Gold production drops in Nevada

(AP) - Nevada gold production fell last year as producers concentrated on processing lower-grade ore while prices are high.

A report by the Nevada Division of Minerals said gold mined in 2009 was valued at $4.9 billion. Nevada mines produced 5.03 million ounces of gold during the year, down 12 percent from 2008.

"It's the economics of the situation," John Dobra, an economics professor at the University of Nevada, Reno. "They couldn't make money using lower grade ore before. So why waste it now? They are letting the higher grade ore sit there and taking the lower grade while prices are high."

The annual Major Mines report, recently released, said Nevada mines last year produced total mineral commodities worth $5.8 billion, a drop of $300 million from 2008, the Las Vegas Review-Journal reported Wednesday.

Nevada gold production has been steadily declining since 2000, when it topped 8.5 million ounces. All-time peak production came in 1998, when 8.86 million ounces were produced.

Tim Crowley, president of the Nevada Mining Association, said low-grade ore is more expensive to mine and process.

"We are purposely mining lower grade ore and trying to provide sustainability for the industry. It costs more to mine lower grade ore, but when the price is up you can afford to do it."

Ore is the rock that contains the gold. By crushing rock and then treating it with water, cyanide and other chemicals, the gold is released and can be recovered. Typically less than an ounce of gold is found in each ton of ore.

Gold sold for an average of $972 per ounce in 2009, but this year the average price has been $1,217, Dobra said.

Alan Coyner, administrator of the Nevada Division of Minerals, predicted continued strong demand for the precious metal.

"I think we will see future increases in gold prices," he said. "As long as we have this tremendous debt load and a weak dollar, I think we will see strong gold prices. In times of economic crises, people tend to turn to gold."

He expects Nevada will

continue to produce about

5 million ounces of gold per year.