For an outsider, it's staggeringly hard to understand mining's power in Nevada. It cannot be easily explained as a consequence of political contributions: Casino employees and moguls, such as Steve Wynn and Sheldon Adelman, two of the richest men in the state, give much, much more to their pet causes and candidates -- in some years nearly 10 times more -- than mining interests do, and yet gaming now pays an annual tax on its gross receipts of 6.75 percent, plus an assortment of annual fees, such as $250 on each slot machine. Nor is hardrock mining anywhere close to the state's main economic engine: It accounts for only 2 percent of Nevada's gross domestic product. Were the Canadian and Colorado-based companies to pack up and leave for New Guinea, as some fear they might, only the small towns in the northern half of the state would even really notice.
But mining is woven into Nevada's history in a way that few industries are, anywhere. The hot springs that burble up through the Earth's crust around the northern Nevada cities of Winnemucca and Elko are a recurring reminder that, 40 million to 100 million years ago, upwellings of magma and magma-heated waters laced the northern Great Basin's craggy mountains with silver and gold. The mountains themselves -- irregular, steep, and separated by shrubless valleys planed flat by prehistoric lakes -- spent many millions of years spinning and drifting into their current north-south alignments after the Pacific Plate slammed into North America at the California coast. Every once in a while, a fault breaks loose with a sufficiently jarring 6.2 or so to remind local residents that those mountains have not quite finished moving.
Not, in fact, by a long shot: The Sierra Nevada shift one centimeter closer to the ocean every year. One day, the floating lithosphere will split apart here, creating a brand-new ocean where Nevada once stood, and no one will care how much companies pay to take minerals out of the ground. For now, however, it's impossible to forget that those precious metals, the ones that have been mined ever since Mark Twain was hedging bets on silver, are the reason Nevada became a state.
Fully four-fifths of the gold excavated in the United States -- one-fifth of the world's supply -- comes out of the fog-draped mountains of northern Nevada. The state is the fourth-largest source of the world's gold, right behind China, South Africa and Australia. Only one goldfield in the world, the Witwatersrand Basin in South Africa, is thought to have more gold than the Carlin Trend near Elko, where Denver-based Newmont Mining has been operating since 1965. Literally hundreds of mountains have been carved up for mines here in the last century and a half, some of them by international corporations that have made a stab at restoring the land when they're done, others by fly-by-nights that left open pits behind to rot, and pit lakes to suck water from the aquifer for decades. Currently, at least 24 tax-paying companies dig for gold here, with Barrick and Newmont the dominant forces. And today's jittery economy has yet more investors out looking for new strikes.
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Gold is an industry that booms when times are bad elsewhere, and droops when other industries flourish: Unlike copper, iron and molybdenum, gold doesn't need a lively manufacturing sector to be useful. It only needs untrustworthy currency and a mercurial stock market. During the lush days of the late-1990s, an ounce of gold went for $250; as the economy began to decline in the next decade, it topped $500. In 2007, gold sold for $670 an ounce; in 2008, $850; in 2009, $1,110. The spot price as this article went to press was $1,152 per ounce.
Those numbers make it all worthwhile for companies like Barrick and Newmont: The environmental impact statements, the lawsuits, the heavy capital investment required to find and extract minerals from towering mountains. Separating microscopic gold flecks from raw ore requires massive crushing machines to reduce the rock to gravel, and complex processes to leach gold from the resulting slurry with cyanide. At Barrick's brand-new Cortez Hills Mine, an expansion of existing operations on the edge of the Crescent Valley 70 miles west of Elko, ore moves to the mill on a conveyor belt 10 miles long. It took two years and $50 million to complete.
Barrick's sales rose by $270 million within the last year, and the company posted a profit of $604 million in 2009, despite being embroiled in a legal battle with the Western Shoshone over the environmental and cultural impacts of Cortez Hills, which some Shoshone say impinges upon a sacred mountain. On April 14, a U.S. district court judge ruled that mining operations could continue while the Bureau of Land Management continued its site evaluation; as a result, Barrick has not cut any of its staff. The unemployment rate among Lander County's 5,000 some residents, which includes Crescent Valley and the freshly bustling mining town of Battle Mountain, remains 7.7 percent.
Meanwhile, the state's urban counties are bleeding jobs. Unemployment in Clark County, which includes Las Vegas and Henderson, hit 13.9 percent in February. The state's general fund balance is crashing: Nevada draws two-thirds of its revenue from gaming and the eighth-highest sales tax in the country: 6.5 percent statewide, a percent or two higher in certain counties. But in a year when the entire U.S. economy resembled a craps table, people weren't exactly flocking to the slots and shops on the Vegas Strip. The Nevada Gaming Control Board reports a 20 percent drop in gaming revenues since 2008, when they hit an all-time high of $12 billion.
Even so, casino and slot-machine owners put more than $1.5 billion worth of taxes and fees into the state's general fund last year. Gaming's tax rules were written decades ago, back when gangsters still ran the craps tables. The industry wasn't regulated because its proprietors were public-spirited citizens, but because everyone agreed the business needed to be kept in line so the feds didn't shut it down. Even Frank Sinatra lost his casino license in the 1950s for accommodating a mob boss at the Sands.
Mining tycoons, on the other hand, benefit from a glorified historical legacy in Nevada that inspires politicians to act in their favor. So far, everyone who has challenged this legacy has failed, including the late Assemblyman Marvin Sedway, a Las Vegas Democrat famous for chain-smoking in the hearing room. In the late 1980s, Sedway wanted to tax gold at $20 an ounce. His effort ultimately led to a 1989 ballot initiative that, instead of raising mining's taxes, wrote the existing rate deeper into Nevada law.