Reno, Sparks firms benefit as gold mining stays strong
Record-high gold prices have benefited many Reno-area companies, and high commodities prices are expected to continue to provide a steady revenue stream to regional assay and metallurgical labs.
And the booming mining sector is bucking trends of high levels of unemployment plaguing the rest of the state.
Tom Needs, director of ALS Chemex in Reno, says employment has increased 183 percent in the company’s Reno office in 2009 with 55 new hires. ALS Chemex also has offices in Winnemucca, Elko and Fairbanks, Alaska, and employs more than 160 in the four offices.
The lack of available capital in the early part of the year, which loosened in the later half of 2009, shifted the bulk of assay work to the normally slower fall and winter months, Needs says. He doesn’t expect a slowdown in 2010 and forecasts a strong year for assay labs.
“High gold prices have spurred exploration and activity, and we see that trend continuing for 2010,” Needs says. “A lot of companies that relied on investment from private equity didn’t have money at the beginning of year, but beginning in October money started flowing more freely and started getting back in mix. This is a good time right now.”
The bulk of work for ALS Chemex comes from gold assaying, but the company also does a large percentage of work in industrial minerals such as uranium and lithium.
“There are a lot of different markets to be tapped, and we are trying to reach into those as well,” Needs says.
Gene McClelland, president of McClelland Laboratories Inc. in Sparks, says one of the trends he’s seen as a result of rising gold prices is that more small mine operators are using his firm’s services to determine how to best extract proven ore reserves.
McClelland’s business has grown substantially since the price of gold began its run-up in 2001. He’s increased employment from 20 to 50, and doubled his lab space to 30,000 square feet.
McClelland says his firm has always performed testing for Nevada’s largest miners, but with the rise in gold prices many junior mining companies and even mom-and-pop outfits are hiring metallurgical firms to figure out the most best way to produce gold.
“Now smaller operations and even almost family individual-type mining operations are pursuing various types of deposits,” McClelland says. “Ore deposits that were below economic grade in 2008 are now at economic grade; I think that is where some of the smaller operations come in.”
In addition to gold, McClelland’s lab is performing metallurgical testing for iron ore, copper, molybdenum and even tungsten deposits.
“What any mining company wants to do is minimize risk, so the larger companies do a lot more test work. They are not willing to accept a lot of risk. Smaller companies do less testing knowing what measure of risk they are willing to accept,” McClelland says. “But no companies do no testing. All do some.”
The weak U.S. economy is one of the main reasons why gold prices remain high, says ALS’ Needs. However, if the dollar gains strength in 2010, he says, it may hurt gold prices and associated businesses in the following year.
Dan Kappes, president of Kappes Cassiday and Associates, doesn’t expect the historic tie-in between a weak dollar and high gold prices to change in the coming year.
“The economy is indicating that we will have high inflation, so we can expect prices to stay up,” Kappes says.
Kappes says that due to an unstable economy, more investors have put their money into the gold markets and added a much-needed infusion of capital for junior mining companies’ exploration plans.
“At these gold prices a lot of people are interested in investing in the gold business,” he says. “They are not seeing many alternative to putting their money, so it’s being put into gold.”
Alan Coyner, administrator for the Nevada Division of Minerals, expects gold prices to remain high throughout the coming year. Increased competition for commodities from other countries, and the growing economies of India and China, will keep bode well for all commodities prices, he says.
Two bellweathers of mining activity for the coming year:
* The Division of Minerals reports that Nevada mining companies plan to spend almost as spend as much on exploration as they did in 2009.
* The DOM reports just a 3 percent dip in the number of mining claims filed in the state from 2008 to 2009.
The state’s biggest mining producers, Barrick Gold and Newmont Mining Company, both have planned expansions of current mine sites that could come online in 2010, Coyner says.
“I see good things for Nevada in 2010 and beyond,” Coyner says.
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