California mining towns left behind in gold rush

Despite sky-high prices and the state’s rich gold legacy, the industry here is mostly dormant. California trails the leading gold-producing state, Nevada, by a wide margin.

A California revival is hardly imminent. Companies trying to reopen old mines in Grass Valley and near Sutter Creek have slogged through years of red tape, and there are no guarantees of success. The Sutter Creek plan is at least a year away, while Grass Valley is several years from reopening.

Standing in the way: scarcity of capital and strict environmental standards.

There’s a cultural issue, too. Old mining towns still embrace their Gold Rush roots but have become havens for tourists and retirees. Some residents aren’t convinced that blasting through rock is compatible with boutiques or bed-and-breakfasts.

In Grass Valley, for instance, a thriving high-tech industry has sprouted in a community where the high school sports teams are called the Miners. Emotions are mixed on the proposal by Emgold Mining Corp. of Vancouver, British Columbia, to reopen the old Idaho-Maryland Mine, which hasn’t operated since 1956.

“The landscape of the community has changed,” said Mayor Lisa Swarthout. “When it was an operating mine it was pretty much in the middle of nowhere. The community has grown around it.”

Swarthout said she hasn’t yet taken a position on the proposal.

The allure of gold at more than $1,300 an ounce could bring about more mining. Sutter Gold Mining Inc., which wants to reopen a mine that runs alongside Highway 49 near Sutter Creek, has said it’s sitting on at least 223,000 ounces and maybe as many as 680,000 ounces.

At today’s prices, that’s a bounty of $300 million to $900 million. Company executives say the price boom isn’t a fluke.

“The pieces seem to be in place, at least in my opinion, for continued strength in gold prices,” said Chief Financial Officer Robert Hutmacher.

The question is whether California can cash in.

At its peak, in 1853, California produced more than 3 million ounces of gold. Last year’s haul came to 161,000 ounces, says the National Mining Association. More than half of that came from a single open-pit mine in a remote area of Imperial County. Nevada produced more than 5 million ounces.

What happened? Production all but collapsed during World War II, when the federal government ordered the closure of “nonessential” gold mines to free up equipment to extract copper and other metals with military uses.

The ban ended after the war, but the price was fixed by the U.S. government at $35 an ounce, and mining waned. The price was allowed to float starting in 1971, but by then several key California mines had closed.

Reopening them has proved difficult.

In the Mother Lode, many mine shafts have filled up with water, adding to the environmental issues. And the partial urbanization of the region creates local opposition.

“If you are near civilization, it is difficult,” said John Parrish, the state geologist.

Parrish said it can take seven to 10 years to assemble the needed permits for mining in California.

Emgold Mining has been working on the Grass Valley proposal since 2003. And still the hurdles are considerable.

Emgold is a “junior mining company,” meaning it has no active operations. Although it raised $1.75 million in new loans last month, it has warned investors about its troubles obtaining the capital it needs to complete the permit process.

“We’ve been hit with the recession, just like everybody else,” said Chief Executive David Watkinson. “Even with the high price of gold, you’ll find junior mining companies are struggling to find money.”

Watkinson said mining would create 400 jobs in Grass Valley. He said he’s encouraged that the project won support of 72 percent of Grass Valley residents in a survey conducted four years ago by the city.

But there is opposition. Critics say the project would create environmental hazards and hurt the quirky character of Grass Valley.

“We feel the real gold is the wonderful environment,” said Ralph Silberstein, a software consultant and president of CLAIM, or Citizens Looking at Impacts of Mining.

Similar issues swirl around the Sutter Gold plan.

Some residents worry about potential noise and traffic problems. They also complain that a resumption of actual mining would mean the end of the daily tours of Sutter Gold’s mine, which is one of the area’s top tourist attractions.

While Sutter Gold officials acknowledge they’d have to close the tours, they insist that commercial mining can peacefully coexist with the area’s tourist trade.

Some merchants say Sutter Gold deserves a shot.

“The area was founded based on gold mining,” said Scott Harvey, a prominent Napa and Amador County winemaker who operates a tasting room in Sutter Creek. “It’s kind of hypocritical to deny somebody the ability to run a mine.”