Smaller miners feel pinch from gold’s decline
What a difference a few months can make.
Mining companies with operations in northeastern Nevada started the year flush with cash after riding a years-long wave of high gold prices — just south of $1,700 an ounce to start the new year. Six months later, gold dipped to under $1,200 an ounce, though it recently rebounded slightly and was trading above $1,300 an ounce last week.
The dwindling price of gold — it peaked at $1,923 an ounce in September 2011 — has curtailed the operations and expansion plans of several mid-sized mining companies with sizeable operations in the state. Nevada’s largest gold miners, having shed tens of millions in market value as their stock prices went into a free fall, also have implemented sweeping cost-cutting measures and curtailed development of new mines to hedge against gold’s bear run.
Mining still is going strong in northeastern Nevada; however, the changes in the commodities markets have exacted a heavy toll on smaller firms.
Among the casualties:
Gryphon Gold of Carson City, which was leaching previously mined ores at its small Borealis project in Mineral County, also filed Chapter 11 at the end of July after surrendering most of its interest in the project to its primary lender, Waterton Global Value. Waterton had taken a 60 percent interest in Gryphon’s subsidiary, Borealis Mining Co., in January in exchange for a $1 million reduction in monthly payments of Gryphon’s credit line.
Great Basin Gold, which operated the Hollister Mine near Midas and Esmeralda mill near Hawthorne, filed for Chapter 11 bankruptcy protection in late February. The mine had been producing roughly 80,000 ounces of gold per year since 2008. Waterton Global Resource Management purchased the assets of Great Basin Gold in late May for $15 million and 15 percent royalty on gold mined at the property 50 miles northwest of Elko.
Atna Resources of Colorado, which had been mining and expanding operations at its Pinson mine in Humboldt County, suspended mining operations in June as costs became prohibitive at lower gold prices. Atna purchased the mine from Barrick Gold Corp. in 2011 for $15 million, 15 million shares of Atna common stock and 10 percent royalty on gold mined at the site.
Mid-sized and small gold producers aren’t the only victims of gold’s diminishing value. Reno-based Allied Nevada Gold Corp., which operates the Hycroft mine near Winnemucca, is reconsidering plans to build a mill at the $1 billion mine-expansion project. Allied Nevada already has invested upwards of $90 million developing the mill. The company headquartered in South Meadows started the year trading at $30 a share on the NASDAQ; last week Allied Nevada’s stock closed under $4, and the company is scaling back its work force in Winnemucca by about 125 positions.
The state’s two largest gold miners, Barrick and Newmont Mining Corp., have taken their lumps as well. Barrick began the year with its stock trading on the Big Board at $30 a share; last week it was at $18, and the Toronto-based company had an $8 billion write-down of its global assets in the second quarter. Newmont opened the year trading on the New York Exchange at just under $47 a share; last week it was at $31 and also took a $1.7 billion write-down of assets in Australia. Both firms also announced corporate layoffs that affect headquarters and rural Nevada administrative staff.