Mineral exploration spending up in Nevada

Mineral exploration spending up in Nevada

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Companies spent at least $460.1 million exploring for minerals and energy resources in Nevada in 2018, up 31 percent over the 2017 expenditure of $351.2 million, according to a new survey by the Nevada Bureau of Mines.

“It’s a reversal of what was a five-year downward cycle, and we have seen that in the number of mining claims, which are over 200,000,” said Richard Perry, administrator of the state Division of Minerals. “It’s really a good news story.”

“Nevada is considered a stable and perspective domicile for exploration,” said Perry, whose division, along with the Nevada Commission on Mineral Resources, supported the survey.

Most of the exploration companies also reported they planned to spend at least as much this year in Nevada as they have in past years, if not more. The survey of 172 companies actively exploring in Nevada found that 81 percent of them would be spending as much or more as they have in the past.

“That bodes well that companies said they would spend the same or more,” said survey author Michael Ressel, an assistant professor and research geologist for the Nevada Bureau of Mines and Geology at the University of Nevada, Reno.

Both Ressel and Perry said the Fraser Institute’s ranking of Nevada as the most attractive investment jurisdiction worldwide in 2018 should give Nevada a boost in marketing the state for exploration and mining.

The Fraser Institute’s ranking of Nevada as the top in investment attractiveness is “a huge honor for Nevada. Being number one means people have confidence,” Ressel said. “Nevada has a good track record.”

The Fraser Institute, a Canadian think-tank that surveys companies each year, released its report for 2018 in March, so the ranking came after the Nevada exploration survey was done, but Nevada has always had a good ranking. The state placed third overall in 2017, and was first overall in 2014.

Nevada’s potential

“Nevada is great because it’s safer and has potential for discovery. There have still been big deposits discovered in the last 10 years,” Ressel said, pointing to new discoveries on the Carlin Trend and Goldrush and Fourmile near the Cortez Mine.

“Premier just announced a really nice drill hole,” he said, referring to Premier Gold Mines Ltd.’s discovery at the McCoy-Cove property near Battle Mountain, where high-grade mineralization was found in the first hole drilled at a target between the historic Cove and McCoy open pits. The discovery is on joint venture property with Barrick Gold Corp. and is to be part of the Newmont Goldcorp-Barrick joint venture for Nevada.

Perry and Ressel said Nevada also gained recognition with a booth at the Prospectors & Developers Association of Canada convention in Toronto in March. Nevada’s booth was an economic development platform, marketing the state’s minerals exploration and production potential.

“Nevada has done a splendid job selling itself,” Ressel said. “Nevada shows it is really productive.”

Rising exploration spending is directly linked to commodity prices. The summary states that exploration spending in Nevada since 2011 mimics global trends tied to commodity prices.

Exploring for minerals

Most of the exploration in 2018 — 77 percent — was for precious metals, Ressel said. The survey found that 15.1 percent of the exploration was for base metals; 5.1 percent for energy metals, including lithium and vanadium; and 2.7 percent was for geothermal resources.

Exploration for copper was up mainly because of the Pumpkin Hollow copper mine near Yerington, Ressel said, while there is little if any oil and gas exploration now, and industrial minerals are holding steady. Geothermal exploration also suffered from lower energy prices.

Still, Nevada is the second largest geothermal energy producer in the United States, Perry said.

The survey also states that Nevada’s exploration spending was 54 percent of the exploration spending nationwide in 2018. Worldwide, Nevada “gets something like five percent of total global spending,” Ressel said.

Nevada’s 31 percent hike in exploration spending is significantly higher than the 20 percent increase globally, the survey states, using figures from S&P Global Market Intelligence.

Exploration employment

Along with spending, exploration employment rose 21 percent in 2018 to 784 people, compared with 644 in 2017. Still, employment is down from 1,040 employees in 2011. The employment was mainly of geoscientists and technical staff, the survey found.

Ressel said the employment figures don’t include vendors, assayers, drillers and other contractors, just direct employment by the companies, “so there is a large component of cash reflected in expenditures but not in employment figures.”

The survey also broke down exploration spending to show that 66 percent went toward actual exploration, which is mainly drilling, and 15.1 percent went for land-holding costs, 7.3 percent for permitting and 8.4 percent for corporate expenses.

“The lion’s share” of exploration spending, including for drilling, contractors, hotels and restaurants, stays in Nevada, Perry said. He commented that drilling companies say there is a shortage of drillers.

Mine sites and grassroots

Roughly 61 percent of the exploration spending in 2018 was toward resource expansions at existing mine sites, while 39 percent was spent on grassroots exploration to find new resources, according to the survey.

“There is a lot of prospecting around existing mine sites, but there is not a lot of emphasis on grassroots,” Ressel said. Nevada may be “ripe for that grassroots exploration that hasn’t been a part of anyone’s recipe.”

Junior companies that explore for minerals can raise funding more easily if their potential drill holes are near existing mines, he said, and for gold especially, “it’s location, location, location.”

There is some grassroots exploration, however, for lithium and vanadium used for batteries, Ressel said.

In the survey, he wrote that “exploration activities are burdened with high risk as substantial investments are not guaranteed to result in extractable resources. Indeed, only rarely do exploration programs result in successful resource extraction, and then only after many years of capital investment and development activities. Despite this, exploration success is imperative for the sustainability of natural resource industries in Nevada.”

The survey also found that the most important factors leading exploration companies to Nevada are its prospective geology, potential for new discovery and access to public lands.

Exploration companies responding to the survey reported the negative side of exploration in Nevada include the time and cost for permitting from state and federal agencies and the high cost of mining claims. The negative factors also included the proposed sage grouse and military withdrawals of public lands from exploration.

The 172 companies used for the survey included 148 respondents, along with 24 companies whose figures were obtained through public company websites, Ressel said. He used a list of 315 companies, but some of those companies are no longer in business and others didn’t respond.

The Nevada Bureau of Mines and Geology conducted the survey for 2017 and 2018 to coincide with Nevada’s legislative session this year. The survey is designed to gauge exploration activities and assess the economic impacts of exploration, including expenditures and employment.

The Nevada Division of Minerals and the Nevada Commission on Mineral Resources partially fund publication of the survey. The division has a summary of the exploration survey on its website. The exploration survey was highlighted at a booth at the Nevada Legislature on April 24, which was Exploration Day for the legislature.

The minerals division sees an increase in funding when there is more exploration since it receives a portion of mining claim fees.

Copies of the Nevada Mineral and Energy Resource Exploration Survey for 2017-2018 are available online for free from the Nevada Bureau of Mines and Geology website.

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