WINNEMUCCA — Along the mining corridor, conventional wisdom has it that once mines start laying off employees, people stop spending money; that is, they shop less and put off major purchases.
In essence, the residents go into "wait and see" mode.
In Humboldt County, many are waiting and seeing what may happen next in the wake of the announcement that Allied Nevada was suspending operations at its Hycroft Mine.
The hope, of course, is the suspension of operations at Hycroft won’t be followed by other mine closures or dramatic drops in the price of gold.
About 230 Hycroft employees were laid off in July along with the contractors working on the property.
Hycroft employees had almost no notice of the layoff. They were instructed on July 8 to meet at the Winnemucca Convention Center where lists were posted with the names of those who were losing their jobs. The lack of notice and the number of people losing their jobs kicked in the WARN Act, which requires 60 days notice or 60 days pay for companies laying off more than 100 employees.
The company intends to continue processing gold that has already been mined, so about 135 employees will keep their jobs -- for the time being.
It has been a rocky ride for employees, as well as the community, while Hycroft attempted to regain its footing following two years of bad news that included faulty gold recovery due to problems on the heap leach pads, a federal lawsuit over allegations of investor fraud, debt stemming from expansion, loss of stock value, and just this spring the company announced it was filing for Chapter 11 bankruptcy.
The hope, of course, is that another mine will buy the Hycroft property and turn things around so people can go back to work. That’s part of the "waiting and seeing."
Winnemucca Mayor Di An Putnam expressed her hope the majority of those who lost their jobs will be able to find other employment in the area.
“I would hate to see the bulk of these people move away,” she said. “That would have a huge impact on us.”
A life-long resident of Winnemucca, Putnam has seen the ups and downs that come with the mining industry.
“We have always been able to survive the crises tossed our way, and we’ll be able to survive this one,” she said and added, “We’re on such an upbeat trend. Everything is truly working positively for Winnemucca, and I just hate to see this kind of blow to the community.”
One of those positive developments is the soon-to-be constructed Boys & Girls Club, which will also feature athletic fields and a STEM Center to support the education efforts of the Humboldt County School District.
The Boys & Girls Club was made possible by donations from the Pennington Foundation, Ralph Whitworth, who has ties to the community, and donations from mining.
In addition to the B&G Club, the city recently constructed a new fire house, received a grant for a new ladder truck for the fire house, and the hospital is expanding.
Putnam said she hoped the community would continue moving in that positive direction.
In the past, the housing market has been one of the first industries affected by layoffs and/or slowdowns in the mining industry. If people who have been laid off aren’t able to find other jobs, they are sometimes forced to just abandon their homes and move on in search of work. Others who are still employed, who may have been considering a move to a larger home, hunker down and wait for the industry to stabilize.
According to Harold Hawkins of Vision West Realty, the housing market has been sluggish in the wake of the Hycroft layoffs. He pointed out not only did Hycroft lay off the majority of its employees, but the community is also facing the closing of Raley’s Supermarket.
Hawkins said he’s heard more about the closing of Raley’s than Hycroft – probably because the large store is so prominent in the community.
“People are concerned right now,” Hawkins said. “We’re not seeing panic, but people are bewildered and they’re not jumping into the market.”
Hawkins has been involved in real estate since 1987. This is his third round of mine layoffs.
“I think if the price of gold does not go down dramatically, and there are no more layoffs, the market will smooth out and people will start buying again; though, perhaps not at the same pace,” he added.
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He explained there is still a decent market for housing. While housing sales have slowed, and people selling their homes are doing so at lower prices, homes are still selling in the area.
“It’s still a decent market,” he added. “It has not collapsed by any means.”
Hawkins has not forgotten the mining slump of the late 1990s that devastated the housing market, which hit rock bottom in about 2000. It took several years before those in the real estate market began to see a serious recovery.
Hawkins does not expect that to happen again anytime soon, so long as the big players, Newmont and Barrick, do not start laying off and shuttering projects.
“That would be the death knell,” he said.
In the meantime, Hawkins remains optimistic.
“I don’t have a crystal ball, but I don’t think this will be long term,” he said. “I think this will turn around relatively quickly.”
For Astrid Schweigert of United Country - Cowboy Country Realty, there has been almost no impact from the Hycroft layoffs.
Schweigert explained because they do a slightly different type of business, with clientele who are not necessarily connected to mining, United Country - Country Cowboy Realty is not experiencing a slowdown; in fact, business has picked up a bit, so much so they’ve had to hire a couple of more agents.
She said their clientele tends to be from out of town and/or are retirees, so they’re less impacted by the ups and downs of mining.
Businesses are not the only ones affected by mining slumps, though the impacts are more immediate.
For the Humboldt County School District, there are about 150 students who have at least one parent who works at Hycroft.
Superintendent Dr. Dave Jensen said the potential for an impact exists, but they won’t know what that may be until school starts or there is a request for records from another district – indicating a student has moved away.
However, there is an expected fiscal impact as the district does receive a portion of the net proceeds from mining (NPM) tax. Jensen said the hope is the loss of revenue through NPM will be offset by the fact other mines are doing better.
However, when the student population shrinks, funding shrinks as well. Due to a change in NRS from the last legislative session, student population that determines funding will now be tallied once per quarter – as opposed to once a year.
Contractual obligations to teachers and other staff are still figured in advance. So, if they’re losing x-amount of students per quarter, they’ll lose funding on a quarterly basis, but still be obligated to those yearly contracts.
“We’re in a holding pattern,” Jensen said. “We’re in a position that we won’t know the actual impact until school starts.”
In the meantime, the district will move forward with its established plan. They’re moving forward with their support of the STEM Center, which will be housed at the new Boys & Girls Club. Construction is scheduled to begin this fall with a completion target of September 2016.
Jensen said the plan is to have the premier STEM Center in northern Nevada. The district sold a parcel of property worth $450,000, which will be used to support the STEM Center.
He praised the private and business support the Boys & Girls Club has received, saying, “We are fortunate for the quality and quantity of support because it makes a difference for the community and students.”
He added their community partners – including those in the gold industry – have been strong advocates of education.
It is too soon to say how other areas of government will be impacted by the layoffs. If it is true people become cautious with their money during mining down times, expect to see lower revenue from sales tax. However, those results will not be available for some time.
The impact to local government’s portion of the NPM will not be known until next year.