Number of mineral claims declines as fee takes effect

David Shaddrick, who holds 111 mining claims in Nevada, complains that a new one-time fee on mining claims enacted last year places a large burden on small prospectors and explorers such as him in his case, more than $15,000.

Exploration companies and prospectors such as Shaddrick appear to be voting with their feet, bailing out of about 12 percent of the mining claims that had been filed in the state.

"The biggest impact is on the little guys," Shaddrick says.

Mining experts say the fee enacted last year in hopes of generating up to $25.7 million to help close the state's budget deficit could result in decreased mining exploration and investment in coming years.

From July through December, the State Division of Minerals says the number of claim filings ran 12.2 percent below year-earlier figures. (Data hadn't yet been collected from Churchill, Lander and Pershing counties.)

That's coming on the heels of a 10.6 percent decline in the number of claims in the fiscal year that ended June 30.

Mining claims decreased in 10 of 17 Nevada counties in fiscal year 2009-2010, the Division of Minerals report shows. Mining claims filed in gold-rich Elko County plummeted nearly 30 percent, falling by 11,596 claims.

Much of the reduction stems from smaller mining companies and individuals cutting back the size of their claims blocks in the face of the requirement for hefty payments from the new tax, says Alan Coyner, administrator with the Division of Minerals. The new tax is tiered from $70, $85, or $195 depending on how many claims a person or organization holds in the state.

Shaddrick, president Nevada Mineral Exploration Coalition, says he'll have to seek outside investment capital to maintain his block of claims in Nevada. The Nevada Mineral Exploration Coalition is comprised of smaller companies and sole proprietorships holding mining claims in the state.

"For those of us that don't have big exploration budgets it is a major impact," Shaddrick says. "When you have no revenues coming in, the only thing you can do to stay alive is to raise venture capital. But what little venture capital you have got you now have to give a whole bunch to the state and to try and raise more, and you now have a negative view on the part of venture capitalists."

Shaddrick, who works as a consultant, says he'll also have to seek extra work to pay his mining claims tax, which he deferred to the June 1 deadline. The tax was due Nov. 1, but claimants had the option of deferring all or part of it.

Persons or companies holding mining claims in the state previously paid a federal claims maintenance fee of $140 per year that is filed with the Bureau of Land Management, as well as $10.50 each year to the state for a notice of intent to hold the claim for a subsequent year. Two dollars of each claim goes to the county in which the claim is registered, and $8.50 goes to the Division of Minerals, which generates about $1.5 million annually for the state agency.

"That is what keeps us in beans," Coyner says.

Coyner says about 60 percent of 189,797 claims filed in fiscal year 2009-2010 were held by people or companies with no viable revenue stream.

"They are drilling, assaying and investing significant amounts of money into rural Nevada looking for a gold mine," he says. "Reduced claims will result in less exploration, which will result in less new mines. Folks on the front-end of work, exploration, need to always be adding new ounces and finding new ounces to supply the mines of future."

Coyner adds that any disincentive to mining exploration, such as additional taxes, could discourage future investment in Nevada. The Silver State this year slipped from third to 10th in a survey of mining-friendly jurisdictions, says a report by Fraser Institute of Vancouver.

"The price of commodities has been skyrocketing, and a gold-rich place like Nevada should see claims rising," he says. "We should have seen a significant increase in exploration and claims staked and instead we have seen a reduction in each of the last two years."

Debbie Struhsacker, executive director of the Reno-based Nevada Mineral Resources Alliance, which consists of many larger and mid-tier exploration companies, says exploration companies will have a more difficult time moving forward when they seek funding from the investment community. Taxes and an uncertain legislative outlook chill global investment interest in the state, she says.

"New taxes have diminished Nevada's reputation as good place to do business," Struhsacker says. "Investors have looked at it (the Fraser Institute study) and considered it as signal that maybe Nevada isn't a good place to put investment dollars into."

Joe Hebert, vice president of exploration for Miranda Gold's Elko exploration office, says the White Rock, British Columbia-based company is going to bite the bullet and pay the new claims fee.

"A lot of companies see it as a cost of doing business," Hebert says. "We probably will have some trimming of claim blocks, and probably everyone will look more critically at the extent of their claim blocks."

Hebert says the net effect would be less activity by individual prospectors and junior mining companies, as well as a higher degree of selection on acquiring new claims.