New Glitter for American Gold

By Cristina Garcia/San Francisco

In the American West, gold mining has long been a romantic if not always profitable enterprise. But nowadays gold mining is back in those parts as a booming, albeit unromantic, big business. No fewer than 22 new gold mines are expected to open up in the U.S. this year, most of them speckled across California, Nevada, Montana and Colorado. The treasure hunt is bound to bolster the position of the U.S. as No. 4 among gold-mining countries. America's importance as a producer has increased lately because traders have become fearful of disrupted output from the world's leading supplier: South Africa. The precious metal's price surged last week to nearly $421 per troy oz., up from about $333 last April.

The rush of '86 is considerably different from that of the late 1970s and early 1980s. Back then, when the price of gold soared to $850 per oz., dozens of small operators and thousands of individual prospectors jumped into the hunt. Most of those revenants of the sourdough era have since disappeared in an industry shake-out that began in the early 1980s, as the value of gold headed downward. The boom is now mostly confined to large, well-financed firms that were initially attracted by gold's higher price. With gold currently selling at more than $400 per oz., the operators can still make an average profit of as much as $200 per oz.

As part of an industry-wide drive to cut costs, most of today's gold mines are surface, or open-pit, operations, a method used in copper and coal mining. The new excavations can take as long as eight years to start up, but then can handle thousands of tons of low-grade ore daily. The latest mines make use of a chemical technique called heap leaching to reduce costs. The procedure involves the spraying of crude ore with a cyanide solution that absorbs microscopic amounts of gold as it filters through the heaps of rock. After further processing, a low-grade bullion is produced that can be used in jewelry and industrial products. Some 25% of U.S. gold production is now extracted by heap leaching, up from only 6% in 1980.

The leaching process retrieves even marginal deposits. One place where the method will be used is Angels Camp, Calif., about 120 miles east of San Francisco. Angels Camp provided Mark Twain with notebooks full of prospecting lore for his short story The Celebrated Jumping Frog of Calaveras County. Today workers for the Carson Hill gold-mining company are blasting and carving out a 1,100-acre open-pit site. When it begins full operation in October, the Carson Hill venture will be the first commercial gold mine to open in the Angels Camp area since 1950. The company's general manager, W.B. Williams, expects to cull only .046 oz. of gold per ton of ore mined. But, says Williams, "if prices go down, we still make a profit."

Other miners continue to see a bonanza in more traditional methods. About eleven miles southeast of the Carson Hill site, Canadian-backed Sonora Mining has invested $85 million to build the largest conventional gold-processing mill in North America, due to open early next year. Sonora hopes to excavate 2 million oz. of gold from the hills around Jamestown (pop. 950), a sleepy settlement born during the 1849 gold rush.

For Jamestown and other mining settlements with new projects, the gold rush is a godsend. Despite its capital-intensive nature, gold mining still demands highly paid labor. At the Sonora mine, more than 5,000 applicants have applied for the 170 permanent positions now available. (Average annual salary including benefits: $30,000.)

The boom will do little, however, to help Western mining communities, like Butte, Mont., and Grants, N. Mex., that have been badly hurt by the drop in prices of such metals as lead, copper and uranium. Even some of the gold- producing states are failing to reap a bonanza. In Alaska, for example, gold placer mining, which involves extracting the metal from river gravel deposits, is off by approximately 50% because of restrictions imposed by newly enforced water-quality regulations.

Protests by environmental groups have stalled gold-mining projects in several Western states. The Asarco project in Montana has been delayed by environmentalists who insist that no construction take place at night because it would disturb the sleep of the region's hibernating grizzly bears. In response, some California and Montana mining companies have begun campaigns to rally public support behind their projects.

Despite such obstacles, the gold rush will proceed as long as worldwide demand remains strong. Last year U.S. mines produced 2.5 million oz. of gold; 1986 production should rise by an estimated 40%. Besides the instability in South Africa, another boost to American mining has come from Japan, which bought 348 metric tons of gold, about half the world's production, during the first six months of this year. Reason for the purchase: in November the Japanese government plans to issue 10 million gold coins commemorating Emperor Hirohito's 60-year reign. When both stability and instability are producing an increased demand for the precious metal, the gold-rush prospects can only look as good as the yellow stuff itself.