said.

Despite the decline Nevada gold production still accounted for over 79% of total US production and approximately 7.3% of world gold production. While the Nevada Division of Minerals reports over 20 major gold/silver mines in the state, several are closed or operating reduced levels.

In his analysis, Dobra estimated that mining and mining services contributed $10 billion to Nevada's Gross State Production (GSP) in 2008, compared to $9.6 billion in 2007. He also calculated mining and mining services contributed $2.4 billion to Nevadans' personal incomes in 2008.

Meanwhile, production costs continued to increase last year. Weighted average cash costs increased from $408 to 2007 to $525 in 2008. "The primary cause of the increases in 2008 was that higher prices have allowed operators to reduce the ore grade of materials processed," Dobra said. "This results in the lower output noted above and a higher cost per ounce."

Dobra asserted that another factor responsible for pushing up costs in 2008 "were significantly higher state and local taxes paid in 2008. Total taxes, which include Net Proceeds, Property, and Sales and Use taxes, increased just under 15% in 2008." Total estimated state and local taxes paid by the mining industry were $225 million, over half of which went to Nevada's general fund.

During 2008 Nevada mining showed what Dobra called "relatively modest increases." Total average direct employment in the Mining and Natural Resources sector was 14,613, up from 14,470 in 2007. Mining and metal mining was still the highest paid sector in the state economy with average pay of $69,300 and $78,600 respectively. Average statewide earnings in 2008 were just under $43,000.

In his report, Dobra said, "Copper is the second most important mineral produced in terms of the value of output, although only a little more than one tenth the value of gold production." Last year's copper production was 175.5 million valued at $555 million compared to 2007 copper production of 142.8 million pounds, valued at $461 million.

Meanwhile, Nevada silver production fell slightly again from 8.41 million ounces in 2007 to 7.96 million ounces in 2008.  Because of higher silver prices in 2008, Dobra estimated the calculated value of 2008 silver production rose from $113 million in 2007 to $119 million in 2008.

In 2008 Nevada exploration spending showed its first decline since 2001 from $168 million in 2007 to $158 million in 2008.

Nevada mines also produced other minerals last year including aggregates, barite, diatomite, dolomite, gypsum, limestone, lithium carbonate, molybdenum, magnesium oxide, perlite, precious opals, salt, silica sand, and specialty clays. Dobra noted the value of these other minerals was an estimated $456 million, down slightly from the previous year. "The decline is likely due to the national recession and a decrease in demand," he said.

Disclaimer

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