Editorial Canadians shine in U.S. gold race

Because gold mining has once again become a highly profitable business — and with strong evidence that its price will at least hold to around today’s rewarding levels — a worldwide search for this long-prized metal is now under way. And it’s certainly meeting with success, especially in the United States where a bona fide gold boom is in full sway.

The rise in gold production in that country is nothing short of dramatic and now exceeds our own. And it is highly likely that the spread will widen as major new U.S. discoveries like those being turned up in Nevada come on stream. While the nature of those huge low grade, low cost Nevada deposits differs entirely from those of South Africa, there is already talk that Uncle Sam’s gold production could, within a few years, be challenging that country, which remains by far the world’s leading producer.

It is the phenomenon of heap leaching that is rocketing gold output in that country. This is a mining-metallurgical process that can render material containing as little as 0.015 oz gold per ton ore grade. Its impact on the industry is reminiscent of what cyanidation did at the turn of the century.

While heap leaching is not likely to have the same impact on gold mining in this country as that of our neighbor, Canadian mining expertise and financing have certainly played an important role in the big buildup there. Today, there are dozens and dozens of Canadian firms at work there, both juniors and seniors. Indeed Canadians can well take pride in the success stories some of these are writing.

A classic example is that of Echo Bay Mines, now the fourth largest North American gold producer. This company started out as a bold little silver producer close to the Arctic Circle, followed by its development of the highly profitable Lupin gold mine, likewise in the Northwest Territories. While certainly not forsaking the Canadian scene, its aggressive and highly capable management saw the Nevada light when it acquired the McCoy mine there several years ago. That led to its nearby Cove discovery last year, by far the company’s most important find to date. In addition to a growing heap leach production, it is now building a 5,000-ton-per- day mill at the McCoy-Cove site that has been expanded to 105 square miles. Over-all production of this company, which will reach at least 550,000 oz this year, is forecast to exceed 700,000 oz next year. And further expansions are certainly in the wind.

And closely paralleling the Echo Bay story is that of American Barrick, which company is likewise coming up with some mighty exciting U.S. discoveries. With financing from its highly profitable Canadian gold operations, it likewise looked south with the acquisition of a struggling gold mine in Utah which it quickly turned into a highly profitable operation. Then it, too, saw the light in Nevada, acquiring its already famed Goldstrike property on the prolific Carlin belt 18 months ago. Already, it can boast a major sulphide deposit there containing upwards of 90 million tons grading 0.16 oz, representing about 13 million ounces of gold underlying its large low grade oxidized heap leach orebody.

Another Canadian company that instinctively comes to mind at the very mention of Nevada and heap leaching is that of the late J. C. Byrne and his Rayrock Yellowknife Resources. One of the early birds to move into that state, the Byrne organization led a syndicate of junior Canadian exploration-mining firms that has already developed no less than four relatively small but profitable open pit gold mines there, as well as being one of the real pioneers in the heap leaching which has so completely changed the economics of gold mining in that country.

But of course we must give credit where credit is due. For the Carlin leader, unquestionably, is and has been the New York- based Newmont organization which is developing no fewer than 16 Carlin gold deposits. That company very conservatively estimates ore reserves of 31 million tons and will boost its past year’s very respectable output from 589,000 oz to 1.6 million oz. in 1991. (A recent drill hole on its Post deposit intersected 1,040 ft of continuous ore assaying 0.495 oz, including a remarkable 470-ft section grading 0.93 oz.)

With so much current activity in the U.S. gold fields, and with so many Canadian companies now involved, The Northern Miner is planning to broaden its coverage of the U.S. mining scene starting this week. (See page A19).

Unquestionably there is going to be a lot of new gold coming on the market in the years immediately ahead. Will the market be able to absorb this? We believe that it will, for the world is printing paper money at a much faster clip than we are ever likely to mine gold. Free-world gold output is adding less than two per cent to the world stock of the metal each year, while the amount of paper money of the industrialized countries has been growing at a rate of 9% through the 1980s and accelerating rapidly.

Gold has always been the traditional investor hedge against the loss of purchasing power of paper money, i.e. inflation. And let’s face it, inflation is here now. And anyone in this country who thinks that inflation isn’t going to grow had better take a look at the terms of Inco’s recent labor contract. Now, any union with clout will be upping demands substantially.

Wasn’t it simply a case of jitters over inflation that fueled the surge in worldwide gold prices this past week?