Denver — The year 2000 began on a note of optimism for mining in the U.S. The Washington Agreement, an accord of Europe’s top bullion-holders that aims to regulate and limit sales, promised to revive the industry after a period of low gold prices (at one stage, dipping below US$260 per oz.).
However, hopes were dashed in April, when the bottom fell out of the dot-com market on the Nasdaq. Industry experts and investors stood by, praying that this might somehow augur well for mining, but little materialized.
The “new economy” crash, which worsened over the summer months and during the subsequent period of uncertainty surrounding the U.S. presidential election, had little immediate effect on mining. The Nasdaq hit its peak in March at 5,048 points, only to plunge more than 50% to less than 2,400. The Dow Jones industrial average was spared the disastrous falls that hit the Nasdaq, though it is now about 10% below its all-time high, set early in the year.
The election resolution put a charge into the overall market (if only briefly), while, at the same time, making it clear that investors who had left in the wake of the Bre-X scandal and falling gold prices were not exactly beating a path back to the mining sector. Despite tremendous losses incurred in the long downturn, they have not yet abandoned the high-tech sector.
Meanwhile, the industry has sought to remedy its problems through consolidation, a development that would seem to offer several advantages. Mining companies need to grow larger to compete with the large computer companies that form almost overnight on the Nasdaq. Also, mergers enable larger companies to cut costs through economies of scale, and thereby combat low metals prices.
Consolidation gripped the gold sector in particular, though several of these proposed mergers failed to pan out.
Production forecasts continued to climb as a result of mergers and acquisitions, even though market capitalizations did not. Newmont expects to produce more than 4.5 million oz. of the yellow metal this year, ranking second in the world behind South Africa’s
Homestake to close
The downside to all this is that oversupply contributes to sluggish gold prices. Nevada’s annual contribution only just started to tail off after years of growth, reaching 8.6 million oz. But while production remained high, fewer gold mines opened during the year, and none of these were in the U.S. America had more than its share of closures, however, most notably
The Dee mine, operated by
The copper sector showed promise early in the year, when consolidation — epitomized by
Still, several projects, including Antamina in Peru and expansions at Escondida and El Teniente in Chile, are banking on higher prices.
Imperial struggles
A perpetual cloud over the American mining industry is the regulatory framework, which has been been a threat to the gold sector especially. Glamis wrangled with the Department of the Interior over the Imperial project in southeastern California. At stake, it has been argued, are the cultural heritage and scenic vistas of native tribes.
In 1997, three years after it began permitting the project, Glamis was gratified to receive the draft environmental impact statement (EIS) from the Bureau of Land Management (BLM). But the winds shifted in January 2000, when the Interior’s top solicitor, John Leshy, issued a directive that applied harsher permit standards.
In April, Glamis filed suit in U.S. District Court challenging the solicitor’s opinion — a suit that was later dismissed on the grounds that it should be filed only after the BLM issues a final ruling. As expected, the BLM turned down the final EIS and is expected to issue its final record of decision in December, at which point Glamis expects to resume legal action.
Problems also plagued the Crown Jewel gold project in northeastern Washington. In late 1999, part-owner Battle Mountain Gold received congressional assistance in pushing through its plan of operations. Early in the year, though, the state’s pollution control board raised water-related issues, prompting the company to downgrade the mineralization into the resource category. After nearly 10 years of permitting, Crown Jewel still has an uncertain future. Meanwhile, Newmont Mining, as a result of its impending takeover of Battle Mountain, will assume the latter’s right to earn 54% of the project. The remainder is held by Denver-based
‘Takings’ suit
In April,
Low commodity prices and a worsening regulatory environment have been a double-whammy on exploration, the only bright spot being platinum group metals (PGMs).
Activity in the Duluth gabbro of northern Minnesota has stepped up, though not quite at the rate experienced across the border in Ontario. The most advanced project is NorthMet, which is being worked by
Also in pursuit of PGMs is Idaho-based
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