Nevada gold output falls

Last year, the Nevada mining industry saw gold production fall for the first time since 1995.

Between 1999 and 1998, amidst falling gold prices and production costs, gold production in the state fell to 8.3 million oz. from 8.9 million oz.

Gold mining remained plagued by low prices, which dipped to the $250-per-oz. range in mid-1999 when the Bank of England announced it would sell most of its gold holdings. However, the price of the yellow metal rallied when the bank’s auctions were over-subscribed, and surged again when 15 European banks entered into the “Washington Agreement” and thereby pledged to limit gold sales over the next five years.

The effects of the low price environment in 1999 were, for the most part, the same as in the previous year. Producers looked for ways to reduce production costs and maintain cash flow. Cash production costs, not including depreciation or amortization (which would allow producers to recoup their initial investments), averaged US$167 per oz. in 1999, down from US$179 in 1998 and US$216 in 1997. If depreciation and amortization are included, average production costs totalled US$228 per oz.

However, more than 2.5 million oz. of Nevada’s gold production were produced for cash costs of about US$100 less than the average of US$228 per oz., thus painting the state’s gold industry in a positive yet misleading light. For example, in 10 of 34 gold mining operations in Nevada, production costs were greater than the average price of gold in 1999 (US$278 per oz.). This resulted in the suspension of mining at some high-cost operations.

— The preceding is an excerpt from the Economic Overview of the Nevada Mining Industry, published by the Reno-based Nevada Mining Association.