Nevada's gold producers continue to save their best deposits for a rainy day that seems a long ways off in the future.
Gold production in the state declined slightly in 2009 and totaled 5.64 million ounces, found an annual overview of the mining industry developed by John Dobra, an economist who heads the Natural Resource Industry Institute at the University of Nevada, Reno.
But the decline in production isn't necessarily a troublesome indicator for the future, Dobra said in the study released last week. "Higher prices allow operators to process lower grades of ore," the UNR economist said. "While lower production levels may seem like bad news in the short term, it extends the life of ore bodies and enhances the sustainability of the industry."
And prices were definitely higher.
The average price of gold received by Nevada producers during 2009 - $972 an ounce - was almost $100 higher than a year earlier.
At the same time, Dobra said, the average cost of gold production in the state declined for the first time in a decade. The average cash cost - a figure which doesn't include depreciation - fell to $508 an ounce from $525 in 2008.
That's largely a reflection of the startup of some low-cost mining operations such as Barrick Gold's Cortez Hills mine in Lander County as well as improved efficiencies at big properties such as Barrick's Goldstrike mine on the Carlin Trend and Newmont Mining's operations on the Carlin Trend and at the Phoenix Mine in Lander County, Dobra said.
Nevada's mines produced $5.1 billion in gold and silver during 2009. The state's production ranks sixth in the world, trailing China, South Africa, Australia, Russia and Peru.
Higher prices as well as new discoveries during 2009 mean that the pipeline of yet-to-be-mined gold deposits in Nevada continue to grow. Proven and probable gold reserves at Nevada properties - a figure that includes gold that can be mined profitably at current prices - stood at 75 million ounces last year. That's an increase of 5 million ounces over the previous year.
Even if no more gold is discovered in Nevada, Dobra said the proven and probable reserves are enough to sustain mining at current levels for more than 13 years.
Tim Crowley, president of the Nevada Mining Association, called the increases in reserves "very good news for Nevada."
Enough promising projects are in development around the state, Dobra said, to lead observers to think that new reserves will be boosted further.
Among the gold projects in the pipeline, he noted, are Fronteer Gold's Long Valley project southeast of Wells, Newmont's Genesis project on the Carlin Trend, and expansion of mines such as Allied Nevada Gold's Hycroft property at Winnemucca and Marigold Mine operated by Goldcorp west of Battle Mountain.
Exploration activity, however, may have declined.
A survey by the Nevada Division of Minerals found that exploration investments in the state totaled $110 million during 2009 compared with $158 million a year earlier. Executives of exploration companies have tight credit markets made it difficult to raise money since the onset of the recession.