BACKGROUND PAPER 87-1

MINING IN NEVADA IN THE 1980'S

TABLE OF CONTENTS

I . I ntrod u ct i on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. The Economic Effects Of Mining On Nevada............. 6

T he Tax at i on of Min i n g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Mining Employment and Payrolls....................... 9

III. Issues Surrounding Mining In Nevada.................. 12

Restrictions on the Use of Public Lands.............. 12

Eminent Domain for Mining............................ 14

I ntegr a 1 Vis t as. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

I V • S u mm a r y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

V. Selected Bibliography................................ 16

Figure I Map of Nevada Indicating Location of Deposits of Gold in Nevada................................................ 3

Figure II Map of Nevada Indicating Location of Deposits of Silver in Nev ad a. . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Table I Nevada1s Role In The United States l Mineral Supply....... 2

Table II Major Mining Operations In Nevada, 1985.................. 2

Table III Percentage Of Assessed Valuation Accounted For By Nevada1s Mining Property And Net Proceeds Of Mines, F is cal Yea r 1984 - 1985. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Table IV Mining Employment By County In Nevada, 1985.............. 10

Table V Annual Mining Payroll By County In Nevada, 1985.......... 10

MINING IN NEVADA IN THE 1980'S

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INTRODUCTION

The early history of Nevada is, to a great extent, the history of the Comstock Lode. This vast deposit of silver in the vicinity of Virginia City, Nevada, was, in fact, responsible for Nevada's separate existence as a sovereign state. As H. H. Bancroft observed:

Nowhere else in the world do we find a society springing up in a desert wilderness, so wholly dependent on a mountain of metal, so ruled by the everchanging vagaries of its development, and which finally attained the full measure of a prosperous commonwealth * * *.

After the exhaustion of the Comstock Lode in the 1880's, Nevada's mining industry declined precipitously, only to be revived by the discovery of precious metals in Goldfield, Rochester and Tonopah, Nevada, around the turn of the century. The Goldfield-Tonopah boom lasted until the early years of the Great Depression.

The 1930's witnessed the rapid development of important deposits of base metals, such as copper, lead and zinc. Copper was par­ticularly important to Nevada's economy for the next several decades, providing the main economic base for communities such as Battle Mountain, Ely and Yerington, Nevada.

Although copper mining declined rapidly after 1975 and ceased entirely in 1978 in response to stringent environmental regula­tions and a decline in the world price of copper, Nevada has remained an important producer of other minerals. For example, the McDermitt, Nevada, mine near the Oregon border has for several years produced almost all of the Nation's mercury. The McDermitt mine is, in fact, the only primary producer of mercury in the American hemisphere. Nevada also leads the Nation in the production of barite and magnesite; is second in the pro­duction of diatomite and lithium; and third in the production of fluorspar, molybdenum and tungsten. Table I shows Nevada's role in the United States' mineral supply. A list of Nevada's most important mining operations is shown in Table II.

However, the current mining boom is based primarily on the pro­duction of gold and silver. Over the last 5 years, Nevada's gold production has quintupled. The state now produces over half the Nation's gold and, barring some unforeseen disaster, such as a dramatic decline in price, gold production in Nevada is expected to continue to increase at least until the year 2000. Figures I and II show the location of known gold and silver deposits in Nevada.

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TABLE I

NEVADA'S ROLE IN THE UNITED STATES' MINERAL SUPPLY

100% of Magnesite 99% of Mercury 83% of Barite 58% of Gold 35% of Lithium 15% of Gemstones 13% of Silver

TABLE I I

MAJOR MINING OPERATIONS IN NEVADA 1985

Number of Project Product County Employees

Freeport Gold Mine Gold E lko 295 Carlin Gold Mine Gold Eureka 575 Horse Canyon Mine Gold Eureka 106 Pinson Mine Gold Humboldt 134 Sleeper Mine Gold Humboldt 137 Copper Canyon Mine Gold Lander 400 Cortez Gold Mine Gold Lander 142 Sumich Mine Gold Lander 100* Nevada Cement Plant Cement Lyon 160 Candelaria Mine Gold/Silver Mineral 143 C-E Basic Magnesite Nye 117 Round Mountain Gold Mine Gold Nye 276 Paradise Peak** Gold/Silver Nye 498 Colada Plant Diatomite Pershing 110 Alligator Ridge Gold Mine Gold Wh ite Pine 157

*No longer in operation. **Employment during development phase.

The current renaissance in gold mining in Nevada has been made possible by a combination of economic changes and technological innovations. The primary economic change has been the dramatic increase in gold prices. In March 1968, the Federal Government established a two-tier pricing system which allowed the price of gold to fluctuate freely in response to the forces of supply and demand. In 1974, the Federal Government went still further, removing restrictions on private ownership of gold. In the late

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FIGURE I

INSET

o , 5,0

Scale, miles

LEGEND

• Oc:c:urrenc:e

A Princ:ipal depoalt

Source: Principal Deposits of Strategic and Critical Minerals in Nevada, N. T. Lowe, Russell G. Raney, John R. Norberg, United States Bureau of Mines, 1985.

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FIGURE II

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Source: Principal Deposits of Strategic and Critical Minerals in Nevada, N. T. Lowe, Russell G. Raney, John R. Norberg, United States Bureau of Mines, 1985.

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•

1970's, loss of confidence in the economy and persistent high inflation made gold an attractive investment for many people. As a result, the price of gold rose from $35 an ounce in 1967 to a peak of approximately $850 an ounce in 1980. Although the price of gold currently is around $400 an ounce, it still remains high enough to make most of Nevada's mines profitable.

Technological changes have also stimulated gold mining. Unlike previous gold mining booms, the present one is based primarily on low-grade ore and disseminated gold. For example, at the Round Mountain, Nevada, mine, approximately 160 tons of rock must be moved to produce 1 ounce of gold. Deposits of this type could not be exploited profitably using traditional methods.

One of the processes which makes the exploitation of low-grade deposits possible is heap leaching. At Round Mountain, the largest heap leaching operation in the world, crushed ore is piled 35 feet high on an asphalt pad. For a period of 50 to 60 days, the ore is sprinkled with a weak solution of sodium cyanide, which dissolves the precious metals. The pregnant solution is then processed to recover the gold and silver. A diagram of this process is shown below.

CRUSHED ORE WITH LIME

i .......... ---.

LEACHING

LEACH PADS

FRESH WATER

LEAN SOLUTION

LEACH WASTE

,...~t-_____ .!P:!!R~!..a!ll..!-~IIlIt..!..!JIWi.----_ TO CARBON ADSORPTION FROM CARBON

,........J.--4-~--4-_--.J!~~l4~Il..!.lIl!!...----I+--- ADSORPTION

I

lc-

5

SOLUTION HEATER

L..-___ ---'

I I

_I

,.- - - - - --FUEL OIL

Unlike the mines on the Comstock Lode and other early mlnlng areas, most of Nevada's modern mines are open pit operations. In fact, the only major underground mine remaining in Nevada is the Sixteen-to-One mine at Silver Peak, Nevada. Open pit mining makes it possible to use larger trucks and excavating machinery than could be used underground and to remove ore more efficiently.

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THE ECONOMIC EFFECTS OF MINING ON NEVADA

Despite the enormous quantity of gold, silver and other minerals produced in Goldfield, Tonopah and Virginia City during the 19th and early 20th centuries, the true significance of these early mining booms for the state's long-term economic development is debatable. Nevada did not have the banks, factories and ware­houses necessary to provide the mines with capital, equipment and supplies. Consequently, the mines relied primarily on out-of-state suppliers and the larger part of the economic bene­fits went to other states--particularly California. As the historian H. H. Bancroft said of the Comstock boom:

What advantage to Nevada has been her mountain of silver? What advantage to her organization as a state? Some, no doubt, but more to individuals than to the commonwealth at large. To the later inhabitants, the merchant, the miner, the farmer, the professional man, it is not a matter of great moment, the fact that millions of money have been taken from somewhere about Sun Peak, leaving hills of debris and ghastly holes in the ground--money squandered by lucky gamblers in New York and Paris, and used for purposes of political and social corruption in Virginia City and San Francisco. Less than the least of the tailings of this vast output of wealth has gone to benefit Nevada.

The present situation is somewhat different. Other sectors of Nevada's economy are now well developed and better prepared to supply the needs of the mining enterprises and their employees. The mines now purchase about half their equipment and supplies in Nevada. They also provide employment for many Nevada citizens and contribute heavily to public revenues. These developments suggest that the benefits of the present mining boom may be far more enduring than those of the past. Some of the specific economic benefits which mining provides to Nevada are examined in the sections which follow.

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The open pit copper mine near Yerington, Nevada - Now being redeveloped as a recreational area.

Ore Mill at Paradise Peak near Gabbs, Nevada.

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The Taxation of Mining

The method of taxing mining was an issue of vital importance in Nevada's early days. The state's first attempt to adopt a constitution foundered on this very question. The first state constitution, drafted in 1863, failed to discuss the problem. It was rejected by the voters who feared that it would enable the state to tax the "poor miner's shafts, drifts and bedrock tunnels." The following year a new constitution was drafted. It resembled the old one in most respects, except that it exempted mines from taxation, substituting a tax on the proceeds of mines.

Article 10, section 1, of Nevada's constitution currently states, in a manner similar to the original document:

The legislature shall provide by law for a uniform and equal rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, real, personal and possessory, except mines and mining claims, when not patented, the proceeds alone of which shall be assessed and taxed, and when patented, each patented mine shall be assessed at not less than five hundred dollars ($500), except when one hundred dollars ($100) in labor has been actually performed on such patented mine during the year, in addition to the tax upon the net proceeds; * * *.

The net proceeds tax is provided for in more detail in chap-ter 362 of Nevada Revised Statutes (NRS). Nevada Revised Statutes 362.120, "Computation of gross yield and net proceeds," allows mine owners to subtract royalties and operating costs from their gross proceeds to arrive at taxable net proceeds. The net proceeds of mines are added to the property tax base and taxed at the same rate as real property.

It should be noted that only the mine itself is exempted from taxation. Real property associated with mining, such as build­ings, equipment and other improvements on the site of the mine, is taxed as real property. As is shown in Table III, the tax on net proceeds of mines and mining property constitutes a very large part of the tax base in some Nevada counties.

In addition to revenues from the tax on net proceeds and mining property, mining also generates significant amounts of sales and use tax revenue. Unfortunately, Nevada's department of taxation does not publish data identifying sales and use taxes paid by mines, so it is impossible to determine how significant these payments are. However, in 1981, a sample of 32 mines in Nevada reported the purchase of $196.2 million in equipment and supplies

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over the course of the year. These mines had paid $11.2 million in state and local sales and use taxes. Based on this sample, it was estimated that the entire industry had paid about $21.2 million in sales and use taxes in the year 1981 (Dobra, Atkinson and Barone, page 33).

TABLE III

PERCENTAGE OF ASSESSED VALUATION ACCOUNTED FOR BY NEVADA'S MINING PROPERTY AND NET PROCEEDS OF MINES

Carson City Churchill Clark Douglas Elko Esmeralda Eureka Humboldt Lander Lincoln Lyon Mineral Nye Pershing Storey Washoe White Pine

FISCAL YEAR 1984-1985

---% 0.6 0.2 0.2

24.9 78.3 77.3 9.0

42.7 12.0 2.3

35. 7 28.4 25.3 22.4

0.1 25.5

Derived from data in the 1986 Annual Report issued by Nevada's department of taxation.

Mining Employment and Payrolls

As an employer of over 6,000 workers (in 1985), mlnlng makes an important contribution to Nevada's economy. This contribution is not evenly distributed across the state. In urban counties, such as Carson City, Clark, Douglas and Washoe, mining is over­shadowed by gaming and tourism. In some rural counties, on the other hand, mining is the primary source of jobs. Table IV shows the relative importance of mining in each of the state's counties.

Because jobs in mlnlng often pay more than jobs in other indus­tries, they may be even more important than their numbers would suggest. Table V shows the percentage of total local payrolls contributed by mining.

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I TABLE IV TABLE V

I I MINING EMPLOYMENT BY COUNTY IN NEVADA ANNUAL MINING PAYROLL BY COUNTY IN NEVADA

I 1985 1985

I I Percent Percent

I of all of all

I County Total Employment County Total Payroll

I I Carson City 39 .3 Carson City $ 1,231,455 .4

I Churchill 43 1.5 Churchill 1,060,658 1.6

I Clark 247 .1 Clark 7,310,978 .2

I Douglas 70 .4 Douglas 1,733,794 .7

I Elko 774 9.0 Elko 22,276,210 13.7

I Esmeralda 234 70.7 Esmeralda 6,539,109 71. 7

I Eureka 636 71.5 Eureka 18,110,524 71. 7 f-l I Humboldt 393 12.0 Humboldt 9,944,153 14.5 0

I Lander 845 62.7 Lander 25,486,890 68.1

I Lincoln 47 3.7 Lincoln 986,709 2.3

I Lyon 131 4.8 Lyon 3,349,010 6.0

I Mineral 284 15.6 Mineral 8,538,537 20.8

I Nye 884 9.8 Nye 29,573,265 10.5

I Pershing 195 25.1 Pershing 5,558,258 30.5

I Storey 126 26.5 Storey 4,029,740 40.3

I Washoe 702 .7 Washoe 22,117,826 1.0

I White Pine 412 20.1 White Pine 13,062,438 28.9

I I Total 6,081 1.4% Total $181,445,457 2.3%

I I Source: Nevada Employment and Payrolls: 1985, Employment I Source: Nevada Employment and Payrolls: 1985, Employment ~ ____ .. Secur it y ~artl11El.nt. L ___ ._. Secur ity Deplg'j:ment. ___ .

Distant view of the Round Mountain, Nevada, gold mine.

Heap leaching at the Round Mountain, Nevada, gold mine.

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The indirect effects of mining employment and payrolls on the state1s economy are much more important than their direct effects. Mining is a part of what is known in economic parlance as the state1s lIexport base. 1I The lIexport base ll consists of industries, such as agriculture, mining and tourism, which pro­duce goods or services which are consumed by people who live outside the state. In other words, mining is one of those industries which brings money into the state. IIExport base ll

industries tend to generate additional jobs and income in other industries.

Economists estimate that for every job provided directly by mining enterprises in Nevada, an additional 1.26 jobs are created in other industries. For every dollar in mining payroll, an additional $1.28 is added to the payroll of other Nevada industries (Dobra, Atkinson and Barone). The indirect benefits of mining are more widely distributed than the direct benefits. Since many of the rural counties where mining is prominent lack facilities for entertainment and shopping, payroll dollars pro­duced by mining find their way into the economies of larger Nevada communities such as Las Vegas and Reno. Mining companies also purchase much of their equipment and supplies in the state1s larger urban areas.

III

ISSUES SURROUNDING MINING IN NEVADA

Restrictions on the Use of Public Lands

As the owner of more than 86 percent of Nevada1s lands, the land use policies of the Federal Government have a profound effect on the state1s mining industry. In particular, the withdrawal of some lands for special uses may restrict mineral exploration and development and have a profound effect on the future of mining. Over the years, certain federal lands have been set aside as military reservations, roadless areas and wilderness areas.

During the Ninety-ninth Congress, bills were introduced to set aside additional land for wilderness areas and to create a national park. The Great Basin National Park Act of 1986, desig­nating 76,000 acres in the vicinity of Wheeler Peak as a national park, was enacted by Congress and approved by President Ronald Reagan.

United States Representative Harry Reid sponsored H.R. 4642 which proposed to designate 592,400 acres for wilderness. This bill passed the U.S. House of Representatives but failed to gain the approval of the U.S. Senate.

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Open pit gold mine at Round Mountain, Nevada.

One hundred and fifty-ton trucks being loaded at Round Mountain, Nevada.

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Senate Bill 722, a more modest proposal sponsored by U.S. Senators Chic Hecht and Paul Laxalt, would have set aside 136,900 acres for wilderness. This bill did not gain the approval of the House. Similar wilderness bills will almost certainly be considered by the One-hundredth Congress.

Eminent Domain for Mining

Unlike many other economic activities, mining must be carried out on a specific location--the site where the minerals are located. In order to ensure that mining companies have access to mineral deposits, some Western States have enacted laws enabling them to exercise the powers of eminent domain.

Nevada's law providing for the right of eminent domain for mining was enacted in 1875. The current version of Nevada's eminent domain law is found in NRS 37.010, "Public purposes for which right of eminent domain may be exercised." Subsection 6 of this section states, in part, that mining, smelting and related activ­ities are "recognized as the paramount interest of this state."

The exercise of eminent domain by mining companies in Nevada has occasionally been a topic of controversy. One common problem is that new deposits of minerals are frequently discovered in the immediate vicinity of historical mining towns. These discoveries lead to a conflict between historic preservation and mining. In 1979, for example, Houston Oil and Minerals attempted to use eminent domain to gain access to a mineral deposit in the his­toric community of Gold Hill in Storey County, Nevada. Concerns about this conflict led the legislature in 1981 to place some limits on the use of eminent domain to facilitate mining activ­ities in historic districts. In order to do so, the company must first present its case to the board of county commissioners (NRS 37.038, "Conditions precedent to taking property within historic district").

Integral Vistas

It is the position of many in the mining industry that the designation of national parks or wilderness areas could lead to wider restrictions on mineral development than is generally realized. Some environmentalists and hikers apparently feel that their enjoyment of national parks or wilderness is diminished if they are able to see large developments and industrial smoke or dust. Therefore, there have been proposals in Congress to place some restrictions on development in regions visible from either national parks or wilderness areas in order to preserve "integral vistas." These regions can be very large. Mining often requires extensive excavation and large milling operations which can be seen from many miles away. If some future Congress decides to preserve these vistas, the effect on mineral development in Nevada could be severe.

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IV

SUMMARY

Mining is the mainstay of the economy in many parts of Nevada. Since it forms a part of the state's "export base," it contrib­utes to the development of other sectors of Nevada's economy. The development of new processes and the discovery of new deposits ensures that mining will continue to be important to Nevada for many years to come.

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V

SELECTED BIBLIOGRAPHY

Directory of Nevada Mine Operations Active During Calendar Year 1985, division of mine inspection, Nevada's department of industrial relations, September 1986.

John L. Dobra, Glen Atkinson, and Robert Barone, An Analysis of the Economic Impact of the Mining Industry on Nevada's Economy.

Nevada Employment and Payrolls: 1985, Nevada's employment security department.

N. T. Lowe, Russell G. Raney and John Norberg, Principal Deposits of Strategic and Critical Minerals in Nevada, Bureau of Mines, U.S. Department of the Interior, 1985.

The Nevada Mineral Industry: 1985, bureau of mines and geology, University of Nevada System, 1985.

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