12/13/09 Government Chokes Off New Mine Development

Precious Metals Market Analysis, By Michael Pennington (Copyright 2010 Pennco Coins)

The photo below is of Barrick Gold’s new Cortez Hills mine, which – after ten years and $500 million – has just hit something of a wall. The U.S. Appeals Court in San Francisco ordered the company to “provide injunctive relief” in a case brought by an environmental organization called the Western Mining Action Project, which is using a local Indian band for cover.

The latest hold-up revolves around a claim that Barrick and the Bureau of Land Management, which made Barrick jump through any number of costly hoops in order to permit the mine in the first place, failed to properly evaluate the impact of truck emissions on the air of the barren desert – trucks transporting the mine’s ore 70 miles to a processing facility.
If a mine can be held up, after 10 years and half a billion dollars spent, by a handful of environment activists over such a niggling concern as truck exhaust in the middle of a desert –  it must be pointed out, in one of the world’s most prolific and politically favorable mining jurisdictions – then how can any mining operation expect to succeed?
Any company wishing to build any mine pretty much anywhere now has to be willing to spend hundreds of millions of dollars – and a decade or more – before even hoping to start production. And even then, as the Barrick ruling shows, they aren’t safe from rear-guard actions by the environmentalists.
This is, of course, having an impact on the world’s extractive industries  – of which the environmentalists would view gold among the least important. After all, unlike copper, it serves no useful purpose – right? And so, they can be counted on to fight any new mine every step of the way. They are too ignorant to understand that Gold is money. In spite of their need for money, they happily celebrate any gold mine they can prevent.
Choking off new mine development in Nevada doesn’t guarantee that gold won’t eventually fall in price. But falling U.S. gold production – makes clear, it has to have an impact on gold’s future price. Simply, the odds of falling gold supply being replaced in any significant way, at any time in our lifetimes, is increasingly slim. This certainly has to put a floor under the price of gold – $1,000? – because without a premium, why would anyone want to go through the trouble of trying to mine the stuff?

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