Nevada's gold mining industry is hanging on — for now

Gold producers in Elko see job growth, despite an international price drop.

 

When the price of gold dropped to a five-year low last week, many economists sounded alarm bells, but one gold industry-dependent community in Nevada gave the headlines a dismissive shrug.  

Despite the drop in gold prices and stagnation of the industry globally, the gold mining business in Elko, a small town in the northeastern part of the state, seems to be doing fine. Elko has so far been immune to the downturns of a historically volatile industry.  

Refinery technician Vincente Sandoval pours liquid gold to form gold dore bars at Newmont Mining's Carlin gold mine operation near Elko. The dore bars contain approximately 90 percent gold, 8 percent silver and 2 percent trace material.
Rick Wilking/Reuters
“Elko is in its own economic bubble,” says Jennifer Sprout, head of the Elko Chamber of Commerce. “Elko as a whole has stayed pretty steady and weathered the ups and downs of the market.” Scott Wilkinson, assistant town manager, says the local economy tends to fluctuate slightly when gold prices go down, but the town has avoided any significant effects — the workforce has grown, local mines haven’t faced layoffs and gold production is still high.

Over the past decade, the number of mining jobs in Nevada has grown  78 percent; the state mines 79 percent of all U.S.-produced gold. In 2013, Elko County alone produced nearly 670,000 ounces of gold, worth — in today’s prices — more than $670 million.  

International company Newmont Mining Corporation plans to hire 260 employees for its new Long Canyon open-pit gold mine set to open early next year in Elko. 

One reason Elko's gold industry seems unfazed is that corporations tend to lay claim to gold deposits soon after they're found, even if it's during a dip in the commodity's price. Elko's companies are preparing for tougher times by extracting hard-to-reach deposits now, while the price is relatively strong. (Though the price has dipped in recent years, it's still above market value). That way, if the value of the commodity plummets, more easily accessible, less expensive deposits are still available to mine.

Other local experts say the economy’s resilience is also helped by the sheer size of Barrick Gold and Newmont Mining Corp., which combined accounted for nearly 70 percent of the total gold extraction in Elko in 2013. They're insulated from price roller coasters that might bankrupt smaller companies, says Pam Borda, executive director of the Northeastern Nevada Regional Development Authority.

The town of Elko itself has been resilient in the face of the latest downturn because the gold industry has elicited growth and diversification of the local economy, says Sprout. A strong outdoor recreation industry has also added jobs and increased spending in the tourism sector, adds Wilkinson; more housing developments are being built, and the number of retail stores and restaurants and bars has grown, too.

The bigger picture may be changing, though. The price of gold has risen steadily for the past decade; as of Aug. 12, the price per ounce was $1,108, compared to only $433 in August 2005. But a growing number of investors say the golden days are over, pointing to the fact that in the past three months, global gold prices have dropped 17 percent. They predict that prices could plunge to as low as $350 an ounce. Claude Erb, a gold forecaster and former commodities trader for an investment management company, told CNN, “Gold is no more or less volatile than stocks or anything else. It can be wildly overvalued, and it’s very overvalued right now.”

Even Barrick Gold's overall stocks are down 60 percent for the past two years. Another large gold company internationally, Goldcorp, saw its stock fall more than 30 percent this year. 

If gold dropped as low as $350, Elko’s economy would be in serious trouble. Even with other sectors going strong, the town does still rely largely on the gold industry, and there’s a chorus of investors that say it’s only a matter of time until the price drop catches up. 

“We would pretty much be a ghost town if prices plunged that low. There would be dramatic shut-downs and lay offs,” Borda says. “But I believe the chances of that ever happening are slim — very, very slim.”

Paige Blankenbuehler is an editorial intern at High Country News.