SIC 1041
GOLD ORES



This category covers establishments primarily engaged in mining gold ores from lode deposits or in the recovery of gold from placer deposits by any method. In addition to ore dressing methods, such as crushing, grinding, gravity concentration, and froth flotation, this industry includes amalgamation, cyanidation, and the production of bullion at the mine, mill, or dredge site.

NAICS Code(s)

212221 (Gold Ore Mining)

Industry Snapshot

Mined on every continent except Antarctica, gold is used for a wide variety of applications ranging from jewelry and the arts to dentistry, electronics, and diverse industrial applications. In 2001 U.S. gold mine production was valued at approximately $2.9 billion. Of that, jewelry and other art-related pursuits accounted for 89 percent of U.S. gold consumption, dental use for 7 percent, and electronics for 4 percent, according to statistics from the U.S. Geological Survey. As a precious metal, gold is traditionally used as a backing for paper currency systems and as a hedge against inflation. Of all the gold produced by the United States in 2001, almost 99 percent came from 30 mines.

An estimated 100,000 tons of gold make up the world's resources, according to the U.S. Geological Survey. South Africa has one half of this total. Brazil and the United States each have 9 percent. Other major producers include Australia, Canada, Russia, and China. Of the 120,000 tons of total mined gold, approximately 33,000 tons are held by central banks as official stocks. The remaining 87,000 are held privately as coin, bullion, and jewelry.

Background and Development

A Shining Past. Its sparkling character, beautiful hue, and unique metallurgical properties—including resistance to tarnishing and corrosion, and virtual indestructibility—have set gold on the throne of coveted precious metals since early history. Ancient Egyptian, Minoan, Assyrian, and Etruscan artists produced elaborate gold artifacts as early as 3000 B.C. As increasingly complex economic systems evolved, gold was used as a high-denomination currency and eventually as a backing for paper-currency systems.

The Source. Naturally occurring gold is dispersed throughout the earth's crust and is usually combined with other elements such as silver, copper, platinum, and palladium. In addition, small amounts of gold are usually recovered as a by-product in the refining of such base metals as copper and lead. Gold ores, large and rare masses of rock that are very rich in the metal, are usually quartz lodes (also called veins) or deposits that fed off of river bed gravel or quartz conglomerate beds (termed blankets or reefs). One of the best-known reefs is the South African Witwatersrand system in the Transvaal and Orange Free States. Though gold occasionally appears in rock formations as visible flakes, grains, or nuggets, it remains for the most part invisible until separated from ore and refined. The principal ores are calaverite, a telluride (containing tellurium) containing 40 percent gold, and sylvanite, a mixture containing 28 percent gold and variable amounts of silver.

Mining History. Ancient Near Eastern civilizations made profitable use of gold culled from alluvial deposits in and along streams. Egyptian monuments dating back to the first dynasty (c. 3100 to c. 2890 B.C.) depicted the washing of gold ores. Gold deposits were also exploited throughout regions including the Aegean, Libya, Persia (later Iran), India, and China. By the Middle Ages in Europe, gold was mined in Saxony and Austria and, to a lesser extent, Spain.

With the European colonization of the Americas in the sixteenth century, gold production reached unprecedented levels, as output from mines worked by slaves was supplemented by hoards taken from native palaces, temples, and burial sites. Well into the seventeenth and eighteenth centuries, South American mines accounted for the majority of world gold production. In the early nineteenth century, massive deposits were uncovered in Russia, making it a world leader in gold mining from the 1820s to the late 1830s.

The discovery of gold in California and Australia in the mid-nineteenth century brought a veritable explosion of gold production. Prospectors flocked to California to participate in the gold rush of 1849, earning themselves the name "49ers." From 1890 to 1915, world production of gold jumped again, with major developments in Alaska, Yukon Territory, and South Africa, as well as Canada in the 1920s. In the early twenty-first century, primary production of gold was carried out in South Africa, Australia, Brazil, Canada, the United States, and several republics of the former Soviet Union, now the Commonwealth of Independent States (C.I.S.). Although gold markets became increasingly convoluted, steady advances in mining and refining technology—such as the development of the heap-leach process in the mid-1980s—continued to increase efficiency and permit mining of less accessible and lower-grade ores.

Mining. Gold is recovered by three basic mining methods: placer mining of alluvial deposits, lode or vein mining, and recovery as a by-product of base-metal mining. In placer mining, the oldest method, the high-density gold is separated from the lighter, siliceous material (called the matrix or gangue) in which it is found. Though the basic principles of placer mining are essentially the same, methods of varying sophistication were developed according to the scale of particular mining operations and the types of terrain exploited. The simplest method of placer mining, practiced by the individual miners in the great American gold strikes of the nineteenth century, was panning—a technique by which several handfuls of siliceous material were placed in a pan or batea (a wooden bowl for washing gold that was commonly used in Mexico) and repeatedly washed with large amounts of water until the denser materials, including gold, were left at the center of the pan. To "sift" greater amounts of material, cradles (also called rockers) were developed in which material was "rocked" with the aid of water, and dense materials were collected in riffle. Pieces of wood or iron were perpendicularly attached to the bottom and sides of the cradle.

Several other large-scale placer methods are used as well. In hydraulic mining, powerful jets of water are directed at thick beds of gravel to break them down and wash the residue through lines of sluices designed to separate gold particles. The subsequent discarding of large amounts of residue into adjacent rivers and farmlands, however, resulted in injunctions in America that limited the practice after 1880. Large-scale placer mining continued to develop, however, with the late nineteenth-century invention of the gold-mining dredge in New Zealand. Originally used in the rivers of New Zealand, California, and Russia, the dredge technique later evolved into the paddock dredge, developed in the western United States. Here, this technique replaced the need for riverbeds by starting with a dredging pond and continuously shifting the pond by redistributing mining wastes and tailings, as the dredge moved across a designated terrain.

In addition to placer techniques, methods for under-ground mining of gold lode or vein deposits closely resemble the pit- and shaft-mining methods used for other metals and minerals. In general, a vertical shaft was sunk to gain access to lodes, often at great depths, by designing stopes—underground excavations wherein ore-bearing materials are produced—suitable to specific sites. The basic sequence of activities constituting the mining cycle is as follows: rock breaking (drilling and blasting); mucking (loading); and transporting (hauling and hoisting).

Recovery. After ore is mined, its gold content must be recovered by one or several techniques that vary according to the type and amount of ore. The process of amalgamation, in use since the mid-nineteenth century, applies the principle that gold particles wetted by mercury adhere to each other and to copper plates coated with mercury. Amalgamation remained a commonly used technique for bulk recovery of gold, even as other, more efficient methods evolved.

One such method, the cyanide process, was introduced in South Africa in 1890 and became the industry norm. The process depends on a series of chemical reactions to flux off (remove by heating) base metals contained in the gold ore. Finely ground ore is first treated with dilute solution of sodium cyanide (or calcium cyanide with lime and natural oxygen), yielding a water solution of gold cyanide and sodium cyanoaurite. After being deoxygenated, the mixture was mixed with zinc dust to precipitate the gold and other metals dissolved by the cyanide. The precipitate is then treated with sulfuric acid to remove residual zinc and copper before it is again washed, dried, and melted with fluxes to dissolve any remaining copper, and to fuse gold and silver. The end result, a mixture of gold and silver called dore, is then cast in preparation for assaying (a complex process for determining purity).

The 1980s saw the development of heap leaching, a low-cost technique for recovering gold from low-grade ores, mining waste, or milling tailings, which has resulted in large new supplies of gold. The ore is crushed and "heaped" on large pads, where a process of sprinkling cyanide acid solution leaches the gold in bulk.

Refining. After dore is recovered from ore, various refining processes are then applied to produce gold metal ready for the market. Two common methods are the Wohlwill process and the Miller process. The Wohlwill process uses direct and alternating currents to electrolyze dore gold in a chloride solution. Gold on the dore anode dissolves and accrues to the cathode, yielding gold of at least 99.95 percent purity. The silver is converted into chloride, while platinum or palladium in the anode dissolves and has to be recovered by further treating the electrolyte. The alternative Miller process is often preferred because of its faster rate of production. Chlorine is bubbled through molten dore, converting the metals into chlorides. Although the purity of gold refined by this method—at least 99.5 percent pure—falls slightly below that of the Wohlwill process, a faster rate of production makes it the preference for most refiners.

Price. After gold peaked in 1987 at $500 an ounce, the industry was characterized as being on a downtrend that continued into the late 1990s. Worldwide deflationary forces—including stagnant economic growth, tepid money supply growth, and weak commodity prices—threatened to continue dampening new gold prices. Gold prices in 1998 were $295.24 per troy ounce, well below the $370 per ounce of 1996.

Declining prices curtailed worldwide exploration spending, which in turn diminished the prospects of new mine supply. In addition, the combination of lower prices and rising production costs precipitated cutbacks at many mines and the closure of numerous others. Production costs in the mid-1990s were estimated at somewhere around $200 per troy ounce. With many companies implementing cost-saving measures, in 1992, average Western world cash and total costs were reduced by 5 percent to $247 per ounce, and 4 percent to $300 per ounce, respectively.

Speculative Demand and World Events. The key swing factor for gold prices has traditionally been speculative demand, arising from the role of gold as a hedge against inflation and backing for currency. Adverse conditions in developed countries intensified deflationary forces in the early 1990s, placing significant downward pressure on gold prices, as recession extended from U.S. to German and Japanese economies by 1992. World events apart from economics, particularly war and political turmoil, also traditionally spur gold price fluctuations, even events in countries thought not to impact industrialized nations.

Money Supply and Gold Speculation. Another key factor in the early 1990s was the indirect effect of money supply growth on gold speculation. Riding on the heels of runaway debt built up in the 1980s, the monetary climate of the early 1990s was characterized by general bank resistance to lending and by wariness or inability of companies and consumers to borrow. By 1992, growth of the M-2 money supply hovered at 1.6 percent, the lowest in over 30 years. (The M-2 money supply includes the current supply of cash, travelers checks, checking accounts, and savings deposits of $100,000 or less, and is slightly less liquid than the M-1 supply of money.) According to Standard & Poor's, such a slow rate of money supply growth tended to favor deflation, which in turn, dampened speculation in gold.

Among industrialized nations, a notable exception to stagnant money growth was Germany, which took measures to counteract excessive money supply growth and inflation in 1992, and ended up sending shock waves through European currency markets. After the Bundes-bank raised its discount rate in mid-July 1992 to 8.75 percent, the highest since 1931, other countries in the European Monetary System (EMS) were forced to raise their rates to maintain the value of their currencies vis-avis the deutsche mark. Artificially high interest rates spurred deflationary measures throughout Europe. Nevertheless, European currency did not stabilize, and the European Monetary System's exchange rate mechanism (ERM) was rocked by turmoil (the Spanish peseta was devalued by 5 percent, and the pound and lira were suspended from ERM to find their own levels in the market).

Given the depth of the European currency crisis, the dollar gold price underwent little change, partly because investors' "flight" funds were largely channeled into the U.S. dollar itself, not its gold equivalent, and partly because foreign exporters kept their dollar-denominated prices steady, at the expense of profit margins, in an attempt to maintain market share in the United States.

Both China and Brazil asserted intentions to gain better control over their national gold industries. The Chinese government in mid-1994 announced intentions to shut down unauthorized markets and give the nation's central bank control of all aspects of gold production and trading; by 1999 China had increased its gold production and mining efficiency. Brazil similarly gained a better grasp of production in the Amazon.

The Official Sector. Constituted by central banks and government agencies, the official sector drew much discussion over the role and influence of its gold holdings. For the better part of the 1980s, official sector institutions were net buyers of gold, becoming marginally net buyers by 1990. Turmoil in the ERM played an additional role in highlighting the importance of reserve liquidity insured by the sales. Influxes of gold to the market by European bank sales in 1992 and again in 1999 and 2000 were not as damaging as many analysts anticipated. Unexpectedly high demand for jewelry fabrication absorbed a good deal, and a significant portion of the Dutch sale circumvented the market to land in several Asian central banks.

Forward Selling. Adapting to the pressure of low prices, many producers received prices much higher than the spot price "fixed" in London by forward selling their gold. By agreeing to deliver gold at a specified future date and price, producers obtained a premium to the spot market price and also hedged against market decline. In late April 1992, North America's leading gold producer, Newmont Mining, prepaid at $336 an ounce all remaining 375,000 ounces of a 5-year, 1-million-ounce gold loan for a gain of roughly $40 million. While many analysts hailed the transaction as establishing a new bottom for the gold market, Standard & Poor's projected that most producers, forbidden by higher production costs to gamble on future gold prices, would continue to sell at available rallies, contributing to declining prices. In the 1990s fewer companies would make profits by forward selling their production.

Supply. Although Canada, western Europe, the Philippines, and several Latin American countries saw declines in production for 1992, overall world mine production in the early 1990s was sustained by increased output from the three largest producers (South Africa, the United States, and Australia) and such key developing countries as Indonesia, Papua New Guinea, Ghana, and Chile. Consequently, Western world gold production rose by almost 4 percent to 1,841 tons in 1992. Throughout the early 1990s the average world mine production had been about 66 million troy ounces.

Starting in 1991, the dramatic upheavals in the former Soviet Union also contributed to surges in market supplies of gold, as stocks were sold for desperately needed foreign currency. The ability of Russian mines to sustain increased levels of production remained a topic of debate into the mid-1990s. The former Soviet Union produced 12 percent of the world's gold in 1993. Despite record production levels in 1992, the rate of production growth declined as compared to Western world production increases of 128 metric tons and 51 metric tons in 1989 and 1990, respectively. Many analysts cited diminished increases in production as a sign that mine supply was reaching its peak. The Gold Institute, a trade organization based in Washington, D.C., projected that world gold mine output would eventually taper off.

In 1997 a total of 301 establishments in the industry had sales of $3.95 billion. The United States imported 257,000 kilograms of bullion and 2,540 kilograms of gold ores and concentrates for consumption in 1998. Conversely, the United States exported 430,000 kilograms of bullion and 401 kilograms of ores and concentrates.

Environmental Issues. The gold ore industry responded on numerous fronts to the environmental concerns of the 1980s and 1990s. Such issues as wastewater, waste disposal, and land reclamation placed additional planning and economic pressures on mining companies, prompting many to seek development in other countries with less stringent regulations. Three environmental acts carried particular weight. Specifically, the Resource Conservation and Recovery Act (RCRA) required mine owners to comply with terms of the National Pollutant Discharge Elimination System (NPDES), which called for the monitoring and testing of water runoff. The American Mining Congress challenged the rule but was overridden in a 1992 court decision.

Tensions between mining and environmental interests were epitomized in Colorado v. Idarado Mining Co., decided in February of 1989 by a U.S. District Court in Colorado. Pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), a proposal calling for a 50-cent-per-pound tax on sodium cyanide used in gold mining was considered. These and other environmental issues put the gold ore industry on guard, as it moved into the twenty-first century.

Amending the 1872 Mining Law. From the late 1980s onward, both Houses of Congress focused considerable attention on measures aimed at reforming the 1872 Mining Law governing use of federal lands by mining companies, with emphasis on increasing revenues for leasing or sales of mineral-rich government lands and on environmental protection standards for mining of such lands. Specific controversy revolved around the fee required to patent a claim on federal land; still at $5 per acre in 1993, critics argued that the country was consequently losing out on the exploitation of precious natural resources. Many experts and mining executives, on the other hand, feared proposed royalty payments of 8.0 to 12.5 percent would adversely affect the gold mining industry. An economic impact study by Evans Economics indicated that an 8 percent royalty on hard-rock mining would cut into U.S. gold and silver mining by 26 and 7 percent, respectively, over a 10-year period.

In the mid-1990s, both the House and the Senate passed bills that would eliminate the ability of mining companies to take title to valuable federal lands containing gold, silver, and other "hard rock" minerals for only a few dollars an acre.

Current Conditions

During 2001 domestic gold production fell by 5 percent to its lowest level since 1996. Domestic gold exploration expenditures declined, continuing a four-year downward trend. In 2000 spending on domestic gold exploration was $183.4 million; in 2001 that total was cut by 42 percent, to $107.2 million. The U.S. decline in gold exploration reflects an overall worldwide reduction in explorations expenditures, which fell by 22 percent in 2001. Low gold prices have kept exploration opportunities to a minimum, but analysts expect activities to increase in the near future, likely to be focused in Latin America.

The U.S. gold industry has been continuing to consolidate, as numerous mines are closed annually. Between 1999 and 2001, 33 U.S. mines ceased operations. An increase in per mine output has helped the United States retain its second-place world ranking for gold production. Larger companies, which continue to buy up smaller operations, are able replace reserves with new production, whereas smaller companies are struggling to keep a balance of inflow and outflow.

During 2001 the price of gold ranged from a low of $257 per troy ounce to a high of $294 per troy ounce, with prices staying around $270 per troy ounce most of the year. The terrorist attacks of September 11, 2001, helped boost the price of gold, as investors sought out gold as a traditional store of value. According to the World Gold Council, the instability and unease caused by the terrorist attacks, coupled with investors' growing skepticism of the business sector brought on by numerous accounting scandals, have brought gold back to the fore-front as an investment option geared toward management of risk. By early 2003 the price of gold stood around $350 per troy ounce.

Industry Leaders

As the world's second largest gold producer behind Canada, the United States produced 335,000 kilograms of gold in 2001, valued at $2.94 billion. About 30 mines contributed nearly 99 percent of all gold produced in the United States. Nevada, Alaska, Arizona, Colorado, and California are the leading gold mining states.

Nevada has long dominated the production of gold in the United States. In 2001, 14 of the nation's 30 largest mines were located in Nevada and produced 253,000 kilograms of gold or more than 75 percent of the national total of 335,000 kilograms. During 2001 Newmont Gold Company's operations led the nation with 84,000 kilograms, and Barrick Gold Corporation's Betze Post/Goldstrike mines extracted 48,200 kilograms. Placer Dome, Inc.'s Cortez mine, also based in Nevada, was the nation's third largest producer, with 37,000 kilograms.

Whereas Nevada's gold production showed an annual decrease of 6 percent in 2001, Alaska's gold mining operations mines increased 6.5 percent from 15,600 kilograms in 2000 to 16,700 kilograms in 2001. Fairbanks Gold Mining Inc.'s Fort Knox mining operations accounted for 12,800 kilograms, making it the seventh largest mine in the nation. It was also in that state in 1994 that the tenth largest nugget of placer gold in Alaskan mining history was discovered. The Silverado Mines Ltd. unearthed a 41.3-ounce nugget from its Nolan Mine.

Kennecott Utah Mining Corporation's Brigham Canyon mine produced 18,400 kilograms of gold as a byproduct of its chief copper mining operations. California's gold mining production fell by 20 percent, from 17,200 kilograms reported in 2000 to 13,800 in 2001. The decrease was caused by the closing of a major mine that ceased to produce and the suspension of operations at another while waiting for expansion permission. Washington State's production fell by more than 40 percent in the same time period, from 2,930 kilograms to 1,700 kilograms.

Workforce

Employment in this sector in the United States dropped to 9,500 employees, comparing unfavorably with the 1997 level of 17,500 employees. According to the U.S. Department of Labor, the industry's mean hourly wage was $22.64.

America and the World

South Africa. The world's largest producer of gold, producing 402,177 kilograms in 2001, South Africa is also the world's highest-cost producer. Due to deepening mines, an ongoing diminution of ore grades, and labor-intensive practices, South African miners resorted to self-preserving measures including high-grading (i.e., focusing first on those portions of a mine containing high-grade ore) and reductions in operating expenses across the board. The government eased restrictions on some operations to allow work on Sunday, despite continued adherence to the politically sensitive blanket ban on Sunday mining. And allying market demand with production, many houses increased forward positions on the hedging market in attempts to secure upward prices for future output. Some of the country's biggest mines are Free gold, Vaal Reefs, Driefontein, Randfontein, and Elandsrand.

An ongoing research program of the Chamber of Mines of South Africa focused on highly integrated mining systems, incorporating several options to conventional drilling and blasting cycles. The effort, initiated in the mid-1970s, yielded numerous advances, including light, hand-held hydraulic drills with performance characteristics surpassing those of their heavier, immobile counterparts; a portable gold analyzer, developed in cooperation with EG&G Oretec, which scanned faces and blasted muck piles with X-ray fluorescence to measure gold concentrations; and others. Further, as South African mines exhausted easily accessible ores and tended toward deeper levels, new technology was designed to encounter the high stresses of such environments and to maintain acceptable working conditions far underground. Most South African advances would eventually benefit the industry worldwide.

Australia. With production of 285,000 kilograms in 2001, Australia was the third largest world gold supplier. Its leading mines include Super Pit, Boddington, Telfer, and Tick Hill. The territory of western Australia produces about 76 percent of that nation's gold. Traditionally characterized by shallow, open-pit mining—primarily of oxide ores—with relatively short life spans, Australian operations increasingly moved into underground mining of sulfide ores in the mid-1990s. They also began more extensive use of heap-leach recovery methods, a process that contributed to a 13.8 percent rise in production at the Telfer mine in 1992. However, the Australian mine industry found itself embroiled in land tenure disputes linked to court rulings protecting traditional aboriginal lands from mining exploration and development.

Other Nations. Other significant gold-producing nations in 2001 included China (185,000 kilograms), Canada (160,000 kilograms), Russia (152,000 kilograms), Peru (138,000 kilograms), Indonesia (130,000 kilograms), Uzbekistan (87,000 kilograms), Papua New Guinea (74,000 kilograms), and Ghana (68,700 kilograms).

Research and Technology

To recover ore from complex deposits that cannot be mined or leached by conventional methods, pressure oxidation and bio-oxidation processes have been developed and patented to extract refractory gold by environmentally friendly methods. A $3-million investment and five years of study at the Twin Creeks deposit operated by Newmont Gold Co. near Golconda, Nevada, yielded a patented process requiring careful design of the milling process to blend the several types of ore present in the deposit. These oxidation methods are also expected to be adopted by other mining ventures.

Further Reading

Amey, Earl B. Minerals Yearbook: Gold, 2001. January 2003. Available from http://minerals.usgs.gov .

Brimelow, Peter. "What is gold worth?" Forbes Magazine, 4 October 1999. Available from http://www.forbes.com .

Kirkemo, Harold, William L. Newman, and Roger P. Ashley. Gold. U.S. Geological Survey. January 2003. Available from http://pubs.usgs.gov .

"Money Supply." Microsoft Encarta Encyclopedia 1999. Redmond, WA: Microsoft Corporation, 1993-1998.

Reuters Limited. "Gold Drops in First Trading Day of 2000," 4 January 2000. Available from http://dailynews.yahoo.com .

——. "Summers: U.S. Not Selling Any Gold Reserves," 8 January 2000. Available from http://dailynews.yahoo.com .

——. "Supply Deficits to Support Gold and Silver CRU," 12 January 2000. Available from http://biz.yahoo.com .

U.S. Census Bureau. "Gold Ore Mining." 1997 Economic Census: Mining Industry Series, December 1999.

U.S. Department of the Interior. Minerals Commodities: Gold, 2001. January 2003. Available from http://minerals.usgs.gov .

U.S. Geological Survey. "Mineral Industry Survey: Precious Metals," October 2002. Available from http://minerals.usgs.gov .

World Gold Council. Annual Market Commentary. January 2003. Available from http://www.gold.org .



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