Why Nevada Is Looking Golden

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The nickname of Nevada is the Silver State resulting from the silver boom of 1858, which proved to not only be the first silver boom within the United States but the most productive until Alaska outpaced their gambling colleagues with the Greens Creek discovery near Juneau only thirty years ago (which, for the record, produces seven million ounces per day). Recent events, however, have made Nevada look a lot more golden these days. That’s because Nevada is believed to be the next site for gold prospecting on a major scale in deposits like the Relief Canyon Mine. Nevada has attracted international attention and mining efforts to the point where they are now the number one gold producer in the entire United States. What’s more, if Nevada was its own country, they’d be the fifth-largest gold producer globally.

Mountains to Moehills

One of the great challenges of gold mining lies in getting the dirt away from the ore. Anyone who has spent time near a mine knows that it’s not a place to wear shorts and sneakers due to the need to sluice huge quantities of water and separate the elements from one another. In Nevada, however, limited access to water (less than ten inches of rainfall per year) means that dry mining has become all the rage. Suction dredges, which are used to pull gold from the sea floor in deposit-rich regions like the Arctic Ocean, have little use on a dry mine. Instead, the major mining technique is drywashing, separating the heavier gold from the lighter rock matter by blasting it with 150-degree air traveling at fifty feet per second. Hand drywashers are small machines sold to tourists and impressionable prospectors who want to try it themselves, but industrial drywashers need to be hooked up to a truck engine and cost about a quarter of a million dollars.

Number Theory

There’s gold present in small quantities just about anywhere – go dig up a shovelful of your back yard and you’ll be the proud owner of about one percent of one milligram of gold, or a whopping $.0003 worth. The richest mines the world have a far higher concentration, but it’s all about quantity even at the highest level. To get one ounce of gold (value of approximately $1200), Nevada mines have to dig up and filter through anywhere from five to ten tons of dirt. That’s enough dirt to fill up a medium-sized swimming pool, but it’s a better ratio than you will find in many other productive mines around the globe. The gold pulled from the rock isn’t a bunch of big nuggets, either, usually condensing in chips and flakes much like you see on the bottom of a Goldschlager bottle. Once the mines have collected 900 such ounces from enough dirt to outweigh 600 elephants, they assemble the valuable metal in long bars that are individually worth over one million dollars. At purity levels of about 90%, the annual Nevada output is around five billion dollars’ worth of gold. That sounds like a lot (ok, it is a lot) but the total output would fit in someone’s living room without crushing the paintings hung on the wall. The coffee table, however…

Cost and Expense

2014 mining operations proved to be something of a mixed bag for a lot of different companies due to the steep drop in gold; during 2013 the price of gold fell by twenty-eight percent, mostly as jewelers saw some of the lowest sales numbers in a generation. The lowered cost of gold forced the mining industry to consider either ramping up production or cutting costs in order to remain in the black. One of the best ways to cut costs is to find mines that are not subject to the instability that you find in mines located in political hotspots like South Africa or Indonesia: as but one example, it's become common place for mines to open in the former country and have to deal with illegal tunnelers breaking into deposits to steal gold and potentially harm the miners. That's why Nevada is such a welcome sight for mining companies, with no political turmoil other than the occasional ballot to legalize marijuana (last attempted in 2006 without success; new proposition forthcoming in the 2016 election). The need to pay American miners higher wages than their overseas equivalent has been negated by the shortened transport routes, superior infrastructure, and ease of recruiting highly-skilled workers.

The Biggest Name

The Hycroft mine is currently of the most mine undergoing 24-hour a day operations in Nevada. In 2013 Hycroft pulled no less than 190,000 ounces of gold out from beneath the desert sand in addition to nearly one million ounces of silver. It's also a unique mine for its use of heap leach filtering, a chemical process which separates metal from soil with a highly-acidic concentration like cyanide. The acidity melts the precious metals within the soil so that they will collect at the bottom of the heap. Hycroft deals with lower-grade ore relative to some competitors, who collect richer minerals but in lesser quantities, relying on crushing machines to separate the proverbial wheat from the chaff. The workhorses of the Hycroft mine are Komatsu trucks capable of hauling 320 tons in one go -- that's a blue whale and a half, for those keeping score at home.

Golden Advice

It's one thing to know about Nevada's mining operations and it's another thing to profit from that knowledge. If you've read this much, you probably want to know how to profit in a greater degree than "invest in gold". While investing in gold is never bad advice, consider investing in gold as well as gold companies. Allied Nevada Gold Corp, Newmont Mining, and Carlin Resources are examples of how the investment opportunities range from multi-national corporations to penny stock outfits. The diversity of mines offers a lot of potential: if you like to play it safe, then bigger is better. If you like high risk and high returns, the smaller mine stocks will provide a far higher rate of return for every new lode they uncover.

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