Miners’ convention digs in in LV despite gold doldrums

Tuesday, Oct. 10, 2000 | 11:01 a.m.

Mining in Nevada

Nevada mineral production of $2.7 billion in 1999 was down from $3.1 billion in 1998, the Nevada Mining Association reported.

But Nevada is still the world's third largest source of gold, with 11.2 percent of the world's gold production, behind South Africa and Australia. Nevada gold production last year was valued at $2.3 billion.

Mining employment in Nevada totaled 12,360 people at an average annual salary of $54,037 in 1999, the state reported.

Nevada's gold industry lacks the luster it had before the metal's price plunged to historic lows in the late 1990s, but mining is going strong and the industry's Las Vegas convention this week is attracting miners in record numbers.

More than 40,000 industry leaders and exhibitors from around the world are gathering for MINExpo International 2000, sponsored by the National Mining Association at the Las Vegas Convention Center this week.

The trade show features 1,300 booths; four days of seminars will include 23 sessions on issues ranging from mining technology in the 21st century to environmental concerns.

The World Mining Congress, a gathering of top executives from around the globe, is being conducted in conjunction with MINExpo 2000, which convenes every four years. The exposition has made Las Vegas its permanent home because the city's convention facilities are the only ones that can accommodate the show's volume and mass.

While the show's 600,000 square feet of exhibitions is about half the size of the largest conventions the city hosts, what's on display is enormous.

Caterpillar, the construction vehicle supplier that has one of the largest booths at the show, is displaying its 797 mining truck that has a capacity of 360 tons and a 3,400-horsepower engine. The company transported pieces of the $3 million vehicle to the convention center on 14 trucks, then assembled it on the trade show floor.

Other mining equipment is so huge that it is on display in the convention center parking lot. Show officials say the city's convention facilities are among the few that can accommodate the weight of the trucks, crushers, drills and processors being shown.

Show officials say it's the big machines and the technological breakthroughs in equipment that have kept the show growing while some segments of the mining industry -- gold, most notably in Nevada -- are slumping.

The nation's coal-mining industry is healthy, said Steve Leer, president and chief executive officer of Arch Coal Inc., St. Louis, and chairman of the National Mining Association. Leer said there's a growing need for electricity to power the nation's burgeoning computer industry.

"We've gone from an oil-based economy to an electron-based economy," Leer said at an NMA news conference kicking off the show Monday.

But that electron-based economy illustrates one of the big political issues of this year's show -- energy policy.

"We are facing some critical choices in this election," Leer said. "We haven't had an energy policy in this country for years, since the Gulf War."

While the energy producers are keeping busy, the gold producers are battling to hang on while prices remain depressed. Ronald Cambre, chairman and chief executive officer of Denver-based Newmont Mining Corp., said one of his biggest challenges is convincing investors to weather the storm.

"These cycles last for five to 10 years," Cambre said. "Mining is a long-term, capital-intensive industry controlled by short-term mentality on Wall Street.

"But the demand for our products is increasing. And that's why we're here. We're looking at new products that will reduce our production costs and make it more cost-effective to operate."

The biggest problem for gold producers has been the depressed price. Cambre said gold would have to sell for $270 to $275 per ounce for the company to break even. In the past 12 months, gold has been trading for between about $253 and $326 per ounce. Monday, it was trading at $270.10 per ounce on the New York Mercantile Exchange.

The average price of gold has dropped below $300 per ounce for the first time since the late 1970s, when it averaged $294.09 an ounce in 1998, according to the Washington D.C.-based Gold Institute.

Using better technology isn't the only thing Newmont and other gold producers are doing to cut their costs. The two largest gold producers in Nevada, Newmont and Barrick Gold Corp., Toronto, are heavily invested in gold production operations internationally.

Cambre said gold producers appear to be in a Catch-22 situation -- the U.S. economy is robust and the American dollar is stronger than most foreign currencies. That makes labor and materials cheaper overseas so companies usually can produce more gold at less expense in other countries.

Cambre said one of the solutions for Newmont has been to buy up small competitors and use economies of scale to get more from existing resources and infrastructure. The strategy is affecting Nevada operations, as Newmont moved earlier this year to acquire Houston-based Battle Mountain Gold Co., for $557 million, a deal that will close in November.

Battle Mountain operates a mine in western Nevada near the town of Battle Mountain. Newmont has operations near Elko and Winnemucca and in Nevada employs 2,750 people.

Newmont announced last week that it plans to boost cash flow by focusing on exploration instead of just acquisitions. Cambre made that announcement at a gold industry conference in Denver, adding that third-quarter earnings would fall short of analysts' expectations of 12 cents per share. Earnings are expected to be posted for Newmont next week.

The announcement may have been responsible for driving the stock price down to a 52-week low of $14.75 a share on Friday. But other gold stocks have been hammered just as badly. Barrick's stock also hit a 52-week low on Friday at $14 a share.

Bebe Adams, a spokeswoman for Barrick, said the company's strategy of hedging its gold price on the market has insulated it during the price downturn. Still, 86 people were laid off at the company's Goldstrike operation in Elko last year in a move designed to save $8 million a year. The company still has 1,620 working at the mine.

Today, Newmont's stock was trading at $15.25, up 6 cents from Monday's closing price. Barrick was at $14.31, down 12.5 cents from Monday.

Mining industry education is another topic on the agenda of MINExpo 2000 and convention attendees have been invited to tour the Gordon McCaw Elementary School of Mines Wednesday. The Henderson school has a simulated mining operation on the campus with displays on geology, mining history and mineral processing geared to elementary-school children.

The project is financed by a foundation administered by Nevada mining industry professionals.