Treasure in the Dust

In times of crisis, the world wants gold—and Nevada’s got it. This is the story of the land, the mine and the community that produce the stuff of dreams—and the seeds of controversy.

The good times in Elko really got rolling about 30 million years ago when a block of the earth’s crust, riding atop the asthenosphere like the skin on pudding, rammed into the larger North American plate. Then, as now, Northern Nevada was stretching and breaking, mountains rising where one block of rock slid underneath its neighbor and valleys forming between the smash-ups. This particular impact zone was especially providential, however, because heat—from the collision itself or magma far below; scientists are debating it—boiled water trapped in the rocks, sending it to the surface along the fracture line. On the way up, the water dissolved microscopic flecks of gold locked in sedimentary rocks, which floated up and gently settled as the water cooled.

Fast-forward about 29,998,090 years. During the gold-fever days of the 19th century, most miners hurried past the 5-mile-wide, 50-mile-long swath of land in northern Eureka County around the Tuscarora Mountains—land that would come to be called the Carlin Trend—for the much richer (or so they thought) gold fields of California. But in 1907, Fred Lynn staked a claim at what is now known as Lynn Creek—it was enough placer gold to justify working the area until the 1960s, but it never added up to much. One estimate puts the total placer yield from the Carlin Trend at just 7,500 ounces.

Microscopic gold was first discovered in the 1880s in Utah. Miners later found profitable ores, indistinguishable from waste rock to the naked eye, in Nevada, too, and by 1961 the Newmont Gold Co. had geologists digging holes and trenches in the Carlin Trend. Newmont opened its first open-pit mine there in 1965.

Fast-forward 10 more years. In the mid-1970s, Elko was a sleepy cowtown halfway between Salt Lake City and Reno with a postcard view of the Ruby Mountains to the south. If you grew up there, you understood that you’d probably have to leave to make a living. The job opportunities, such as they were, were in agriculture, gaming or tourism. At less than $200 an ounce, gold wasn’t much of a factor.

Related Story

The Dissenter: While Big Gold booms, an old battle rages on.

Then prices started to rise, spiking at $850 an ounce in January 1980 thanks to double-digit inflation and a nation spooked by the siege of the U.S. Embassy in Tehran, Iran. In troubled times, gold has long been a comforting economic bosom on which to lay your head, and with proven reserves in millions of ounces, the Carlin Trend started looking positively voluptuous.

Gold prices subsided from their 1980 peak, but they hovered at the $400 mark through the late ’90s, high enough to spark a genuine boom, complete with housing shortages. Elko saw a few painful years beginning in 1999 when gold fell below $300, but the trend line has been rising ever since, spiking to unprecedented levels in the past half decade. When the Great Recession hit America, it missed Elko.

Gold symbolizes stability, a lifeboat for a world adrift on a roiling sea of unemployment, plunging domestic and international stock markets and net worth gone up in smoke in the housing crisis. By late August, an ounce of gold cost $1,851. And Nevada has a lot of gold. It’s the fourth-largest producer in the world behind China, Australia and South Africa, and accounts for 82 percent of domestic production. Last year, Nevada mining companies dug up 5.3 million ounces of gold, valued at $6.5 billion. (Skyrocketing prices have their benefits: In 2007, Nevada produced $5.2 billion worth of all mineral, metal and fuel products combined.)

Elko is the biggest town in Nevada’s gold country, and it has benefited nicely. The county’s unemployment rate is half that of Las Vegas. The largest employer in town, Barrick Gold Corp., wants to hire 1,000 workers this year, but it’s so difficult to find skilled employees that companies recruit internationally.

Bad news everywhere else, it seems, is good news for Elko—and, to an extent, for Nevada. With gold leading the way, the mining industry as a whole added more than $200 million to state and local coffers in 2010. Critics, though, say that number should be much higher.

But before the legislative battles over appropriate tax rates, before sales on international markets, before the shaping of liquefied gold into shining ingots, there is a mountain and a mine and the people who make it work.

This is the tale of the struggle to get all that gold out of the ground—and into the economy.

• • •

To get to the richest gold deposits in the United States, drive west of Elko on Interstate 80 and exit at Nevada State Route 306. You’ll wind through the grassy hills of Bob’s Flat and cross the serpentine Humboldt River at Beowawe, a desiccated ghost town that counts a one-room library, open Mondays and Thursdays, among its few thriving concerns.

Ten miles farther south on 306 is Crescent Valley, a plain hemmed in by the Cortez Mountains to the east and the Shoshone Range to the west. It’s also the name of a town with just enough weather-beaten mobile homes strewn about a loose grid of treeless, dusty streets to earn a spot on the map. The valley is broad and sweeping, a textbook example of Nevada’s basin-and-range topography that has been so kind to Elko. The town is the kind of place you look at from a car window and wonder, “Who the hell would want to live here?”

South of the town, 9,100-foot Mount Tenabo hovers on the horizon, its northern slopes still showing fingers of snow well into June. A big bite has been taken out of the base of the mountain. This is the Cortez Hills mine.

Miners have been picking and scratching at Mount Tenabo and the Shoshone Range for more than 100 years. Photos of the mountain from the 1920s show it denuded, the trees cut down to make charcoal for smelters. Maps tell the tale of big strikes and played-out claims: Goldquartz, Gold Acres, Mill Canyon, the Clipper Mine. Nothing in the past, however, suggests the scale of Barrick’s operation at Cortez.

The Toronto-based Barrick is the world’s largest gold producer, and Cortez is its crown jewel in North America. In the first quarter of 2011, Barrick produced 366,000 ounces of gold at Cortez, helping the company reach $1 billion in net income for the same period. The goal for 2011 is 1.3 million ounces from Cortez, and they’re on pace to get there.

The operation is visible 10 miles away on a clear day, the terraces or “benches” of the open pit spiraling into the ground, heaps of waste rock piled up into too-round hills that will eventually be squared off, capped with soil and seeded to mimic nature’s handiwork. Barrick began working this pit just three years ago, but it’s already a testament to the way gold motivates men. The project is massive, and massively complex. From an observation deck at the top, the Liebherr T282B haul trucks—among the biggest wheeled vehicles in the world at 24 feet tall and 29 feet wide—look like toys as they wind their way from the bottom carrying 400 tons of rocks and gravel in each load.

But Cortez Hills is only half visible from on high. It also extends underground in a series of tunnels big enough to drive a dump truck through. The entrance is sealed by a robust, airtight yellow door. To get into the mine, you wait for the first door to open, drive though it, then wait for it to close behind you before a second giant door opens.

Beyond the doors, the main tunnel descends at a 15 percent grade. But down here, the artificial light casts a colorless gray glow, negating depth perception and erasing time. The floors, walls and ceiling are all the color of unmixed cement. One tunnel looks exactly like the next.

“I’m lucky that I got here when the mine wasn’t as deep,” says 32-year-old miner Tammy Adams, pigtails poking out from underneath her hard hat as she steers a four-wheel-drive Ford pickup into the mine. “Somebody starting now might have trouble getting used to it and remembering where everything goes.”

The mine is a loop, one tunnel for inbound trucks and the other for outbound. Air doors equalize the pressure between them. Overhead ductwork brings in fresh air, keeping the temperatures a consistent 65 degrees year round. There’s some dust in the air, sailing past your headlamp in the forced ventilation like wind-driven snow, but most workers don’t wear masks or respirators. This isn’t a coal mine. “Ventilation in this mine is wonderful,” Adams says.

Modern underground miners do much of their work solo, at the controls of heavy machinery: A driller prepares a wall for blasting with a rig mounted to the front of a machine; another uses a machine to reinforce the resulting tunnel with bolts and wire mesh; a mucker uses a machine to scoop the debris from the blast into a dump truck, and drivers, many of whom are women, haul it to the surface. On this day, Adams is running a machine called a jammer—it looks like a low-slung bulldozer with a battering ram mounted on the front. Once a tunnel is blasted, the ore removed and the walls stabilized, her job is to pack it tight with concrete. A month later, when the concrete hardens, mining can continue below the back-filled tunnel.

It’s not a physically demanding job; there isn’t a pick or a shovel in sight. If you break a sweat, as the miners say, you’re working too hard.

But it does pay the kind of money that helped build a blue-collar middle class. Miners in the open pit start at $20 an hour; those working underground make more. With overtime and bonuses based on hitting safety benchmarks, they can easily earn six-figure salaries. Barrick offers a generous 401(k) match and low-cost health insurance that starts immediately—a must in order to remain competitive. Miners with underground experience almost need agents to field the job offers. “We’re losing some of our better folks to contractors,” says Vern Goglio, Cortez Hills’ underground manager.

On the way back to the surface a series of signs attached to the wall, Burma-Shave style, reminds haul truck drivers who may have become dulled to the mechanized routine of their work that theirs is an inherently dangerous job: “What am I doing?” “How is it likely to happen?” “What will I do about it?” “Sort. Manage. Shine. Standardize. Sustain.” Then it’s back through the yellow doors and out into the bright sunshine. Sunglasses are a good idea.

High-grade ore from the mine is crushed and loaded onto a 10-mile conveyor belt for a trip across the valley to the milling operation. At the other end, the ore travels up a ramp and into cylindrical grinders, gets mixed with water and cyanide and pumped into a series of million-gallon vats, industrial-size separators that serve the same purpose as a miner’s sluice pan. A mix of cyanide and water is still the best means of pulling gold out of solution, though the process is refined with carbon and the cyanide is recovered and neutralized rather than dumped onto the ground or in a river as in the pick-and-shovel days.

Low-grade ore is “heap leached,” meaning it’s piled on a lined pad and soaked with the cyanide mixture. The solution that flows out contains microscopic gold.

With further refining, the gold-bearing slurry turns into a sludgy black paste that you “wouldn’t even bother to pick up if you walked by it,” in the words of an engineer at the milling plant. Burn that paste in a blast furnace, however, and the result of all this manpower, all these machines, all this blasting and digging and piling finally reveals itself. There’s gold in that there sludge.

Workers don’t pour every day, but when they do they average 10 900-ounce “doré” bars of gold, each about the size of a loaf of bread and worth more than $1 million. The bars are loaded into armored trucks for a trip to Salt Lake City and their introduction to an eager world market.

• • •

In a state hungry for sustainable development, gold mining—like silver mining before it—defines the opposite. Cortez isn’t going to run out of gold anytime soon, but if the market for it drops, it’s 1999 all over again in Elko. Business owners who depend on Big Gold shudder at the thought.

“I have a friend who owned a heating and air-conditioning business,” says 48-year-old Elko mayor and native Chris Johnson. “I remember talking to him back in 2000 and him saying that he had to call his shop to make sure the phone was connected because he hadn’t had a call in a month.”

Johnson estimates 60 to 70 percent of the Elko economy is based on gold. The city is always talking about diversification, he says, and has concrete-and-steel proof in the Northeastern Nevada Regional Railport that it takes the idea seriously. The development is a cooperative venture between the county and the Elko County Economic Development Authority that opened in 2010 with the goal of turning Elko into a transportation hub. To date, however, it’s primarily been used by the mining companies. There are other notable successes. In July, the Ruby Pipeline went into operation, pumping natural gas from Wyoming to Oregon with a compressing station and jobs in Elko County; a geothermal power plant is under construction in Tuscarora, providing construction jobs and a handful of permanent positions; SAS Global, an engineering company based in Michigan, opened a facility at the railport last year; Pacific Steel & Recycling moved to Elko in 2008.

• • •

Against the background of Elko’s story, a macroeconomic and political drama rages on in Nevada. It centers on one big question, the one that echoed through the Legislature all spring: Does mining pay its fair share? After all, most Nevada gold mines use federal lands for private gain at a nominal cost. And under the federal General Mining Act of 1872, companies pay no royalties on precious minerals extracted from those lands. Coal and oil companies operating anywhere in the United States pay royalties; Barrick, Newmont and any other miner with a pick and a pan hoping to strike it rich do not. Furthermore, the Nevada Constitution caps the net proceeds tax on mineral resources at 5 percent. In 2010, Barrick paid $88 million in these mining-specific taxes. (The industry also pays the payroll, property and sales taxes paid by every other business in the state.)

Nevada also allows mining companies to deduct a long list of expenses only tangentially related to getting minerals out of the ground, from marketing to fire insurance. The Nevada Mining Association itself acknowledged that it was probably taking liberties with deductions to reduce its tax bill, according to an April 17 article in the Las Vegas Sun. Gov. Brian Sandoval recently approved a bill creating a Mining Oversight and Accountability Commission to close these loopholes. The industry, meanwhile, says it pays its way. It provides thousands of high-paying, stable jobs while taking on the risky, high-stakes work that requires millions in upfront capital before the first ore is scooped out of the ground. (The Nevada Mining Association says the industry as a whole has invested $30 billion in exploration and equipment in the state since 1980.) And it can take years to get federal and state permits to start a project—eight in the case of Cortez.

Unofficially, and spoken with a measure of disgust, is the industry’s wish for the state to get its financial house in order so Big Gold doesn’t have to keep batting away this annoying line of questioning every two years when the Legislature meets and realizes anew that the sky is falling. “Honestly, we’d like the state to come up with a tax structure that works,” Barrick spokesman Lou Schack says.

And if that takes awhile, or never happens, so be it. The status quo is working fine for the mining companies. Pulling 1 million-plus ounces of global comfort out of the ground, putting people to work, shoring up the economy of Northern Nevada and making record profits doing it isn’t a bad business model. When gold prices drop, so too will Elko’s fortunes. But that’s the nature of the business. For now, the city is enjoying its moment, 30 million years in the making.