After a year in which gold prices briefly flirted with a level of $725 an ounce before settling back to around $650, executives of Nevada's mining industry have that giddy once-in-a-lifetime feeling as 2007 unfolds.
"We've seldom seen a rosier outlook," says Russ Fields, president of the Nevada Mining Association.
The continued increase in precious metal prices this year continues a run that began after gold dipped as low as $275 an ounce in the early years of this decade.
Then, some producers wondered how they'd survive. Today, they wonder how high prices for gold and other metals will go and for how long.
Analysts at Goldman Sachs a few weeks ago predicted that gold will average $785 in 2007. Other analysts are talking about $1,000 gold maybe as soon as late next year.
Pushing prices: Demand from China and India as well continued weakness in the dollar.
The only worry continues to be a steady upward creep of mining costs, although the industry is learning how to deal with them.
John Dobra, an economist at the University of Nevada, Reno, who specializes in mining issues, estimates that the cash cost of mining an ounce of gold in Nevada was $288 an ounce in 2005 an increase of 15 percent from a year earlier.
Costs continued to edge up this year, Dobra said, although the retreat in fuel prices after mid-year provided a break to miners whose giant trucks are heavy consumers of diesel fuel.
Cost pressures continue on other supplies such as tires. But Dobra said mining companies have learned techniques better maintenance of roads, for instance that help them lengthen the life of tires and reduce those pressures.
The booming industry also struggles to find skilled workers for positions ranging from truck drivers to mining engineers, and it's paying them more assuming it can find workers at all.
"We're getting pretty good at running lean," quips Louis Schack, a spokesman for Barrick Gold, the biggest mining company in the state. "The most critical need is skilled underground miners."
The demand for workers will continue to grow as new mines come on line. Newmont Gold will be ramping up its Phoenix and Leeville mines in northern Nevada into full production this year.
The Phoenix Mine by itself is projected to produce between 300,000 and 320,000 ounces of gold a year a big addition in a state where gold production totaled 6.85 million ounces in 2005.
The mine has a projected life of 20 years. When mining is completed, Newmont will reclaim land that's been disturbed by exploration during the past 140 years.
Heavy investment in exploration is likely to continue to bring a steady stream of new mines into production so long as prices remain attractive, says Fields.
"Exploration activity has been just enormous over the past couple of years," he says. "There are going to be successes in that exploration."
A study by the Nevada Division of Minerals this summer found that exploration investment in the state in 2005 was 52 percent higher than a year earlier. And mining companies said they expected to put even more exploration geologists to work in the field during this year.
While gold is the dominant factor in Nevada's mining industry, Fields notes that mining of other metals copper, molybdenum, silver is booming as well.
And the industrial minerals industry in the state is strong as well. Sand-and-gravel miners, for instance, benefit from continued development of commercial, industrial and residential projects.
