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Mother Lode not feeding gold fever - Sacramento Bee

The latest gold rush is leaving the Golden State in the dust.

 

The latest gold rush is leaving the Golden State in the dust.

For the first time in 25 years, the price of gold has soared to more than $700 an ounce, sparking renewed interest in mining the precious metal. Yet the home of the Gold Rush of 1849 is mostly watching from the sidelines.

 

 

Production of gold in the state was a mere $29 million last year, according to the California Geological Survey, down from $39 million in 2004.

Put another way: Gold generates about as much income in California as the state's tangerine crop.

 

Most of the state's gold comes from the desert regions of Southern California. Gold mining in Northern California, home of the Mother Lode, has been reduced to almost nothing.

 

As a gold producer, "I don't think (California) is on the radar anymore," said John Dobra, economist and gold market expert at the University of Nevada, Reno.

 

But two out-of-state mining companies are planning major mining operations in Grass Valley and Sutter Creek.

 

Canada's Emgold Mining Corp. says its Grass Valley mine, at a site that once was among California's most prolific, is believed to contain about $1 billion worth of gold at current prices. The Sutter Creek site could produce about half as much, according to estimates by Sutter Gold Mining Inc.

 

Still, mining won't start in Sutter Creek until 2008 at the earliest and in Grass Valley until 2009, according to executives with the two companies.

 

"That's the issue with mining; the process can take 10 years," said Susan Kohler, senior geologist with the California Geological Survey.

 

But the latest surge in prices could bring out more prospectors. Many market analysts believe prices could reach $850 an ounce in the next year or so, and some say $1,000 isn't out of the question. The all-time high is $875 in January 1980.

 

Gold closed Wednesday at $705.70, up $4.20, on the New York Mercantile Exchange.

 

Prices have risen 40 percent since November - an increase that has taken some in the business by surprise.

 

"I'm really pleased and shocked - not at breaking $700 but the speed with which it occurred," said Michael Miller, chief executive of Sierra County's 110-year-old Original Sixteen to One Mine, one of the few significant operators left in Northern California.

 

The reasons for high prices are many. Geopolitical worries, including the West's standoff with Iran, prompt investors and traders to put their faith in gold. "Gold becomes the safe haven," said Hal Herron, CEO of Sutter Gold Mining.

 

Demand is rising in China and India. The high price of oil has further enriched the ruling families in the Middle East, putting further upward pressure on gold, Dobra said.

 

"Middle East investors are switching out of certain currencies into gold," said Mike O'Connor, spokesman for Emgold.

 

For those who believe in gold, it's been a long time coming. As prices fell to about $250 an ounce in the late 1990s, venerable California miners such as Brush Creek Mining and Development Co. in Sierra County fell by the wayside.

 

A few companies have been able to wait out the market. In 1990 an affiliate of Sutter Gold bought the Sutter Creek location, a 535-acre underground mine, and has quietly invested about $20 million into readying the site for production, Herron said.

 

"We were just fortunate to hold onto it during all the (price) troughs," he said.

 

Sutter Gold's stock is traded on an offshoot of the Toronto Stock Exchange; most of the shares are held by two interrelated Wyoming companies that have interests in gold, uranium and other commodities.

 

Herron said the major permits have been obtained in Sutter Creek, but the company still has a financial hurdle to overcome: It soon will begin preliminary mining activities, hoping to find enough gold to show potential lenders that the Sutter Creek site will pencil out.

 

"It's not for the faint of heart," he said.

 

In Grass Valley, locals are buzzing over Emgold's proposal to revive the old Idaho Maryland mine - historically one of California's richest gold-producing sites but idle since 1956. A predecessor of Emgold's was going to reopen the mine in the 1990s, but "unfortunately they ran into the bear market," O'Connor said.

 

Now Emgold, based in Vancouver, British Columbia, is starting over. It is in the early stages of obtaining permits and is trying to gain local support for the project, estimated to cost $135 million.

 

Grass Valley is taking a wait-and-see attitude. While many residents see jobs and other economic benefits and would welcome a business that would remind them of the region's history, others are wary of potential environmental hazards.

 

"There's definitely some nostalgia there," said city Planning Director Tom Last. "At the same time, there's concern."

 

One reason why mining might not make a major comeback: California's gold regions have turned themselves into havens for antiques merchants, retirees and others who don't want to see heavy industry in their communities.

 

Much of the gold country "went the way of winery and tourism," Miller of the Original Sixteen mine said dismissively.

 

In some places, though, mining and tourism feed off each other. Matelot Gold Mining Co., located at Columbia State Historic Park, offers mine tours and gold-panning lessons. The company expects business to pick up this summer because of the hubbub over high gold prices.

 

It might even cut back on some of the public tours so employees can focus their attention on mining, said owner Jan Lewellen.

 

"There's a lot of people coming into the county asking, 'Where can I pan for gold?' " she said. "We're very excited."

 

 

2004 U.S. GOLD PRODUCTION

Nevada: 6.98 million ounces

Alaska: 415,000 ounces

California: 105,000 ounces

All other states: 868,000 ounces

 

Source: National Mining Association

 

Dale Kasler

Sacramento Bee Staff Writer

 
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