The rise of gold prices to free-market levels has Newmont Gold Co. doubling the life of one if its Nevada mines.
"When we thought the price of gold was going to move up last fall, we announced plans for our gold quarry operation at Carlin that will extend the life of this pit for 10 more years," Newmont vice president of investor relations Jack Morris said Thursday.
"At sub-$300 price levels, the mine had basically been depleted. It had not been economical to continue there at lower prices."
The price of gold climbed to more than $300 an ounce this week with the late London fixed price Thursday at $312.70, up $3.40 from Wednesday. It had bottomed at $253 in June, Morris said.
He said the price of gold was driven down artificially by fears that some European central banks intended to sell off large portions of their gold reserves.
Morris said some speculators and traders had exaggerated those concerns and taken advantage of the falling gold prices through short selling. And some central banks were lending gold to speculators and producers who used it for price hedging transactions, he said.
But the leading European central banks announced in September an agreement to limit their future gold sales, Morris said.
"That has put some faith back into the market," he said.
The price of gold spiked briefly after that and dropped, but has climbed fairly steadily to the current level.
"What's happening now is there's a realization on the part of the gold market that the price of last summer was simply not sustainable," he said.
"Now there's a change, a sentiment that the artificial constraints on the pricing mechanism - from fears of central bank selling or of excessive lending or borrowing by producers - has abated," Morris said. "It appears that gold prices again will be set by supply and demand.
"The supply of gold is limited and the demand is increasing, so we should see the price of gold continue to move upward."
Newmont's operations at the Gold Quarry pit, about 10 years old, have nearly exhausted one layer of ore and stripping the overburden covering the next layer would have been too expensive at last summer's prices, he said. Mining at Gold Quarry has been going to end early this year, he said, but the company's optimism about gold prices led to the commitment to remove the overburden and reach the deeper ore.
"You can't just turn mining operations on and off like a spigot," Morris said. He said the development work at Gold Quarry is being staffed by moving Newmont employees from other operations, rather than adding more miners.
"We've been working the past three years at increasing the efficiency of our operations in Nevada," Morris said. "We have a large work force, which is quite mobile."
He said Newmont currently has nine active operations in Nevada but had 18 active in 1998.
Louis Schack, Newmont's spokesman for Nevada, said the company has not laid off miners since 1998 and has about 2,800 employees in the state. He said the decision to develop the deeper ore at Gold Quarry would not mean more mining jobs for the company's surface operations in Nevada.
But Newmont is planning to increase its force in the state, Schack said. The Deep Post underground mine near Carlin is being expanded to develop the remaining gold in that mine's deposit, which Schack described as "considerable.
"We will be hiring quite a few people this year and through 2001 to staff that operation," Schack said. Production from that deposit is scheduled to begin in mid-2001, he said.
Morris said Newmont produced gold at an average cost of $164 an ounce in the last quarter of 1999 and at an averaged 1999 price of $175 an ounce. He said the company's production cost is one of the lowest in the industry.
Newmont's Nevada underground mines also include the Deep Star and the Carlin East, West and Main operations, Schack said. Newmont has been mining underground in Nevada since 1994. And Newmont's surface operations outside of the Carlin area include Twin Creeks near Winnemucca and the Lone Tree complex between Winnemucca and Battle Mountain, he said.