Mining companies plan to sharply increase their exploration activity in northern Nevada during the next 12 months but there's no promise that discoveries will end up as profitable production.
As gold prices remained above $400 an ounce through most of 2004 and sometimes flirted with the $450 level mining companies ranging from the giants who spend millions on exploration each year to the tiniest outfits will pour money into the search for new gold deposits this year.
It's a search that's critically important to the state's economy.
In recent years, gold production has averaged more than 7 million ounces a year from Nevada mines it ranks behind only South Africa and Australia as a gold producer and mining companies need to replace those reserves to keep the industry vibrant.
And it's not just the rural counties along the Interstate 80 corridor that depend on mining jobs.Many of the industry's assay labs, professional services and equipment suppliers are located in Reno and Sparks.
But long lead times for new projects mean no one knows whether the gold that's discovered in 2005 will lead to profitable production.
Typically, a new mine in Nevada requires about five years to win the necessary permits, says Russ Fields, president of the Nevada Mining Association, and markets can change dramatically in the meantime.
"It's tough to get through the process,"Fields says."We don't want to cut corners, but we want to get through it."
Newmont Mining,for instance, this month started construction on its Phoenix mine near Winnemucca a project that took 10 years to win permits, in part because the project kept changing as the result of corporate realignment.
The sheer size of the $20 million project it will be the largest gold-processing plant in the state also slowed approvals.
On the other end of the spectrum is the Standard Mine, a project southwest of Winnemucca completed by Apollo Gold in recent weeks.
Even though that mine is entirely on private land, permitting took some 18 months, says Alan Coyner, administrator of the Nevada Division of Minerals.
Worries about the regulatory environment are only a small cloud, however, for an industry that's basking in the sunshine of high prices.
"Most of these mines are quite healthy at $400 gold," says Fields, even though higher costs for fuel and electricity in the past couple of years have eroded a bit of miners'margins.
High prices for gold also have allowed mining companies to make money even though they're beginning to work lower-grade deposits at some properties.
Low-grade ores boost processing costs for each ounce of gold produced.
The good times for miners spills over as well to their suppliers.
Some exploration companies say, in fact, that drilling programs are slowed because they can't find enough rigs to handle the work.
Fields notes that suppliers have seen the boom-and-bust cycle before and aren't rushing to hire bigger staffs.
"Everybody who is working is working a lot of hours right now," he says.
The boom is seen, too, in other minerals.
Most notably, Quadra Mining Ltd.
this year began producing copper at the Robinson Mine seven miles west of Ely after a five-year shutdown.
Coyner says other minerals including uranium around the state also are beginning to draw renewed interest.
