Last year was a see-saw ride for Bruce
Kennedy, president and chief executive officer
of the Robinson copper mine just west of Ely.
And he's not the only mining executive
facing an uncertain future.
After record-setting production levels in
the first two quarters of 2008 42 million
pounds of copper in the first quarter, and 44.8
million in the second fortunes at the
Robinson mine clouded in the fourth quarter
as global copper demand evaporated and its
per-pound price withered.
Since July copper prices on the London
Metal Exchange have plummeted more than
60 percent to hover near $1.50 a pound in
early December, Quadra Mining, parent company
of the Robinson mine, predicts the mine
still will deliver 130 million pounds of copper
and 125,000 ounces of gold for the coming
year but at what price?
The company says hedges will insulate the
mine from current market conditions but
back in 2006 the decision to lock in copper
production on the futures market hurt Quadra
to the tune of $143 million as copper prices
skyrocketed.
"We have some hedge production for the
first half of this year in the $2 range and
above,"Kennedy says, adding that he's made
six budget revisions in the past two months.
"We have modified our mine plans and our
mine sequencing and capital requirements to
minimize outward-bound cash flow."
Robinson expects copper prices in the
$1.60 to $1.70 range for at least the first half of
the year. Operating costs at the Robinson mine
are in the $1.40 per-pound range, he says.
So far, Kennedy says, Robinson has not laid
off any of its more than 450 employees, but it
has terminated contracts with three of four
exploration rigs at the mine site.
"We are bumping along the bottom and I
think we will be here for a number of months,
but sometime in middle of February we will
see copper prices get up off the bottom and
improve."
As a result of tumbling copper prices,
Quadra, which primarily operates copper
mines, has seen its shares battered on the
Toronto Stock Exchange.With the decline in
demand and rapidly falling per-pound price
for copper, Quadra's share price plummeted
from a 52-week high of $27 to just $2.25 in
early December.
The story is equally bleak for the state's
molybdenum miners,who also enjoyed
record-high prices and then saw reduced
demand cripple the market.
Sparks-based Golden Phoenix Minerals,
operator of the Ashdown Mine in Humboldt
County, ceased production and laid off 76
miners, while Denver-based General Moly,
operator of the Mt.Hope project near Eureka,
said in November it may delay delivery of noncritical
mining equipment and construction
projects to conserve cash.
John Dobra, associate professor of economics
at the University of Nevada, Reno, says
Mt.Hope has a big enough deposit of molybdenum
that General Moly still can move forward
at current market prices.
And the sharp drop in fuel prices may
lower mine operating costs, Dobra adds.
"There may be some good news on the
cost side for first time in five or six years," says
the economist.
The future of Nevada's gold miners is
equally unclear, although the price of gold has
held up despite a global recession.
Gold has retreated more than 25 percent
from a March high of $1,000 an ounce to the
$700 range. Despite the decline, Omar Jabara,
senior director of communications for
Newmont Mining, the state's second-largest
gold producer behind Barrick Gold, says
Newmont remains bullish on production in
2009.
"For the long term,we see a strengthening
in gold price mainly because all the fundamentals
remain intact supporting demand for
physical gold," Jabara says."People see gold as
a hedge against inflation.We expect gold
prices to remain firm we don't see the bottom
coming out of gold."
Jabara says Nevada continues to be the
cornerstone of Newmont's production and is
likely to continue in that role.Newmont has
eight surface and underground mines in the
state, the largest being the Gold Quarry roughly
60 miles south of Elko. Its newest mines are
the Phoenix Mine near Battle Mountain and
the Leeville Mine in Eureka County.
And a couple of gold mines will begin production
this year.
Allied Nevada Gold of Reno expects to
bring the Hycroft Mine west ofWinnemucca
back into full production this year. The mine,
which has been closed since 1998, is projected
to produce 100,000 ounces of gold a year.
Pacific Gold Corp. of Reno says its subsidiary,
Nevada Rae Gold, anticipates gold production
in the first quarter at its Black Rock
Canyon Mine in Crescent Valley in Lander
County. The operation is expected to produce
approximately 6,500 ounces of gold in its first
full year of production.
