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Mining during a pandemic

Mining during a pandemic

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The coronavirus pandemic is an event that is “likely to change the world forever,” Barrick Gold President and Chief Executive Officer Mark Bristow said last month.

We know the pandemic has changed the world a lot since the start of the year, and we don’t know how this will all play out, but it looks clear that we are living through a time in history that will have lasting impacts.

In the world of mining here in the Nevada, the impacts have been much less than they have been for lots of other industries and people in the world.

Many countries temporarily shut down their mining industry to help slow the spread of the coronavirus, but in the United States mining has been classified an essential industry and has been allowed to continue operations.

On March 19, as part of the country’s coronavirus guidance, the Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency issued an “Essential Critical Infrastructure Workforce” advisory list. Under the “Critical Manufacturing” category, the list includes “Workers necessary for mining and production of critical minerals, materials and associated essential supply chains, and workers engaged in the manufacture and maintenance of equipment and other infrastructure necessary for mining production and distribution.”

Commenting on the inclusion of mining on the list, National Mining Association CEO and President Rich Nolan said, “Mining underpins every aspect of our economy, providing the metals, minerals and coal that are essential to nearly every sector identified as critical infrastructure under DHS’ CISA National Infrastructure Protection Plan. It was gratifying to see DHS reiterate the importance of our industry during this crisis.”

Many other countries took a different approach. With at least 32 countries passing lockdown orders which affect mines, in early April over 1,600 mines around the world had temporarily suspended their activities, according to a report from GlobalData.

On April 7, Kirill Kirilenko, precious metals analyst at CRU Group, told Investing News Network his firm was estimating that about 10 to 15 percent of gold mines globally were offline.

All those mine closures have affected a lot of people.

“When South Africa shut down its mining industry to contain the coronavirus, more than 450,000 workers were sent home in 24 hours,” Feliz Nijini wrote for Bloomberg News on April 12. “Getting them back will take much longer for the nation’s gold and platinum miners.”

Through the month of April some lockdowns ended and more governments classified mining as an essential service, so many mines reopened. By the end of April a little more than 700 mines were still shut down due to coronavirus concerns.

In Mexico, the mines were shut down in early April, and the shutdown was later extended to May 30. However, on May 13, the government of Mexico announced that by May 18, industries like mining, construction, and car and truck manufacturing would be allowed to resume. Some in the country disagreed with the decision, but the AP reported Mexico was under pressure from U.S. officials to reopen auto assembly plants, which led to the accelerated reopening.

Here in Nevada, most mines have stayed open, but there have been a wide range of changes to their operations as they work to keep their workers safe and as they deal with changes to the world’s economy and to supply chains. In his interview in this issue of the Mining Quarterly, Tyre Gray, the new president of the Nevada Mining Association, said mine production in Nevada in May was about 65 to 70 percent of what it would be during normal times.

“But the truth is we are grateful to have 65 to 70 percent of something versus 100 percent of nothing,” Gray said.

McEwen Mining’s Gold Bar mine near Eureka, which poured its first gold in February 2019, and Nevada Copper’s Pumpkin Hollow project near Yerington, which began production in December 2019, are two mines which announced they were scaling back operations due to the effects of the coronavirus pandemic.

On March 26, McEwen Mining reported that “in order to protect the health of our workforce, their families, and the nearby communities from the spread of COVID-19, both the Black Fox and Gold Bar mines (the Black Fox Mine is at Timmins, Canada) will scale down operations beginning today for a period of 14 days. Certain production and exploration activities will continue at Gold Bar in areas where social distancing can be observed, including ore crushing, irrigation of the heap leach pad, and operation of the process plant.”

On April 14 McEwen Mining announced that Gold Bar’s “downstream activities such as heap leaching and process plant operation are continuing.” Operations at Gold Bar continued to be scaled back in May.

On April 6, Nevada Copper announced that “it has become necessary to temporarily suspend copper production at the Pumpkin Hollow project as a result of the restrictions imposed by government-mandated measures and other impacts of the COVID-19 pandemic.”

“General concern regarding the risks to the health of the company’s workforce, contractors and suppliers, the consequences of the working restrictions now in effect, and disruptions to the Company’s supply chains, have made it necessary for the company to suspend copper production,” Nevada Copper said.

The shutdown was expected to last at least six weeks, but the company did say it was initiating an accelerated mine development plan at its Pumpkin Hollow underground project.

In general, the larger mining companies, which are likely to have more resources and more control over supply chains, have fared better than smaller operations.

Exploration is also facing a lot of uncertainty during the pandemic’s troubled economic times.

“With junior explorers unlikely to see much support over the next several months, this sector will be the hardest hit,” Kevin Murphy wrote for S&P Global Market Intelligence on April 28. “We now expect global exploration budgets to fall 29% in 2020 to a total of $6.9 billion.”

Coal mining, which was already going through rough times, has been hard hit by the coronavirus pandemic.

“Since the coronavirus hit the U.S., coal mines across the country have begun shutting down, laying off workers and slowing production,” Reid Frazier wrote for NPR on April 23. “Bankruptcies loom everywhere in the industry.”

“Just about everything that can go wrong, has gone wrong for the coal industry,” Matthew Preston, a coal analyst at the firm Wood Mackenzie, told Frazier.

In contrast to the coal mining industry, and many other industries in the United States and the world, Nevada’s mining industry is doing quite well.

Combatting COVID

Some mines in other parts of the world have seen a lot of coronavirus cases. On April 27, a Reuters story said the Peruvian copper mine Antamina, owned by global miners BHP and Glencore, had reported 210 positive cases of coronavirus.

The mines in Nevada have a lot going for them as they deal with preventing the spread of COVID-19. The mining companies have always put a big emphasis on safety. The international mining companies which have been around for years have experience in dealing with epidemics. And the mine sites are generally quite spread out, with many people working individually in big equipment.

One part of the mining operations that have required some logistical changes is busing the miners to and from work. Companies had to reduce the number of miners on each bus in order to help maintain social distancing and have found additional means to transport employees.

Nevada Gold Mines, the joint venture of Barrick Gold Corp. and Newmont Mining, has instituted a wide range of steps to protect miners, office workers, and the communities surrounding the mines. In May the company reported there had been a total of seven confirmed COVID-19 cases at its operations. Nevada Gold Mines has more than 7,000 employees.

Newmont Mining stated in early May there had been no COVID-19 cases at mines it operates across the globe. The company has had to close mines where countries required shutdowns during the pandemic.

Kinross Gold Corp., which operates the Bald Mountain and Round Mountain mines in Nevada, reported its mines were not materially impacted by the pandemic but could be challenged over time given the global impacts of a prolonged crisis.

Coeur Mining Inc., which operates the Rochester gold and silver mine in Pershing County, reported its mines in Nevada and two others in the U.S. continued to operate, but mining had been temporarily suspended at a mine in Mexico.

Hecla Mining Co. reported four out of its five mines, including in Nevada, were operating, and a mine in Quebec that was shut down due to the pandemic reopened in mid-April.

“Our rapid and early response to COVID-19 protected our workers, operations and the communities in which we operate,” said Hecla President and Chief Operating Officer Phillips S. Baker Jr.

Hycroft Mining Corp. stated on its website that it “takes the health and well-being of its employees, contractors and the community in which we operate very seriously,” and it was modifying business practices to reduce possible exposure to the workforce.

The Hycroft Mine is near Winnemucca.

Scorpio Gold Corp. announced in early April voluntary wage and salary reductions throughout the company during the pandemic and until the company receives major financing to build a process facility at its Mineral Ridge Mine in Nevada.

Other impacts

Looking at the impacts of the coronavirus from a different angle, gold producers ran into a snag getting their gold to refineries in the first weeks of the pandemic, but Reuters reported on May 6 that two of the world’s biggest gold refiners, Valcambi and Argo-Heraeusm, were restoring most operations in Switzerland.

Bloomberg reported the collapse of commercial air travel also affected transport of gold to the refining plants, and Newmont President and Chief Executive Officer Tom Palmer told Bloomberg the company was finding “alternative paths to get that dore to refineries around the world.”

The pandemic impacted mining companies in a brighter way, too. Gold prices rose as they often do in a time of crisis, and oil prices sank, and these market fluctuations boosted free cash flow for the companies.

Newmont’s chief financial officer, Nancy Buese, said that “with gold prices currently around $1,700 per ounce, favorable oil prices and foreign exchange rates, these tailwinds will more than offset short-term disruptions as we manage through these challenging times.”

Kinross provided a slide in its May 6 earnings report that shows the company budgeted for 2020 a gold price of $1,200, and the spot gold price on May 5 was $1,704 per ounce. The company budgeted for an oil price of $65 per barrel, and the spot price for oil on May 5 was $25 per barrel.

Supporting the community

With the coronavirus shutting down so much or our nation’s economy, lots of people are faced with financial hardships and uncertainty about the future. The mining companies in Montana are stepping up to help out.

Nevada Gold Mines committed $1.5 million to the governor’s coronavirus task force, $275,000 to Elko, Battle Mountain and Winnemucca for food services, and $100,000 to a food bank in southern Nevada. NGM also decided to issue $150 in Chamber Checks to each of its 7,068 employees to help boost the economy.

Both Newmont Mining and Barrick Gold have each donated about $20 million worldwide to communities where they operate.

Kinross donated $5.3 million to host governments and communities in response to the pandemic. Kinross Bald Mountain announced it was providing $59,200 for community food programs directed toward children and senior citizens during the crisis.

Kinross Round Mountain provided $100,000 to the Southwest Central Regional Economic Development Authority to develop a revolving loan fund for small businesses in Esmeralda County, northern Nye County and southern Lander County.

Elko Mining Group also contributed $100,000 to the development authority and another $150,000 to various organizations, as well as 2,500 gallons of hand sanitizer made at a whiskey distillery in Kentucky for use in Nevada. Nevada Prison Industries in Carson City rebottled the sanitizer for distribution.

Coeur Mining Inc. donated money to the State of Nevada COVID Response, Relief and Recovery Task Force and initiated a community-led gift card initiative to support local businesses and residents. Coeur also provided N95 masks to local emergency response personnel. Also, Coeur donated a structure in Lovelock for drive-through COVID-19 testing.

Lithium Nevada partnered with Frontier Community Action Agency to provide food to Humboldt County residents in need. Each month, the agency has been recruiting volunteers from local businesses to help package and distribute commodities, according to Maria Anderson, community relations manager for Lithium Nevada.

The company, which is developing the Thacker Pass lithium project in northern Humboldt County, committed to providing $250 per week to the agency and the Winnemucca Food Bank.

The Nevada Mining Association has had a fund matching campaign for the Food Bank of Northern Nevada.

More on the mining industry and the pandemic appears in articles throughout this Mining Quarterly.

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