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July 23, 2014

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MINING:

Copper prices threaten mining town

In towns whose economies lack diversity, one crashing market can be devastating

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Sam Morris / FILE

The Robinson Nevada Mining operation, just outside of Ely, has not experienced any layoffs yet, but with the market looking bleak, some wonder whether it’s just a matter of time.

Bruce Kennedy, manager of the Robinson copper mine near Ely, hasn’t been sleeping well.

Chances are he’s not the only one in the mining community 250 miles north of Las Vegas who has been tossing and turning lately. As most Americans have been watching their 401(k)s or stock portfolios dwindle, Kennedy and the 520 employees of Robinson mine have been watching copper prices. And the news isn’t good.

Although the fortunes of rural Nevada gold miners actually improve with a withering economy, because the price of gold rises when economic times are tough, with the copper mining industry, it’s the opposite.

As construction of new homes and office buildings and orders for appliances and electronics have fallen off in the U.S. and around the world, the price of copper has fallen along with demand for the metal. This year started out with two of the best quarters in the history of the Robinson mine. But the rest of the year hasn’t been so rosy.

Kennedy said Friday he hasn’t gotten orders from the corporate office in Vancouver to lay off workers in the Robinson mine in the town of Ruth, a few miles past the brothels on the road from Ely. He hasn’t even been asked to put together a hypothetical plan to shut down the mine.

“However, I know that just like every company in the world, at our corporate office they do look at those things,” Kennedy said. “With our 520 people, we employ roughly one person in 10 in Ely.”

Thus the mine manager’s sleepless nights.

Robinson has closed before, and Ely suffered.

When Kennecott Copper closed the mine in 1978, and then the railroad and copper smelter in 1983, the area was devastated. Unemployment was near 25 percent, recalled Scott Hase, manager of Nevada Job Connect’s Ely office.

“It really did change the character of this community,” said Karen Rajala, coordinator of the county’s Community and Economic Development Department. “That left a real void.”

Tales of the closing have taken on near-mythical proportion. Just try to get through a conversation with a White Pine County resident without it coming up.

When the mine closed a second time in 1999, after operating for only three years, the county was better prepared to deal with it, Rajala said.

Between the closures, the state had built a prison that employs about 465 people.

Still, Rajala said, it was hard losing businesses, tax revenue and people after the second closure.

“They had become friends, and now they were gone,” she said. “It’s hard for any ... community that experiences a closure. The difference for a mining community is that when the employment’s gone, the people leave, too.”

So when the mine reopened in 2004, it couldn’t have been more welcomed.

The last three years have been good ones, and this year the mine is expected to produce 150 million pounds of copper.

Still, efforts to diversify White Pine County’s economy have continued.

The county revitalized its nearly 40-year-old effort to court the utility industry. Developers have proposed two large coal-fired power plants just miles from town, although they have met intense opposition from environmental groups. Many locals see the plants as a welcome source of jobs, both for temporary construction crews and a smaller but more permanent workforce.

Developers have compared the plants’ tax contributions to those of the Robinson mine, which contributes about $35 million in wages and $12 million in property taxes and other tax revenue to the local economy every year, according to Kennedy.

But the future of the power plants is uncertain.

And some economists point out that power plants and prisons wouldn’t be first-choice backup plans for most communities. They’re probably Ely’s only choices.

“You have to be selective, and there aren’t many selections,” said Bill Robinson, chairman of the economics department at UNLV’s business school.

Other economists see parallels between the rural areas of Nevada that rely so heavily on mining and the urban area that relies so heavily on gaming.

“The key for any local economy is to have some diversity in terms of economic base,” said John Dobra, an associate professor who specializes in mining economics at the University of Nevada, Reno. “Vegas has got the same problem ... It’s so dependent on the gaming industry and the construction industry that’s tied to that gaming industry.

“The problems of a place like Ely are similar to those of a place like Las Vegas, just on a much smaller scale.”

Other economists likened Ely’s mining boom, bust and rebirth economy to those of Pittsburgh (steel) or Detroit (automomobiles).

Hase said he hasn’t seen much panic yet over Robinson parent company Quadra’s recent earnings reports, which indicated times are tough and getting tougher. That might be, in part, thanks to Kennedy’s reassurances in the local paper that the mine isn’t going anywhere.

He says the mine has cut expansion exploration projects and work done by contractors, and delayed capital projects to cut costs. But he hasn’t laid off any of his own workers.

Kennedy admitted that layoffs and mine closings are common in cyclic industries such as mining, which rely as much on stable commodity prices as on the machinery and workers that lift the minerals out of the ground.

“You’re going to have an ebb and flow of business,” Kennedy said. “I have been through boom and bust cycles, not just with copper.”

As a young engineer working in the uranium mining industry, Kennedy was assigned the task of analyzing how many workers at his mine would get pink slips. But he’s optimistic about Ely.

So is Randal Burns, a young production geologist at Robinson mine. He says many of his colleagues have lived through the highs and lows, too — some of them in Ely.

“I look at it as a cycle,” he said. “I think the (copper) market will go up once the credit market unfreezes.”

And if it doesn’t, and Quadra is forced to lay off its workers?

“You just kind of do what you have to do to make ends meet,” he said. “Some drive trucks. Some leave town to go to other mines. But they come back when Robinson reopens.”

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