Golden Celebration: Elko is hoping the market has hit rock bottom
Bill O'Driscoll
RENO GAZETTE-JOURNAL
4/20/2002 03:22 pm
ELKO — The economic aftershocks could be ebbing in this epicenter of Nevada mining. After several years of plummeting prices, the gold market is showing signs of strength and stability at $300 an ounce, up more than $25 since last fall.
“Twenty-five dollars makes a big difference. It’s job security for us,” said Bill Smith, a mechanic at Newmont’s Carlin operation about 30 miles west of Elko.
In a region where three-fourths of all jobs are in some way connected to the gold mines, that’s welcome news amid falling student enrollments and rising unemployment.
It also widens Elko’s collective smile from last week’s celebration of the 50 millionth ounce of gold produced in the Carlin Trend, a gold-soaked stretch of earth in Elko and Eureka counties west of here.
The double dose of good tidings has helped to reboot the psyche in northeastern Nevada.
“I think we’ve hit bottom,” said Kevin Melcher, director of instruction for the Elko County School District.
In 1998, the district’s official count tallied 10,444 students. Last September, the count was 9,847. So Melcher has seen first-hand what low gold prices can do.
The landscape is vastly different than when he arrived from Reno in 1980. Then, gold was going for $700 or more an ounce, mines churned it out as fast as they could and schools scurried to find room for a burgeoning enrollment.
Today, Melcher senses a turnaround.
“The feeling I have is for growth to pick up in the next couple of years, but not like the mid-’80s,” he said.
First, though, pain lies ahead. Elko has approved a property tax increase and eight city employees have been laid off.
Mayor Mike Franzoia insists the changes are tied to the post-Sept. 11 economic downturn which has hit Nevada in falling tax revenues.
It shows at Bodily Furniture, where owner Ed Gillins has watched sales drop 12 percent from their 1996 peak. And it shows on the county’s multiple listing service, where 480 dwellings are up for sale, the most Realtor Dee Pruitt has seen in years.
But Pruitt, too, sees hope emerging.
“It’s picked up somewhat in the last 30 days,” he said. “I think it’ll slowly get better.”
Franzoia agrees.
“There’s a thread of optimism,” he said. “Mines are so much more efficient now. It’s prepared them well for the next growth period.”
At Newmont Mining Corp., the state’s largest operation and the biggest name on the Carlin Trend, staffing has fallen from 4,000 in 1997 to 2,800 today.
Some losses are linked to layoffs, particularly in 1998, but others stem from increased automation and technology, said Lee Krugerud, Newmont vice president of North American operations.
He said 1999 and 2000 were tough years.
“People wondered where the bottom was,” he said. “Behaviors have changed, but we’ll be very methodical going forward even with a continued ramp-up in gold prices.”
Tough times also meant consolidation.
Newmont recently completed its acquisition of Australia’s Normandy Mining Ltd., making Newmont the world’s biggest gold producer.
And Barrick Gold, Nevada’s No. 2 producer, has bought Homestake Mining Co., giving Barrick ownership of all or part of five mines in Nevada — including the Goldstrike property on the Carlin Trend.
“With consolidation, this is one strength that will distinguish companies and their ability to grow, explore and continue making a contribution to Nevada’s development,” said Barrick Vice President Vince Borg.
The rise in gold prices can be traced in part to a surge in Japanese imports as people lost faith in that nation’s banking system, said John Dobra, economist at the University of Nevada, Reno.
Add in terrorism-induced uncertainty worldwide, and people are drawn toward gold, Dobra believes.
“It’s the ultimate currency, that’s probably what’s driving it,” he said.
Still, mining companies should not expect to see the breathtakingly high prices of the 1980s, Dobra cautioned.
“That was a real anomaly,” he said. “I would expect a long run at holding its value at what is now.”
That’s all right by the mines as they move forward into the next 50 million ounces of gold in the Carlin Trend.
Newmont’s operational costs, from digging ore to pouring gold, have dropped from $232 an ounce in 1996 to an estimated $213 this year, Krugerud said.
But Newmont pays $65 million a year for electricity, he said, so it is considering funding — or helping to fund — a new power plant off the Sierra Pacific Power Co. grid.
“We’re trying to protect ourselves from the volatility of costs,” Krugerud said.
Other signs point to a brighter future.
On Thursday, the state reported the Elko region’s jobless rate fell in March to 6 percent from 6.3 percent a month earlier.
Borg said Barrick’s Goldstrike property has more than 20 million ounces of gold in reserves.
That’s what Elko wants to hear.
The county has grown to more than 45,000 residents, and mining, with an average salary of $58,000, is the state’s the highest-paying job sector.
Melcher points to the positive in the past year: a new airport, a new hospital and $4.5 million in improvements to Great Basin College.
“That has put Elko into a position to be poised to take off with the next wave of growth,” he said. “We’ve seen both ends of the swing.”
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