Gold's long bull run - the price of precious metal rose roughly 44 percent in 2010 and its up about 214 percent from November of 2006 - is expected to sustain its momentum in the coming year, mining industry experts say.
And that's expected to drive continued economic strength in the northeastern Nevada counties that rely heavily on the mining industry for their basic employment.
Kurt Criss, director of operations planning for Newmont Mining Corp., says the economic factors that led to gold's meteoric rise are still in place. The price of gold rose to a record $1,900 per ounce in mid-2011 and mining executives expect it will crack the $2,000-an-ounce barrier in 2012 after recent pullbacks that they consider to be temporary.
Increased investor demand for gold as a safe haven from volatile stocks, as well global demand from foreign governments stimulating regional economies by increasing their currencies all have helped the price of gold skyrocket, Criss says.
"Most metrics you look at are all bullish for gold," he says. The high price of gold has helped the state's two biggest mining companies - Newmont and Barrick Gold Corp. - expand mining activity in existing properties and explore for significant new discoveries.
Barrick, the world's largest gold mining company, has an exploration budget in excess of $100 million exploration just for its Nevada properties, says Lou Schack, manager of communications and community affairs.
Barrick in 2010 completed a major expansion of its Cortez property, the state's largest gold mine. The Cortez complex produces about 1.4 million ounces of gold each year. Barrick also completed an expansion at Bald Mountain, an open pit mine in White Pine County, and the company is in final permitting stages for its Arturo project in Elko County where it expects to begin mine site construction within a year.
Its Turquoise Ridge project in Humboldt County - currently a large underground mining operation planned to transition into open pit mining - could become the largest mining operation in the state, Schack says.
"We are as busy as we have ever been," he says. "The market remains strong for gold and other metals, and I suspect that will continue. As long as all other investments aren't looking strong, there is reason to believe that gold will remain strong. When the market is good you reinvest in exploration, and down the line if that exploration is successful you have new mining projects."
Newmont also is using the high margins on gold production to expand its footprint on existing mines and drill for new prospects. The company produced roughly 2 million ounces of gold from its Nevada properties in 2010, Criss says, and it has a production target of 2.4 million ounces annually by 2017.
To get there, the Denver-based company spent $2.3 billion to acquire 100 percent interest in the Long Canyon property in Elko County's Pequop Mountains between Wells and Wendover. Newmont still is in the permitting and exploration stages at Long Canyon and hopes to begin mine site construction by 2015, says Mary Korpi, director of external relations.
Other key projects in Newmont's North America portfolio include expansion of the Leeville/Turf underground mine and expanding the facilities at its Phoenix mine south of Battle Mountain in Lander County. Newmont plans to add an additional milling facility at the mine, as well as install a copper leaching facility that will process material that otherwise would have gone to a waste dump.
Newmont expects to bring its Emigrant mine south of Carlin online in the second half of 2012. When the mine ramps up to full production it should employ approximately 135 workers and produce 80,000 to 100,000 ounces of gold per year.
"When you have got margins as we have today, that is an opportunity that we have to invest in these projects and really does allow us to sustain the business and the industry," Korpi says. "It is good for jobs, the local communities and the state of Nevada."
Labor, as it has for several years, will be one of the biggest factors pressuring mining and exploration companies in 2012. The demand for highly experienced mine site workers and engineers can lead to higher wages, especially for companies such as Barrick and Newmont, who employ several thousand workers each.
Other factors that could influence production costs are the price of tires and fuel, two large expenditures in mining operations.
Although Nevada is dominated by gold mining, copper production also plays a large role in the state's production of precious metals. The Robinson mine near Ruth has produced about 120 million pounds of copper annually the past few years, says Derek White, executive vice president of corporate development for QuadraFNX Mining LTD of Vancouver, the mine's owner.
The price of copper still remains high at roughly $3.50 per pound, but it has retreated from its historic highs of roughly $4.50 a pound in 2011. Concerns about the global economy, particularly the fiscal distress in Greece and Italy, have pushed the price down, White says.
But copper mining companies aren't terribly concerned with short-term swings in price, White says - their focus is on what factors will shape copper prices during the next three to five years. And the outlook for copper is good, he says.
"On a supply and demand level, we see a fundamental shortage of supply that is suffering from lack of investment. Copper needs significant infrastructure, and there are not many new projects coming online.
"There is not enough supply, and we have very strong and growing demand. We are seeing pretty good upside in the next three to five years, even with all bad economic news. For the mines in production today, like the Robinson Mine, that bodes very well."
Production at the Robinson mine slowed early this year as work transitioned from the older Tripp and Veteran pits into the newer Ruth pit. However, White notes, as miners develop more ramp access into the new pit and create more mining faces, production is expected to increase back to historic levels.
