Mining industry ups exploration as prices rise

Last week's good news about the gold industry in Nevada contains the kernel of an even-better piece of news.

The mining industry, the second largest behind only tourism in Nevada, generated revenues of $3.7 billion during 2005, with gold accounting for $3.05 billion of the total.

That compares with industry-wide revenues of $3.3 million a year earlier.

With the average price for an ounce of gold rising to $445 an ounce in 2005 compared with $410 an ounce a year earlier, the value of Nevada's gold production rose by $250 million during the year.

The kernel of better news? A long-standing trend of reduced gold production from Nevada's mines nearly reversed itself during 2005.

The year's gold production 6.85 million ounces fell from 6.94 million ounces in 2004 and continues well below the peak production of nearly 9 million ounces recorded in 1999.

But the 90,000-ounce decline in production is much less than declines of 300,000 or 400,000 ounces a year recorded in the early years of this decade.

"The magnitude of the decline has leveled off," said Alan Coyner, administrator of the state Division of Minerals. "We're finally start-ing to see some resurgence in activity."

Another positive sign, Coyner said, is a significant pickup in exploration activity during 2005. That's likely to bring new discoveries and additional production, the state mining official said.

Although gold prices have risen steadily since they averaged $310 in 2002, the mining industry can't react quickly to higher prices.

Even a seemingly simple project such as bringing a closed mine back into operation can take a year or more, Coyner said.

And John Dobra, a University of Nevada, Reno, economist who specializes in mining economics, noted in a report for the Nevada Mining Association last year that Newmont Gold's new Phoenix Mine south of Battle Mountain began the permitting process nine years before it produced an ounce of gold.

"You can't turn these things on and off like a faucet," Coyner said.

And that means that mining executives find themselves making decisions about major investments with only a hazy idea about the price they'll get for a mine's production in a year or two.

Gold was selling at about $630 an ounce last week, a price that's profitable for even some of the high-cost producers that were shuttered when prices declined in late 1990s.

Nevada is the largest gold producer in the United States, and ranks third behind South Africa and Australia worldwide.

While gold is the 800-pound gorilla of the Nevada mining industry, rising prices for other minerals also boosted miners' receipts during 2005.

The value of silver production in the Silver State, for instance, rose to $73 million from $69 million a year earlier.

The revenues posted by Nevada's producers of industrial minerals everything from aggregates to copper to mercury was about $560 million last year compared with $360 million a year earlier, to see some resurgence in activity."

Another positive sign, Coyner said, is a significant pickup in exploration activity during 2005. That's likely to bring new discoveries and additional production, the state mining official said.

Although gold prices have risen steadily since they averaged $310 in 2002, the mining industry can't react quickly to higher prices.

Even a seemingly simple project such as bringing a closed mine back into operation can take a year or more, Coyner said.

And John Dobra, a University of Nevada, Reno, economist who specializes in mining economics, noted in a report for the Nevada Mining Association last year that Newmont Gold's new Phoenix Mine south of Battle Mountain began the permitting process nine years before it produced an ounce of gold.

"You can't turn these things on and off like a faucet," Coyner said.

And that means that mining executives find themselves making decisions about major investments with only a hazy idea about the price they'll get for a mine's production in a year or two.

Gold was selling at about $630 an ounce last week, a price that's profitable for even some of the high-cost producers that were shuttered when prices declined in late 1990s.

Nevada is the largest gold producer in the United States, and ranks third behind South Africa and Australia worldwide.

While gold is the 800-pound gorilla of the Nevada mining industry, rising prices for other minerals also boosted miners' receipts during 2005.

The value of silver production in the Silver State, for instance, rose to $73 million from $69 million a year earlier.

The revenues posted by Nevada's producers of industrial minerals everything from aggregates to copper to mercury was about $560 million last year compared with $360 million a year earlier.