D. Dowd Muska

 

An Economic Prescription: Mine, Baby, Mine

October 04, 2012

America, a nation of burger-flippers? Tell that to Nevada’s gold miners.

By itself, the Silver State -- things change -- produces more gold than every nation on Earth, save China, South Africa, and Australia. The past decade’s economic lurches, terrorist attacks, and fiscal nightmares have pushed many investors toward the security of precious metals. An ounce of gold, less than $300 in the late 1990s, now fetches just under $1,800. The Nevada Mining Association reports that since 2002, its members have increased hiring by 80 percent.

America’s hydrocarbon renaissance gets plenty of press. Our manufacturing rebound (exports up, 500,000 new jobs since January 2010) garners headlines, too. But there’s a third blue-collar comeback, and it’s gone unnoticed. U.S. mines are boosting yields and seeking workers.

The Bureau of Labor Statistics describes mining as the “extraction, quarrying, and beneficiating (e.g., crushing, screening, washing, sizing, concentrating, and flotation)” of minerals. In January, the U.S. Geological Survey reported that the value of 2011’s rocks, clay, and sand was $74 billion, up 12 percent from 2010. Pricey gold and silver drove some of the surge, but the USGS noted that the “non-metallic minerals sector increased by 3 percent, the first increase since 2007.” And despite the Obama administration’s multipronged assault, coal production rose slightly in 2011, as it did in 2010.

Mining employment fell during the Great Recession, but has risen 9.1 percent since its October 2009 nadir. (Total U.S. employment rose just 2.9 percent during the same period.) National Mining Association data show that the average wage for miners is $71,050 -- 48.6 percent higher than the average for all workers. The coal subsector pays even better: $81,200.

Slowing growth in China, Europe’s debt woes, and Washington “gridlock” have many wondering if mining, both here and abroad, can sustain its impressive growth. GE thinks so. It recently announced a billion-dollar commitment to acquire a bigger stake in the industry, a strategy that might lead the finance/manufacturing behemoth to acquire Joy Global and/or the Weir Group. The Wall Street Journal found that at last month’s MINExpo International, the number of exhibitors rose by “45 percent from the previous show four years ago.”

The mining mega-meetup was held in Las Vegas, an apt location, given what’s happening a few hundred miles to the north. In the early 1960s, a geologist discovered something curious along the Carlin Trend, a geologic feature in Northeastern Nevada. The region contains widely dispersed flecks of gold that are impossible to detect, he explained in a 1989 interview with Time, “under an ordinary microscope.” Scientists and engineers eventually devised methods to profitably, if cumbersomely, liberate the micro-motherlode. Wealth began to flow. A September profile in the Las Vegas Review-Journal noted that while the Mark Twain-era Comstock Lode dug up 8 million ounces of gold over 23 years, in 2011, “Nevada produced 5.5 million ounces of gold, the equivalent of an empty Boeing 747 in weight and worth $8.7 billion at 2011’s average price of $1,572 an ounce.”

Mining is usually far more prosaic than Nevada’s gold bonanza. In Wyoming, there’s a bentonite boom. The Billings Gazette reported in May that “companies have ramped up production, racing to extract a commodity that was deposited millions of years ago as volcanic ash and chemically reworked in a shallow, inland seaway.” The clay is used in adhesives and kitty litter. It’s also needed for the “mud” drillers use to access oil and natural gas. “Fracking” has boosted demand for industrial sand, which is mostly mined in the South, Midwest, and California. And the U.S. is set to resume the mining of “rare earths,” elements increasingly consumed in high-tech devices.

What threatens the mining sector? You guessed it: Government.

Earlier this year, after legislators refused to streamline Wisconsin’s permitting process, Gogebic Taconite walked -- taking with it plans for an iron-ore mine that would have created 700 jobs and generated over a billion dollars in tax revenue. In D.C., the environmental left ceaselessly lobbies to change the 1872 act that governs hardrock mining on federally controlled land. (It’s an outdated system in need of modification, but never trust “reforms” pushed by the Sierra Club and the editorial page of The New York Times.) Many of the corporations that employ American miners are multinational, and thus, relief from a ludicrously high corporate tax is overdue if the U.S. is to remain an attractive place to invest.

High unemployment for workers without college degrees? Growing “income inequality”? Budget deficits at every level of government?

Mine, baby, mine.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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